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Sunday, August 18, 2013

India Cements cuts capex to Rs 250 crore

This story first appeared in DNA Money edition on Wednesday, Aug 14, 2013.

India Cements has cut its capital expenditure plan of Rs 300 crore by Rs 50 crore, company officials said on a recent earnings call.

“The company’s current gross debt stands at Rs 3,230 crore and the company doesn’t intend to spend on capacity expansion in fiscal 2014. However, it may look at expansion over the next 2-3 years,” Mihir Jhaveri and Prateek Kumar, analysts at Religare Institutional Research, said in a company note on Monday.

The capex in this fiscal would largely be spent towards maintenance and some debt reduction.

In the first quarter, India Cements spent towards capex of Rs 60 crore, while it was Rs 530 crore for the entire last fiscal.

The company’s profitability was hit due to weak realisation despite its industry leading volume take-off in Q1. The company’s sales increased 3% on-year to Rs 1,240 crore, but its operating profit and net profit declined 31% and 59% yoy to Rs 193 crore and Rs 43.9 crore, respectively.

Rajesh Kumar Ravi, analyst, Karvy Stock Broking, said in his company note said while sales volume rose 11% yoy (as compared with industry growth of 3-4%), the company’s net realisation declined 1% quarter on quarter and 6% yoy.

“This was despite cement price improvement in Andhra Pradesh market during later part of the first quarter. Net realisation decline (3% below our estimate) resulted in Ebitda decline of 31% yoy (versus our estimate of 19% decline) and adjusted net profit decline of 59% yoy (versus our estimate of 39% decline).”

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