Expecting 16 million tonne sales this year: Shree Cements

Shree Cement second quarter net profit fell 18.9 percent year-on-year to Rs 93.7 crore. But HM Bangur, Managing Director, Shree Cement remains optimistic about the future.Below is the transcript of HM Bangur’s interview with Ekta Batra and Reema Tendulkar on CNBC-TV18.Ekta: Can you just tell us about how your performance was on the cement space this quarter also alluding to volumes generated this time?A: Volumes in cement this quarter compared to last year have increased by 11 percent. Last year we sold 34.5 million tonne, this year we sold more than 38 lakh tonne. So quarter-on-quarter (QoQ) it is a growth of 11 percent. Realisations have also increased.Ekta: How much did it increase by and what does it stand at?A: It is increased by roughly Rs 100 a tonne. So, per tonne EBITDA was little better. Volumes were higher. In the process the EBITDA has increased from Rs 247 crore to Rs 275 crore. Reema: Could you tell us what the performance in the power sector was with respect to realisations as well as volumes?A: In power sector also the performance was better. We sold 41 crore units last year. This year we sold 49 crore units in the same period. Our realisation also increased significantly. Last year, it was Rs 3.35 and this year it is Rs 3.90 that is 17 percent increase but this is because of the higher cost of fuel our cost also increased. So, EBITDA per unit has slightly increased by 10-11 percent.Ekta: What do you envisage in terms of may be margins going forward based on the fact that your power and fuel cost have seen a 27 percent rise, your freight and forwarding cost also have seen a 16 percent rise for the quarter?A: This 27 percent rise is fine but it is hardly 4 percent rise because 22 percent volume growth is there compared to last year. Per unit it is 4 percent rise; that was very much expected. Now with the power and fuel cost coming down, we expect in the coming months power and fuel will be lower than the last year on a per tonne basis. Reema: What can we expect your volumes in the cement sector to be going ahead?A: We expect Indian economy to do very well and for our total yearly sale, we expect to do 16 million tonne this year. Last year it was about 13.5 million tonne, so, 2.5 million tonne more than last year.Ekta: What are you working at in terms of utilisation in your entire cement capacity because we do understand that you have increased capacity? What would your utilisation rates be then?A: Our Raipur, Chhattisgarh units are not commissioned. So, this time utilisation level is 90 percent. However, it should come down a little With increase in volume. The Raipur unit will take some time to stabilise. So, next quarter utilisation level should come down but overall the volume growth will be there.Reema: Last time you indicated that you will commission the Chhattisgarh unit by April of 2015. Is that on track and therefore in FY16 how much could your volumes be from the current 16 million tonne that you are hoping to achieve this year?A: That is very far away. We have already commissioned our cement grinding unit in Chhattisgarh. Between April or May we should be commissioning our clinkerisation unit. So, the project is well on time.As far as next year is concerned, we should be growing at 11 percent or so if the Indian market grows by 7-8 percent which is expected.