India Cements reports historic loss, MD assures the future is steady

We had a tough time. The quarter has seen the largest loss. We have never had a loss of this magnitude in the history of India Cements.

What caused this loss?

The loss was primarily due to escalating coal costs, which went up from $60 to $300-plus. This affected the fuel cost directly. Indirectly, this has pushed up the cost of packaging materials and the like. There has been a substantial rise in the variable cost.

Why did you sell Springway Mining?

The company invested in SMPL in December 2018. Till the time it was sold, the company had invested around Rs 309 crore in it. We have sold it for Rs 603 crore. That addressed our liquidity issue. With that money, we could improve other plants. We have 26,000 acres of land – some precious and some not so precious.

The sale of SMPL is sufficient for managing our liquidity situation. I do feel that the industry is now recognising the fact that prices will have to move up. We feel prices will go up.

Is cost management a bigger priority than the demand issue?

Cost control is challenging at all times. This time around, we are hit by both cost and price. I have not come across this kind of situation. But you have to live and learn. In the wake of escalating coal costs, we could do nothing. We have to improve the efficiency of all our plants. We are looking at cutting costs internally. The industry has been caught napping on the cost front.
The cost of coal was not just due to the Ukraine war. Coal prices had started to go up even prior to the war. Power costs too have gone up in the meantime. Going forward, cement prices will have to go up if cost increases have to be offset. The issue is not about the availability of coal. It is about the price it is available at.

On the demand side, it is more due to the supply overhang. With the planned infrastructure spending in the south (of India), things will improve on the demand front.

We have stopped captive production of power due to the increasing cost of coal. We are now getting power from the grid. The power cost has gone up due to tariff hikes, but our overall cost has been hit more by the escalating price of coal.

Is your debt repayment schedule on course?

Yes. With the sale of SMPL, there is no liquidity pressure. What we needed, we got from the SMPL sale. We did not go to the bank. We did not flounder. We took the step to protect the company. It was the right decision.