Shree Cement Limited on October 14 reported a 67 percent plunge in standalone net profit of Rs 189 crore in the second quarter of FY23, as against a profit of Rs 578 crore recorded a year ago. On a sequential basis, the profit dropped 40 percent from Rs 316 crore earned during the previous quarter.
Standalone revenues for the Rajasthan-based cement major rose 18 percent on-year to Rs 3,781 crore as compared to a revenue of Rs 3,206 crore registered in the year-ago quarter. On a sequential basis, the revenue was 10 percent lower from Rs 4,203 crore recorded in the previous quarter.
The company was able to grow its volumes during the quarter compared to last year which coupled with better realizations aided the year on year growth in revenues. However, the usage of high cost inventory of coal and pet-coke severely impacted the profitability.
Surging costs
The cost of raw materials as percentage of revenues rose 83 basis points (bps) to 7.6 percent for the quarter. Sequentially, the raw material cost was higher by 35 bps as a percentage of revenues.
The inventory cost for the company jumped more than 250 bps to 1.6 percent as a percentage of revenues for the quarter. The company had witnessed a decline in its inventory costs during the same period last year. Sequentially the increase was even higher at 480 bps.
The company was able to rein in employee costs, which declined 77 bps on year but on a sequential basis, there was an increase of 37 bps.
The full effect of the surge in global crude and coal prices during the previous quarter was now felt during the current quarter. On a YoY basis, the power and fuel cost surged 1,285 bps to 32.5 percent of revenues. Compared to the previous quarter however, the power and fuel cost was lower by 187 bps.
The cost of depreciation as well was higher by close to 180 bps on both the yearly and sequential basis.
Impact on margins
Consequently, due to the rise in costs, the operating and net margins for the quarter took a severe beating. The operating margin for the quarter stood at 18 percent, down 1500 bps from the operating margin of 33 percent recorded during the year ago period. Sequentially, there was a decline of 100 bps.
Similarly, the net margin was down 1300 bps to 5 percent as compared 18 percent achieved during the September ending quarter of last year. Compared to the previous quarter, the net margin was down 300 bps.
Changes in Management
The board of the company approved the appointment of Hari Mohan Bangur as Chairman of the company with effect from October 15, 2022. He was the Managing Director of the company and replaces Benu Gopal Bangur, who was at the helm of the company as Director and Chairman since its inception. Neeraj Akhoury is now the new MD after the Board approved his appointment for the position.
Benu Gopal Bangur has now been appointed as ‘Chairman Emeritus’.
The board also approved the appointment of Prashant Bangur as Vice Chairman. Till now, he was holding the position of Joint Managing Director.
Shree Cement closed 0.31 percent higher at Rs 21,140 per share on October 14 on the NSE. The stock is down 24 percent over the past one year and has declined 12 percent in the past one month.
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