Cement sector has off late
witnessed a very good traction with sales volumes and realisation both
witnessing good growth. And that was visible with all leading cement
manufacturers posting strong financial performance for June 2016 quarter. The
Ramco Cement also announced its June 20016 quarter performance where the better
sales volume has helped the company put up a strong show.
For the quarter ended June 2016
it posted a topline of Rs 972.09 crore and EBITDA of 306.07 crore as against Rs
950.91 crore and Rs 253.18 crore respectively for June 2015 quarter. As regards
companies bottomline, with consistent decline in interest cost Pat for June
2016 quarter stood at Rs 155.93 crore as against Rs 97.49 crore posted in June
2015 quarter.
As for the operational
performance volumes increased by 15 percent on Y-o-Y basis. To put the things
in absolute numbers, domestic sales volumes were 20.45 lakh tonnes in June 2016
quarter as against 17.82 lakh tonnes in June 2015 quarter.
The company has taken many cost
cutting measures for the quarter and its impact is visible on margins as well. To be specific the company reduced the
operating and logistics costs significantly and is confident of sustaining it
in the coming quarters also. On its wind farm division, the firm
said for the quarter ended June 30, 2016, the division has generated 706 lakh
units compared to 383 lakh units during the corresponding quarter of the
previous year.
As mentioned earlier the company manage
to reduce its interest cost. This was on the back of the fact that company reduced
its debt burden by Rs 312 crore.
As regards our view on the company,
we have three major positive factors. First is further expected uptick in
cement demand in southern part of India to drive growth. Secondly focus on
reduction of debt would be result in improvement on bottomline front. Though the
margins have already witnessed improvement in June 2016 quarter we expect that
margins set to improve further with improved realization. While there has been
already a 500 basis points improvement in June 2016 quarter, we expect another
250 basis points improvement going ahead. Even cash flows are likely to improve
going ahead.
About the Company
The Ramco Cements is a large cement manufacturer
with a total capacity of 12.50 million tonne per annum (MT). Out of this 7.55
Mt is in Tamil Nadu, 3.65 MT is in Andhra Pradesh and 0.29 mt in Karnataka. It
also has a grinding unit in west Bengal with a capacity of 1 mtpa. It also has
159 MW of Wind power generation capacity. One advantage the company has over
the other players is, Ramco is one of the lowest cost manufacturers of cement and
hence enjoys better EBITDA per tonne as compared to peers. This is one reason
that the company was able to sustain many economic cycles in the past as well.
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