Earnings Review:Shree Cement profit dives, power and fuel costs surge

28 Jul 2022

The power and fuel costs more than doubled for Shree Cement Ltd in the June quarter and took a heavy toll on the company’s operating profit and net profit. A good sales rise could not offset the cost pressures.

In Apr-Jun Shree Cement’s consolidated net profit fell 56% to 2.8 bln rupees as compared to the year ago quarter, and it was also down 58% from the previous quarter. The consolidated net sales rose 22% on the year and 1.1% on the quarter to 44.1 bln rupees

At a standalone level the company’s net profit of 3.2 bln rupees, which was down 52% on the year, was considerably lower than analyst estimates of 5.1 bln rupees.

The revenue from operations were up 22% to 42 bln rupees and was above analyst estimates of 40.5 bln rupees.

Shree Cement’s consolidated operating profit fell 22% on the year to 8 bln rupees, down 22% over the year ago period and down 14% over the previous quarter. The operating margin contracted sharply to 18% in Apr-Jun from 28% a year ago and 21.1% in the previous quarter.

The profitability hit by a substantial rise in power and fuel expenses, which are predominantly petcoke and coal costs. It jumped 2.1 times on the year to 15.1 bln rupees. It accounted for around 38% of the company’s total operating expenses. Sequentially too it was up, by 19%

The freight and forwarding costs increased moderately by 8.3% on the year to 9.1 bln rupees and compared to the previous quarter it showed a decline of 5.2%.

Shree Cement’s depreciation charge jumped 30% on the year to 3.5 bln rupees in Apr-Jun. Tax expenses fell sharply by 53% on the year to 0.97 bln rupees.

Shree Cement is the second largest listed cement company by market capitalisation with 12 manufacturing units across 10 states in the country.

The company recently announced an expansion of annual cement capacity by 3 mln tn by end of 2024 for which it would have to incur a capital expenditure of 25 bln rupees.

Shree Cement’s current annual capacity stands at 46.4 mln tn. In 2021-22 (Apr-Mar) its plants ran at 64% capacity.