Birla Corp reports capacity utilisation of 91% in June quarter

Kolkata: Unusually weak cement prices and sluggishness in demand, coupled with an unprecedented downturn in the jute industry, weighed down Birla Corporation Ltd’s June quarter profitability.

In the face of contracting demand, the company’s sales by volume fell less than 1 per cent, thanks to improved capacity utilization at its Mukutban unit. Alongside, its Jute Division suffered a setback in the June quarter as the Government scaled back orders for jute bags and export of shopping bags was hobbled by logistical constraints.

Consolidated revenue for the June quarter at Rs 2,207 crore was down 9 per cent, while EBITDA at Rs 275 crore was 12 per cent lower than last year. Cement sales by volume during the quarter were at 4.38 million tons (mt) compared with 4.41 mt in the same period last year. This translates into a capacity utilization of 91 per cent, which is well ahead of rating agency ICRA’s estimated full-year average capacity utilization of 71 per cent.

Cement sales during the quarter were impacted by the general elections and extreme weather conditions in some of the company’s key markets. Still, the company ramped up sales of its premium products, the share of which was at 59 per cent of total sales by volume through the trade channel. Premium product sales at 1.85 mt during Q1FY25 represent a 2 per cent growth year-on-year (y-o-y). Sales by volume of Perfect Plus, the company’s flagship brand, grew 8 per cent over the same period last year.

Realization per ton for the Q1FY25 at Rs 4,820 was 7 per cent lower than last year, and resulted in EBITDA per ton falling 9 per cent to Rs 603. It is estimated that overall cement prices in the June quarter were down 3-5 per cent from the end of March as manufacturers pushed for market share despite tepid demand.

Demand remains subdued even in the current quarter, whereas supply-side expansion is expected in the central and eastern Indian markets due to commissioning of new units. As a result, cement prices are expected to remain under pressure until the third quarter of the current fiscal year.

Amid unfavourable market conditions, the company benefited from further decline in power and fuel costs, which fell 20 per cent y-o-y and 8 per cent sequentially. Alongside optimizing fuel mix, the company increased the share of renewables in total power consumption to 27 per cent versus 23 per cent in the same period last year and 25 per cent in the March quarter. The company also reduced its raw material costs for the Cement Division by 4 per cent from last year.

The company’s net debt at the end of June was Rs 3,152 crore. The company reduced its interest cost for the June quarter to 7.90 per cent, down 12 basis points from a year earlier.

Jute Division: Birla Jute Mills, or the Jute Division of the company, registered a cash loss of Rs 3.9 crore in the June quarter against a cash profit of Rs 6.4 crore last year. The jute goods industry is faced with multiple challenges, which forced major mills to scale back production. Government orders have fallen sharply, leading to an inventory pile-up. Most mills are currently running at partial capacity.

Besides reduction in govt orders, several cottage-size mills have sprung up in jute-growing areas. These have a substantial cost advantage over organized sector mills and they are fast eating into govt orders.