Boost in margins on increased cement capacity: Shree Cement

HM Bangur, MD, Shree Cement explains to CNBC-TV18 that improvement in EBITDA margins at 32 percent of revenue was because of an increase in capacity from 70 percent last year to 90 percent currently.

Below is an edited transcript of the interview on CNBC-TV18 Q: You have posted a strong topline growth up around 55 percent y-o-y. What sort of realisations did you register and what was the growth in volume that you clocked-in?
A: In the cement sector, our production this year – on a September-to-September basis -  is up by about 40 percent and the realisation is also up by about 10 percent. Q: Can you tell us about the sales and realisation recorded in the power division for this quarter?
A: This quarter we have dispatched 6,171 lakh units and last year it was only 1,600 lakh units. So capacity-wise, the growth in power is 272 percent. Q: What are your margins this quarter around? What are your operating profit margins?
A: In the power division, our operating profit is around Rs 1.05 per unit, at a sale rate of Rs 4.32. Q: What about the overall EBITDA margins as compared to 23.4 percent posted in the previous quarter of last year?
A: This time, the EBITDA margin is about 32 percent of the revenue. Q: What has led to such a strong improvement and would it be sustainable going forward?
A: Last year, our capacity utilisation was around 70 percent capacity of cement. This year it is 90 percent. So even in this dull period of July-September, we were able to use upto 90 percent of our capacity. Q: So overall what kind of revenues do you plan to record going ahead? A: The company recorded a growth of this type because of the low base last year same quarter. But for the year, we do not expect a volume or growth in turnover of 50 percent. Q: Where do you see merchant power rates, going ahead?
A: In the long-term the price realised by the company should be at around Rs 4. Sometimes it will go up and at other times, we may have to sell it at Rs 3.80 or so. But I expect Rs 4 to be the average long-term rate for power.