Unusually weak cement prices and sluggishness in demand, coupled with an unprecedented downturn in the jute industry, weighed down Birla Corporation Limited’s June quarter profitability.
In the face of contracting demand, the Company’s sales by volume fell less than 1%,thanks to improved capacity utilization at its Mukutban unit. Alongside, its Jute Division suffered a setback in the June quarter as the Government scaled back orders for jute bags and export of shopping bags was hobbled by logistical constraints.
Consolidated revenue for the June quarter at Rs 2,207 crore was down 9%, while EBITDA at Rs 275 crore was 12% lower than last year. Cement sales by volume during the quarter were at 4.38 million tons (mt) compared with 4.41 mt in the same period last year. This translates into a capacity utilization of 91%, which is well ahead of rating agency ICRA’s estimated full-year average capacity utilization of 71%.
Cement sales during the quarter were impacted by the general elections and extreme weather conditions in some of the Company’s key markets. Still, the Company ramped up sales of its premium products, the share of which was at 59% of total sales by volume through the trade channel. Premium product sales at 1.85mt during the June quarter represent a 2% growth year-on-year. Sales by volume of Perfect Plus, the Company’s flagship brand, grew 8% over the same period last year.
Realization per ton for the June quarter at Rs 4,820 was 7% lower than last year, and resulted in EBITDA per ton falling 9% to Rs 603. It is estimated that overall cement prices in the June quarter were down 3-5% from the end of March as manufacturers pushed for market share despite tepid demand.
Cement prices fell sharply in Northern, Central and Eastern India. Even in Western India, prices were under pressure. Demand remains subdued even in the current quarter, whereas supply-side expansion is expected in the central and eastern Indian markets due to commissioning of new units. As a result, cement prices are expected to remain under pressure until the third quarter of the current fiscal year.