Slowdown impact: India Cements 'may' hold back capex plans

CHENNAI: South India’s largest cement maker by volume, The India Cements Ltd., on Monday said that if the current economic slowdown persists for some more time, then it may be forced to hold back some of its planned capital expenditure, which includes setting up a green field cement factory in Madhya Pradesh.
“We may hold back capital expenditure,” said N Srinivasan, vice chairman and MD of The India Cements.“I want to expand. I want to go there (Madhya Pradesh). But, I want to be sure before I go there,” he said.
The country is going through an unprecedented economic slowdown. GDP grew at a mere 5%, a six year low for the last quarter.
India Cements had announced plans to set up a new integrated cement factory in Madhya Pradesh and a grinding unit in Uttar Pradesh involving an investment of nearly Rs 1400 crore.
The ongoing economic slowdown and a screeching halt by government purchases in Andhra Pradesh after the new state government assumed power there resulted in 10% drop in revenues year-on-year for the September quarter at Rs 1249 crore. On a sequential basis, revenues dropped 15%. Profits for the quarter rose to Rs 8.72 crore year-on-year, but crashed 88% sequentially.
The net plant realisation or the price the company realises for every tonne of cement sold was down to Rs 3501 sequentially from Rs 3654.
The company operated its factories two out of every three days as capacity utilisation at the plants dropped to 68% from 77% a year ago. The overall cement and clinker volume was at 26.67 lakh tonnes, a drop of 13%.
The silver lining was the cost control. Cost of production was down by Rs 50 a tonne to Rs 2257 on account of lower fuel and pet coke prices.
“We lost due to poor AP demand. Cumulatively between AP and Telangana, we normally sell 31 lakh tonnes. This was down to just 13 lakh tonnes which has impacted the working results,” Srinivasan said.