Birla Corporation June quarter EBITDA at Rs. 252 crore in a challenging environment

Kolkatta, August 9, 2020: Birla Corporation Limited reported a June quarter EBITDA of Rs 252 crore, which represents a drop of 37% from last year amid severe disruptions in key markets and manufacturing centres due to the Covid-19 pandemic.
The operations of the Company’s 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 ramp-up 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.
Cash profit and net profit for the quarter at Rs 172 crore and Rs 66 crore, respectively, are the result of a turnaround in end May and June, though significantly lower than last year on account of the impact of the lockdown from the end of March.
Revenue for the June quarter (including other income) at Rs 1,241 crore declined 34.7% year-on-year as sales by volume dropped 33.9% to 2.4 million tons (mt).
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.
Clinker production at the Company’s Satna and Chanderia plants could not start immediately after the general easing of the lockdown due to district-specific conditions.
Similarly, the Company’s 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.
Birla Corporation Limitedmanaged to protect realization despite subdued demand and across the board inventory pile up. Realization for the June quarter at Rs 4,906 per ton was 0.5% 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.
Even amid challenging market conditions, Birla Corporation Limitedcontinued to push sales through the more profitable trade or retail channel, resulting in relatively better price realization.

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