Growth will slow down, power sale to rise: Shree Cements

Speaking to CNBC-TV18 after announcements of results, HM Bangur, managing director, Shree Cements attributes the jump in profits to better capacity utilisation, increased sales and increase in other income thanks to the courts deciding in the company's favour.

Bangur expects growth to slow down and is optimistic about the surge in the sale of power. He says that the claims of cartelisation in the cement sector were unfounded and adds that the CCI judgment is eagerly expected. Below is an edited transcript of the interview on CNBC-TV18. Also watch the accompanying video Q: There has been a big jump in profit levels. What was the contribution of operationally good performance and other income?
A: Our capacity utilisation has been much better. In the fourth quarter of 2012 as compared to the same period in 2011, cement sales increased by 30% in volume metric terms and instead of 25.7 million tonne, we have sold 33.5 million tonne.
The net realisation to company is almost flat and is operational profit. Apart from this operational profit, a lot of incomes have been recognised due to the courts deciding in the favour of the company. And it is this that has inflated the other income overhead. Q: What's the expectation for FY13? Having delivered in FY12 do you think you will be able to maintain that kind of a trajectory in FY13-14 or do you think the pace could slow down a bit?
A: The pace will definitely slowdown because the 30% growth rate is not easy to maintain. I expect the cement market to grow by 9% and the company to grow by 12% in volume terms. Our expectation is around 1.3 times the industry growth in North India. Q: What about your own capacity utilization and volume growth? You said that in the fourth quarter you sold 33.5 million tonne. What is your  FY13 forecast in terms of volume of cement output?
A: The quantity of 33.5 million tonne is the maximum capacity utilisation and we expect to increase this by 12.5-13 million tonnes in the next year. Q: How was the pricing this quarter? Are you expecting prices to remain or could there be a slight uptick and given the kind of capacity additions in North India, do you think you have some leeway to pass on prices?
A: No, definitely prices are very volatile. Up to the fourth quarter, till the end of March, the price was very firm and the demand was very good. Suddenly in the April-June period, demand turned low and prices began to weaken.
So it is very difficult to predict. But the average prices will be about 3-4% higher than the last year. that's all I can forecast.
_PAGEBREAK_ Q: Are you expecting a slight reverse in the near-term?
A: Yes, I expect that upto September or till the monsoon season, there will be some downturn or realisation will be almost similar but high prices will rule from December to March. That is the time we expect the price recovery to take place. Q: Of the Rs 1,450 crore that you have reported in terms of revenues, how much is contributed by power?
A: Power is hardly 10% of our revenue. Q: What were the number of units you sold in Q4 and FY12 and what is the per unit realisation?
A: We sold 43 crore units in Q4 and the average realisation if Rs 4.20. Q: How do you expect things to pan out for the power sector in FY13?
A: The sale of power in FY13 will be better as we expect prices to firm up because till now the power sector was heavily subsidised and now all over India there is a consciousness that power rates should increase. If estate agencies increase the power rate then naturally private operators also will benefit. Q: The Competition Commission of India (CCI) has completed its investigation into the cement sector. Are you expecting any ruling in the near-term and have you factored in a possible negative stance by the CCI?
A: The CCI investigation is over and the judgment is expected. Whatever the ruling is, it will be hazardous to guess as we feel that no wrong has been done though the arguments have been powerful. We feel there is no cartelisation but then ultimately the CCI has to give its verdict and then only we can react. Q: Any intimation from the CCI on when the final order is likely to come?
A: No, we don't have any indication.