Analyst Concall
Shree Cement focused on value over volume Jul-Sept
This story was originally published at 22:33 IST on 11 November 2024
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--Shree Cement: Preferred value to volume in challenging demand scenario
--CONTEXT: Shree Cement mgmt's comments in post-earnings analyst call
--Shree Cement: Expect better pricing scenario in Oct-Mar if demand improves
--Shree Cement: Cement realisation in Jul-Sept was INR 4,447/tonne, flat QoQ
--Shree Cement: Jul-Sept clinker sale 310,000 tn vs 420,000 tn Apr-Jun
--Shree Cement: Will spend INR 40 bln every year for 4 years as capex
By Steffy Maria Paul and Anand J.C.
MUMBAI – Due to a challenging demand environment during the September quarter, Shree Cement Ltd. focused on value over volumes, the company's management said in a post-earnings analysts' call Monday. Slower rollout of the government's capital expenditure projects, a prolonged monsoon, and a softening in manufacturing momentum led to a subdued demand for cement in the quarter, the company's management said. The company's total sales volume for the quarter was down by 7% on year to 7.60 million tonnes in the quarter.
The company said it focused on products with higher earnings before interest, tax, depreciation, and amortisation, and higher value during the quarter. The company's sales of premium products were 15% of its total trade sales volume in the quarter and the cement manufacturer's management said it expects to maintain it at this level for the next few quarters. The company's sales of premium products were 7.6% of its total trade sales volume in the June quarter.
While urban demand moderated during the quarter due to the softening of consumer sentiment, rural demand saw some improvement, the company said. The cement manufacturer said it expects the pricing environment to get better in Oct-Mar if demand improves.
The company said its capacity utilisation for the quarter fell to 56% from 76% in the June quarter. The company said its lead distance for the quarter, which is the distance between the company's manufacturing facility and the market it caters to, was 433 kilometre, down from 453 kilometre in Apr-Jun, and 475 kilometre in the September quarter last year. The company said it expects to maintain the lead distance around the same level but might try to go back to markets where they find attractive prices. The company maintained its capital expenditure guidance of spending INR 40 billion every year for the next four years.
The company's depreciation and amortisation expenses for the latest quarter and the half year doubled on year. In Apr-Sept, the cost incurred towards depreciation and amortisation was INR 13.11 billion. The company expects this to double to around INR 27 billion for the full year 2024-25 (Apr-Mar) owing to commissioning of new plants in April and June next year.
The company said that its cement realisation was flat on quarter at INR 4,447 per tonne. The company clarified that this figure does not include other operating income. The company's other operating income for the quarter was INR 660 million, up from INR 450 million in the June quarter, the company said. The company said that its clinker sales during the quarter was 310,000 tonnes, down from 420,000 tonnes in the June quarter.
Shree Cement said its north region, which includes Gujarat and parts of Uttar Pradesh, accounted for 58% of the overall sales mix, while the east and the south each formed 31% and 11% each. The company said its on-year volume growth in the northern region declined 6%, while the growth in the east region declined 8%, and south declined 10%. In Oct-Mar, the company expects its north and south markets to grow relatively better, while it expects growth in its east region to remain muted.
Shree Cement declared its financial results for the September quarter after market hours on Monday. The company reported a net profit of INR 931.3 million, down 81% on year on revenues of INR 37.27 billion, which fell 18.3% on year. Monday, shares of the company closed at INR 24,418.25 on the National Stock Exchange, down 0.5%. End
Edited by Vidhi Verma
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