Shree Cements posted a stellar Q1 with profits quadrupling to ₹508 crore and standalone income rising 45 per cent to ₹2,494.22 crore. There is also a smart bump up in margins. Its Managing Director Hari Mohan Bangur says higher sales, lower energy costs and depreciation charges have contributed to better profitability. Shree Cements is putting up a unit in Chhattisgarh, while expanding in Bihar and Karnataka. The outlook for July-September is clouded by monsoon which slows construction work, affecting cement demand.
This time there were two things. Our base for eastern India was very small. Our sales in eastern India doubled and total volumes went up significantly by 20 per cent. Second, the energy prices were low and the selling price was somehow maintained. Moreover, our depreciation cost was decreased because of the new Indian Accounting Standard Ind-AS. All of these led to very good profit.
Not really. I will definitely not say this was an exceptional quarter and it should be taken as a benchmark or future guidance. Our profitability will come down slightly (quarter-on-quarter) but it will be better than last year.
How are you shaping up on the margins front? There was a 1,000 bps jump in margins in Q1. What can be expected in the coming quarters?
No comments on that because we can comment on our cost coming down and volume increase, which we are reasonably sure of. But selling price is totally unknown to us and without that no margins are be estimated.
What is your capacity utilisation right now?
Our capacity utilisation will be 75-80 per cent. However, we keep on increasing our capacity. In the last five years, our capacity utilisation has been around this level but we kept on increasing capacity and production.
What’s your capex plan going forward?
We are putting up a unit in Chhattisgarh for which work has started. We are expanding in Bihar. In South India, we have started work in Karnataka.
What’s the outlook on the eastern market? What's your plan for that side?
I feel the eastern market is buoyant. Because of the low base, the demand will be high. But there are challenges as new capacities are coming up in that region. So there will be good and higher capacity.
What is realisation and volumes in Q1? What's the outlook on that going forward?
In case of power, we are neutral. We are neither bullish nor bearish. Power demand is there but rates are not remunerative. As we have already put up a unit, interest is not being counted. Otherwise, new units at this price will not be viable.
After a robust monsoon, how are prices holding up in Q2 and what's the trend in pricing for the coming quarters?
It will be wrong to compare April-June to the monsoon months of July-September. Monsoon comes every year. So for the monsoon season, you have to compare July-September with the same quarter of last year. If you compare that, it will be positive. However, it (Q2) will be definitely weaker than last quarter (Q1).