India Cements faces steep earnings cuts as company-specific concerns loom

livemint.com:

India Cements Ltd is seeing sharp cuts in its FY24/FY25 earnings estimates after it disappointed investors with its unimpressive June quarter (Q1FY24) earnings performance. Shares fell nearly 1.5% on the National Stock Exchange in early deals on Tuesday. Its cement division posted an operating loss, yet again.

Overall, Ebitda (earnings before interest, taxes, depreciation and amortization) saw a sharp year-on-year dip and net loss stood at Rs75.3 crore. Volumes at 2.66 million tonnes (mt) were flat year-on-year and fell sequentially. According to the management, sales volumes were constrained by liquidity crunch being faced by the company.

However, in an attempt to boost its operational efficiencies, the company plans to consult Boston Consulting Group to help cost reduction to the tune of Rs200/tonne by March 2024 at its three plants located in Andhra Pradesh. Also, the management intends to undertake capital expenditure of ₹35 crore over FY24/25 aimed at improving cost efficiencies. To fund this capex, the company expects to generate Rs100 crore via the sale of 80–90 acre of land parcels.

The management expects benefits of easing raw material prices to reflect in the company’s performance gradually, but dealers channel checks show that cement prices have failed to see an uptick in the recent months across most regions in India. This has prompted some analysts to trim their earnings expectations from the company. “We are slashing FY24/25E Ebitda by 34%/12% to factor in the weak pricing environment," said a Nuvama Research report.