Birla Corporation Limited has, in FY2021-22 achieved its highest ever cement sales by volume, overcoming unprecedented challenges such as cost pressure, sluggish demand and disruptions owing to the Covid-19 pandemic.
Sales for the full year at 14.22 million tons (mt) represent a 6.2% growth over the previous year. The previous highest of 13.65 mt was achieved prior to the pandemic in FY2018-19. The spurt in sales came mostly towards the end of the financial year. March quarter sales at 4.24 mt were up 27% sequentially and 1.7% year-on-year.
Sales in the three months till 31 March were the highest ever for a quarter. Birla Corporation’s capacity utilization for FY2021-22 was one of the best in the industry at 92% against 85% in the previous year.
This translated into a revenue growth of 9.8% for the full year and 8.7% for the March quarter, but even so, profitability came under immense pressure because of the extremely high fuel costs which could not be passed on to consumers.
Market conditions were not conducive for price hike until at the end of the financial year, and it is estimated by rating agency Crisil that margins for the cement industry contracted by 400-500 basis points in FY2021-22.
While Profit before Tax for the March quarter at Rs 153.18 crore was lower by 14.8%, the net profit at Rs 111.08 crore was down 55.5% year-on-year, due to one-off credit adjustment of Rs 124.98 crore in income-tax expense in the previous year. Similarly, profit before tax for the year at Rs 537.75 crore was down 24.5%, while the net profit for the year at Rs 398.59 crore was 36.8% lower than the previous year.
Despite healthy growth in sales by volume in almost every segment and market, Birla Corporation’s profitability was hugely impaired by at least 40% increase in fuel cost and 8% increase in cost of delivery. Freight costs continued to rise through the year as diesel prices were revised in tandem with rising crude prices. To rationalize cost of delivery, the Company worked towards reducing the lead distance for each production unit and dependence on road transport.
“Despite achieving the highest ever production at three of our units—Satna, Maihar and Chanderia—and record sales in five States, our profitability took a hit because of excessive rise in fuel and freight costs, which could not be passed on to consumers,” said Shri Harsh V. Lodha, Chairman, MP Birla Group. “The tide has, however, started to turn from March, and we are hopeful that in the current financial year, our Company will reach new heights. The Mukutban unit which has commenced production at the end of April will add a lot of heft to our cement business in the near future.”