Corporate Performance     

Published: October 31, 2024
Updated: October 31, 2024

Birla Corporation

Plant efficiency uptick to spur growth

Birla Corporation (BCL) is the flagship company of the MP Birla group, with interests in the cement and jute industries. Including its subsidiary RCCPL Pvt Ltd, the company has 10 cement plants in eight locations across the country with an annual installed capacity of 20 million tonnes. The company produces an array of cement products, under the MP Birla Cement brand, suited to different climatic conditions as well as consumer segments. It also sells construction chemicals and wall putty.

BCL reported a September quarter consolidated EBITDA of Rs 194 crore against Rs 316 crore in the same period last year. In the traditionally weak monsoon quarter, cement demand was sluggish and prices plummeted to record lows in all key markets. The company’s EBITDA per tonne from cement sales for the September quarter was at Rs 461 compared to Rs 683 in the same period last year. The cement division’s EBITDA margin at 9.8% for the September quarter represents a contraction of around 300 basis points from a year ago.

The company’s consolidated revenue at Rs 1,970 crore was down from Rs 2,312 crore in the same period last year. Cement sales by volume during the September quarter at 3.97 million tonnes were down 5% from a year ago. An extended monsoon, floods and a slow pick-up in government demand were said to be largely responsible for the unusually weak demand. Despite adverse market conditions, BCL was able to achieve an overall capacity utilization of close to 80%, and around 90 % in core markets. With the realization per tonne from cement sales in the September quarter at Rs 4,697, the company contained the decline at 3% sequentially.

‘MOST EFFICIENT’

The Mukutban plant of the company’s subsidiary, RCCPL Private Limited, has achieved the best-in-class allround performance: it optimized product mix and stabilized market footprint. As market conditions improve, the company’s mid-West operations are expected to improve profitability

The manufacturing assets of the RCCPL cements plants at Maihar, Kundangunj and Mukutban are considered among the most efficient units in the industry, and are to be the key growth drivers of the company going forward.

Work on Kundangunj Line 3 with a capacity of 1.4 mt is continuing full steam, and it is expected to be commissioned by the first quarter of the next financial year. The initiatives undertaken by BCL in the post-Covid environment to bring about excellence in manufacturing, supply chain and logistics paid off by reducing variable costs in cement production by 11% from the previous ye

POWER SAVINGS

While ramping up the share of renewables in total power consumption to 25%, against 23% a year ago, the company rationalized its power and fuel costs by optimizing the fuel mix and increasing generation from the Waste Heat Recovery System (WHRS). Helped by a sharp drop in pet coke prices, the cement division’s power and fuel costs for the September quarter were down 16% from the previous year.

Alongside, BCL continued to push sales of premium products even amid flagging sales. Sales through the more profitable trade channel were maintained at 71% of total sales, roughly the same as a year ago. The share of blended cement in total sales was a tad lower than last year at 83%. In its pursuit of scaling up consumption of green power, the company has entered into an agreement with a private enterprise to provide 12 MW of renewable power at the Maihar unit. The supply of power from this captive unit is expected to start within the current financial year.

Outlook: The company remains cautiously optimistic about the December quarter. With the festive season continuing till mid-November and assembly elections being held in Maharashtra, recovery in demand is expected to be delayed till end-November. However, a good rabi crop and Central government expenditure on infrastructure announced in this year’s Union budget are expected to provide impetus to the economy. On balance, with a moderate increase in prices and a visible uptick in demand, one expects the cement industry to recover the losses of the last two quarters with a buoyant performance in Q4 of the current financial year.