EBITDA, profit margin have bottomed out: Sanghi Industries

In an interview with CNBC-TV18, Bina Engineer, Director, Sanghi Industries, discussed the company's second quarter earnings and the outlook ahead. Below is the transcript of Bina Engineer’s interview with Sonia Shenoy and Latha Venkatesh on CNBC-TV18. Sonia: This time, your income has gone up, but that is because you have commenced your new cement grinding mill. However, your operating profit has fallen and your margins have crunched down quite a bit to about 12 percent. Do you expect more pressure on your operating profits in the second half of the year? A: No, not really. I think from now on, things should improve. We have seen that upto about mid of September, things were both on volume front as well as on grinding front. But from the second half of September and whole of October, we have seen improved realisations. So, typically, what you observed in the results is there was 30 percent improvement in volume at a seven percent reduction in the prices and realisations on a year-on-year with this. But now that has been clawed back and prices have improved, so we should see a better realisation and improved margins. Sonia: So, what was the exact volumes that you clocked-in in this quarter itself and were there any clinker sales? A: Clinker sale was very insignificant. We have done 5,27,000 tonnes of overall volumes.  Latha: How do you expect the revenues in the second half to pan out? A: As I said, things are already looking up. There is an improved price realisation of 7-8 percent and the volume is also picking up. Apparently, Diwali will be a slightly lull period, but thereafter, until March, I do not see any other disturbances or hurdles in volume growth. Our terminals and Gujarat as well as in Mumbai are already in place. The infrastructure chain capitalising is in place and if markets are good things should really look up. Sonia: Can you just tell us what was the earnings before interest, taxes, depreciation and amortisation (EBITDA) per tonne in this quarter and what is the guidance for the year because in the last quarter, you reported an EBITDA per tonne of Rs 527 which was much lower than the quarter before? Have you seen further worsening in this quarter? A: No, we have maintained almost similar number during this quarter also despite the price fall because we had improved costing. And one very unique factor for this quarter was that we had to purchase clinker from outside because we had run out of clinker stock during our annual maintenance shut down period. So, there was almost an added cost of about Rs three crore under clinker which has  also resulted into crunch of EBITDA. So, that will not be the factor which would repeat in coming months. So, from what we have maintained, it can only improve. Latha: Did you have to make any contribution to the District Mineral Fund? A: District Mineral Fund, notification is out and provisions have been made, but state is yet to put in the mechanism for collection and actual payment in place. So, until then we have made the provision but payout is to be done. Latha: What price increase did you take in October you said? How much did your prices go up? A: In October, we have seen about 6-7 percent improvement already. Latha: And in November? Any price improvement? A: That will go along with the margin but, nothing that is immediately on cards. Sonia: And can you just leave us with some qualitative comments where the demand situation has picked up at all, because the sense we are getting from most cement manufacturers is that there is absolutely no movement in demand. A: I would say that there is marginal improvement in Gujarat and residence sector.