India Cements embarks on turnaround strategy

Cement major India Cements Ltd (ICL) is firing on all cylinders to return to profit track after company made losses in the fourth quarter of FY 23 and as well as for the full year.

It has formulated a slew of action plans including monetising its non-core assets, refurbishing of old factories to increase efficiency and achieve lower cost of operation besides marketing initiatives to target increased volumes. Through these measures, India Cements expects to see break-even in the first quarter of FY24 and make profits in the consecutive quarters.

Despite improved sales, hit hard by unprecedented increase in raw materials , especially coal and pet coke and fuel costs, ICL had reported a net loss of Rs 218 crore for the fourth quarter of FY23 as compared to loss of Rs 24 crore in the corresponding quarter of last fiscal. The company also had a write off towards one-time impairment of certain investments and advances to the tune of Rs 114 crore which added to the loss. According to an analyst, the exceptional loss is on account of investment write-offs in Andhra Pradesh Gas Power Corporation (APGPCL), where the company had invested with the purpose of obtaining low cost power, and due suspension of operations at APGPCL, the company has provided a write-off.

For the full year of FY23, the company incurred a net loss of Rs 188 crore as against a net profit of Rs 39 crore.

As first step to bring in much required funds, the Chennai-based company is in the final stages of finalising its monetising plan under which it will be selling 600 acres of land the company owns in Tirunelveli district of Tamil Nadu. India Cements expects to realise about Rs 1200 crore to Rs 1300 core out the transaction. A portion of the proceeds is proposed to be used for repaying Rs 500 crore debt this year of the outstanding Rs 2,900 crore as on March 31, 2023.

The company has a total 26,000 acres of land across all its manufacturing facilities. ICL had in October last year sold its subsidiary Springway Mining Pvt Ltd (SMPL) to JSW Cement for a total consideration of Rs 476.87 crore as part of its monetisation drive.

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N Srinivasan, vice-chairman & MD India Cements, while addressing the earnings media conference, recently, said:”Once we complete this monetisation plan, we will be in a better position. The demand for cement is there in the market and we will be in a position to make breakeven in Q1 of FY24 without resorting to price hikes.”

The company has received reports of consultants FLSmidth and Krupp Polysius for refurbishment of its old plants which will ensure greater efficiency and reduced cost of operation. Due to spiralling coal and pet coke costs and high variable cost, India Cements was incurring about Rs 500 more per tonne of cement production compared to competition.

ICL management told analysts in a recent earnings call on the plant revamp front, it will be targeting three to four factories.

The company’s capacity utilisation improved to 72% in March 2023 quarter and it is expected to cross 80% in the coming quarters.

“The performance is expected to be much better this year with good demand, reduced variable cost, increased sales and 80% capacity ity utilisation. This will be without any price increase,” Srinivasan said.

The company is banking on the consistent high quality of cement , bag by bag apart from lower operational cost and slew of new marketing initiatives to promote the brands and connect closely with consumers, channel partners and influencers. With a total capacity of nearly 16 million tonnes, it has eight cement plants and two grinding units located in Tamil Nadu, Andhra Pradesh, Telangana, Maharashtra and Rajasthan.

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ICL is also betting big on Chennai Super Kings (CSK), as principal sponsor of the most successful IPL team. In March 2022, it launched Conkrete Super King (CSK cement) in a bid to leverage on the brand value of CSK and its captain M S Dhoni. Its new products like CSK cement and HSK accounted for 6% total sales last year.

During this IPL season, with crores of viewers on TV and digital platforms, visibility of India Cements scaled new high and helped the company to leverage CSK brand value. ICL has also embarked on new marketing and brand promotion drive with a slew of ground level activities, connecting with consumers, dealers, stockists and influencers like engineers, contractors, masons.