Birla Corp

Q1 Net falls 53%

Aug 12, 2020 09:08 IST capital market

Birla Corp posted 53% drop in consolidated net profit to Rs 65.77 crore on 35% decline in income from operation to Rs 1,221.97 crore for the first quarter ended June 2020, amid severe disruptions in key markets and manufacturing centres on account of the impact of the Covid-19 pandemic lockdown from the end of March. The consolidated sales volume (including overseas) declined 33.9% to 2.4 million tonnes (mt), while realization eased by 0.2% to Rs 4,998 per tonne.

Consolidated Quarterly Performance

The Company consolidated income from operation declined 35% to Rs 1,221.97 crore for the first quarter ended June 2020, due to drop in sales volume.

The consolidated sales volume (including overseas) declined 33.9% to 2.4 million tonnes (mt). Even amid challenging market conditions, Company continued to push sales through the more profitable trade or retail channel, resulting in relatively better price realization. The company sold 2.06 mt through the trade channel, which accounted for 86% of total sales by volume for the quarter (up by 2percentage points from corresponding previous quarter). The share of blended cement within total sales also remained high at 94%. The share of premium cement in sales (by volume) through trade channels decreased to 36% as compared to 44% in corresponding previous quarter. Capacity utilization decreased by 38 percentage points to 58%. The Company realization eased marginal by 0.2% to Rs 4,998 per tonne.

The operations of the Companys plants stood suspended for nearly the entire month of April. Sales during this period were also negligible. Though things started to move in May, it was only in the latter half of the month that operations normalised. With production across most plants gaining steam only in the first week of May, around seven of 13 weeks were available during the quarter. However, local lockdowns and restrictions continued to hobble operations. Although it took longer than expected to restart operations, all teams mobilised for rapid rampup to deliver a high run-rate in the latter part of May and June. This partially compensated for the loss of volumes and earnings in the six weeks of the quarter, although sporadic disruptions in isolated pockets in core markets continued.

Clinker production at the Companys Satna and Chanderia plants could not start immediately after the general easing of the lockdown due to district-specific conditions. Similarly, the Companys two grinding units in Rae Bareli District of Uttar Pradesh could resume production only in early May, leading to loss of sales in our lucrative home markets. Once operations commenced, the Company maintained its leading position in these markets.

Operating margin (OPM) decreased by 130 bps to 19.1%, due to rise in other expenses by 220 bps to 11.6% and rise in employee costs by 230 bps to 7.6% as a percentage to sales and net of stock adjustments, were partially offset by drop in power & fuel expense by 210 bps to 18%, raw materials costs by 140 bps to 12.5%, and logistic expenses by 110 bps to 22.2% as a percentage to sales and net of stock adjustments. As a result, the operating profit (OP) declined by 39% to Rs 233.12 crore.

The Company managed to protect realization despite subdued demand and across the board inventory pile up. Realization for the June quarter was lower than last year, mainly because of the soft prices prevailing in the East. The 5% drop in EBITDA per ton at Rs 981 for the June quarter was on account of low fixed cost absorption, low capacity utilization and the adverse situation prevailing in some of the key markets of the Company. Sudden lockdown in the third week of March had also led to pile up of inventory at the depots which was liquidated during the quarter.

Faced with unprecedented uncertainties, the company has undertaken several measures to rationalize costs and improve efficiencies across the board. To shore up profitability, a special drive has been undertaken to aggressively reduce fixed costs and optimise transportation and distribution costs, including the cost of transporting fly ash by rail. These are being done in addition to reduction in power cost through higher generation of solar power and other optimisation measures as well as a change in product mix at certain plants.

Credit cycle has been tightened to manage credit risks owing to the tight liquidity situation in the markets. The Company has also been focusing on bringing down its finance cost on a continuous basis. During the June quarter, the average borrowing cost was 8.08% compared to 8.60% in the corresponding period last year.

Other income grew 13% to Rs 19.04 crore. With 17% jump in interest cost to Rs 79.97 crore and 2% rise in depreciation cost to Rs 87.67 crore, the Company PBT declined 61% to Rs 84.52 crore. With 76% decline in net tax outflow to Rs 18.75 crore, the Net Profit, as a result, fell by 53% to Rs 65.77 crore.

Annual Financial Performance

For the financial year ended March 2020 (FY 2020), consolidated income from operation of the company advanced by 6% to Rs 6,915.69 crore. OPM inclined by 480 bps to 19.3%, thus, OP rose by 41% at Rs 1,335.97 crore. Other income grew by 8% to Rs 85.13 crore. After accounting for finance charges (up 5% to Rs 387.67 crore), depreciation (up 4% at Rs 351.91 crore), the PBT inclined by 115% to Rs 681.52 crore. The tax outgo was up by 186% to Rs 176.34 crore. The effective tax rate rose by 640 bps to 25.9%. Thus, the Net Profit grew by 98% to Rs 505.18 crore.

Jute Division

The Companys jute division suffered a loss of Rs 3.42 crore in the June quarter, as against an EBJTDA of Rs 4.83 crore in the corresponding period of last year, because of a substantial loss in production due to the lockdown and disruption due to the Amphan cyclone which caused extensive damage. The Companys jute mill at Birlapur in West Bengal could operate for only 16 days during the June quarter compared with 89 days in the same period last year. Production during the June quarter was at 1,715 metric tons as against 8,583 metric tons last year.

Projects

The Companys ongoing project at Mukutban in Maharashtra was impacted by the prolonged lockdown when no work was permitted, and thereafter by shortage of workers as migrant labourers returned to home states. The Company was well on its way to complete the project ahead of its target date. However, these interruptions have constrained the management to revisit the project schedule. While construction is being stepped up progressively as workers return to the site, total remobilisation would take longer. Based on current projections, the Company is hopeful of completing the project by early 02FY22.

Current Demand Status

While April was a washout for most cement companies due to commercial activities coming to a standstill, markets began to open-up in May on the back of multiple factors such as pent up demand from the trade channels (which had run dry during the lockdown), pick up in rural housing, a good Rabi harvest and better availability of construction workers in the villages.

Construction in urban areas continued to be affected adversely due to acute shortage of workforce and spread of the pandemic leading to extended lockdowns in most cities. It is only towards end of June, some green shoots were visible thanks to demand from government-led infrastructure projects and release of funds for welfare schemes such as MGNREGA and PMGKY.

Although the Company saw better demand in Madhya Pradesh, albeit at lower price levels, demand from the profitable Bihar market was impacted due to the flood situation in several districts of North Bihar-traditionally a high realisation zone. In the East, both prices and demand remained depressed much longer than other regions due to the Covid-19 situation and more stringent regulations on people and road movements.

With the arrival of monsoons, cement prices have started to weaken in key markets from the end of June. Timely arrival of monsoons, however, augurs well for recovery of Indias economy. While demand during rest of the year will be a function of how the lockdowns in various regions of the country pan out from time to time, expectations of gradual easing of lockdown in urban areas and resurgence in infrastructure activities with migrant workers returning to construction sites are indicative that the worst may be over for the industry. The Company remains cautiously optimistic about a gradual return to normalcy over the next few months.

The scrip hovers around Rs 653.05 (07 August 2020) on the BSE.

Birla Corp : Consolidated Results

 

2006 (3) 1906 (3) Var % 2003 (12) 1903 (12)
Income from Operations 1221.97 1883.81 -35 6915.69 6548.73
OPM (%) 19.1 20.4 19.3 14.5
Operating Profit 233.12 384.65 -39 1335.97 948.61
Other income 19.04 16.86 13 85.13 78.47
PBIDT 252.16 401.51 -37 1421.10 1027.08
Interest 79.97 96.03 -17 387.67 370.52
PBDT 172.19 305.48 -44 1033.43 656.56
Depreciation 87.67 86.24 2 351.91 339.12
PBT before EO 84.52 219.24 -61 681.52 317.44
Exceptional Income/Expenses 0.00 0.00 0.00 0.00
PBT after EO 84.52 219.24 -61 681.52 317.44
Taxation 18.75 78.62 -76 176.34 61.74
Net Profit 65.77 140.62 -53 505.18 255.70
EPS (Rs)* # # 65.6 33.2
* EPS is on current equity capital of Rs 77.01 crore Face value of Rs 10
# EPS Not Calculated As It Is A Seasonal Business
Var % exceeding 999 is truncated to 999
LP: Loss to Profit PL: Profit to Loss
EO: Extraordinary items
EPS is calculated after excluding EO and relevant tax
Figures in Rs crore
Source: Capitaline Corporate Databases

Birla Corp: Segment Results

 

2006 (3) 1906 (3) Var (%) % to Total 2003 (12) 1903 (12) Var (%) % to Total
Segment Revenue
Cement 1189.42 1803.27 -34 97 6582.43 6216.8 6 95
Jute 32.57 80.07 -59 3 333.27 331.2 1 5
Others 0.95 1.61 -41 0 8.21 6.73 22 0
Total Revenue 1222.94 1884.95 -35 100 6923.91 6554.73 6 100
Less: Inter Segment Revenue 0.97 1.14 8.22 6
Net sales 1221.97 1883.81 -35 6915.69 6548.73
Segment Results (Profit before Finance Cost, Exceptional Items & Taxes)
Cement 166 311.64 -47 103 1046.04 671.07 56 99
Jute -4.25 3.05 -239 -3 13.59 10.57 29 1
Others -1.26 -0.51 -2.69 -3.19
Total 160.49 314.18 -49 101 1056.94 678.45 56 100
Finance Costs 79.97 96.03 -17 387.67 370.52 5
Exceptional Items 0.00 0 #DIV/0! 0.00 0 #DIV/0!
Other Unallocated expenditure / (Income) -4 -1.09 ` -12.55 -9.51 `
Profit before Tax 84.52 219.24 -61 681.82 317.44 115
Capital Employed (Segment Assets-Segment Liabilities)
Cement 8278.49 8126.05 2 169 8320.45 7682.78 8 173
Jute 888.96 894.23 -1 18 920.47 914.33 1 19
Others 145.23 147.25 146.12 146.8
Unallocated Capital Employed* -4417.65 -4564.69 -3 -90 -4580.87 -4248.65 8 -95
TOTAL 4895.03 4602.84 6 97 4806.17 4495.26 7 97
Figures in Rs crore
Source: Capitaline Databases

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