Earnings Review: Shree Cement PAT hit by high input cost and low sales

21 May 2022

A big jump in power and fuel costs and lacklustre revenue growth caused Shree Cement Ltd’s bottomline to fall in the quarter ended March. A decline in some other operating costs, depreciation charge and tax outgo could not offset the impact of power and fuel costs.

The second largest listed cement company, by market capitalisation, recorded an 18% fall in its consolidated net profit to 6.6 bln rupees in Jan-Mar.

Shree Cement’s consolidated revenue from operations went up by 3.1% to 43.6 bln rupees.

At a standalone level, the company’s net profit was down 16% to 6.5 bln rupees, slightly higher than analyst estimates of 6.4 bln rupees. The revenue from operations were up 3.6% to 41 bln rupees and was below analyst estimates of 42.5 bln rupees.

The consolidated operating expenses were pre-dominantly hit by a substantial rise in power and fuel expenses which jumped 76% on year to 12.7 bln rupees. It accounted for one-third of total operating expenses.

Petcoke and coal prices determine the power and fuel costs for cement companies, and prices of both have been on a continuous rise for the last three quarters.

The 76% rise in power and fuel costs was the highest in 12 quarters, data from Informist Corporate Fundamental Database showed. It was possibly the largest increase ever.

It was the main factor that led to a 26% fall in operating profit to 9.2 bln rupees.

The operating margin stood at 21.1% in Jan-Mar, making it the lowest margin level in 14 quarters. It was also significantly lower than 29.4% a year ago.

The change in other primary operating costs in Jan-Mar did not cause pain to Shree Cement’s profitability.

In Jan-Mar, the freight costs were down 1.1% to 9.6 bln rupees while the raw material costs were up 3.3% to 3.1 bln rupees.

The company also cut its staff costs by 19% on year to 2.2 bln rupees.

The bottomline performance would have been hit harder had the tax expenses not fallen sharply by 73% on year to 482 mln rupees and the depreciation charge of 3 bln rupees not been 10.1% lower than the year ago level.

The company, today, also announced a final dividend 45 rupees a share for 2021-22 (Apr-Jun).