MUMBAI: There was hardly something thrilling about Ramco Cements Ltd’s March quarter earnings. Cement quantity development slipped 11% year-on-year (y-o-y) to 2.93 million tonne hit by the coronavirus lockdown. Like its friends, the corporate’s administration is cautious about demand outlook and has warned of a slowdown within the builder and industrial segments.

Worth hikes undertaken earlier and elevated sale of premium merchandise aided realisations within the March quarter however features there have been offset by larger promotional expense.
To scale back price, Ramco Cements goals to trim commercial and gross sales promotion spend sharply in fiscal 2021, its administration mentioned. The saving grace, not only for Ramco Cements however for different cement corporations as effectively, has been benign gas costs. Ramco’s working prices through the March quarter remained below management because of delicate petroleum coke and coal costs.
Cement sector has been combating a tough scenario on the demand entrance for fairly someday now. Most of the time, realisations have been pushed by premiumisation for a lot of cement producers. So poor demand development and muted realisations have been synonymous with the sector. Nevertheless, an extra dampener for this inventory may very well be its elevated leverage on accelerated capital expenditure.
Of the deliberate capex of ₹3,300 crore, the corporate has incurred ₹1,900 crore until FY20-end. It must be famous that the corporate’s Vizag grinding unit was commissioned in March however the commissioning of the brand new greenfield Odisha grinding unit and clinker capability enlargement at Jayanthipuram has been delayed by three-six months to August and March, respectively, resulting from coronavirus-led disruptions.
In accordance with analysts this delay can’t be negated because it might push the corporate’s internet debt as much as an estimated ₹3,500 crore throughout first half of FY21. Ramco’s internet debt stood at ₹2,900 crore as finish of March, practically doubling from the year-ago interval. In fact, as soon as the enlargement is full, ramp-up of latest capacities would help volumes and enhance working prices. That mentioned, the near-term concern of a stretched steadiness sheet can’t be ignore.
In the meantime, on the NSE, the inventory has misplaced practically 16% on a year-to-date foundation. Its south-focused friends Orient Cements Ltd and India Cements Ltd have posted optimistic returns throughout this era. On the valuations entrance, the inventory trades at a one-year ahead price-to-earnings a number of of 24 occasions, which is at a reduction to rivals.

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