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Rising fuel prices, company-specific one-offs impacted margin in Q2: JK Cement

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Rising fuel prices, company-specific one-offs impacted margin in Q2: JK Cement


Rajnish Kapur, COO, JK Cement, shared that rising fuel prices and company specific one-offs impacted margin in Q2. He expects margin to be in the 24-25% range, going ahead.

JK Cement posted weak Q2 earnings on the back of higher expenses and costs.  Operating profits for the company were down 24 percent year-on-year (YoY) at Rs 330 crore in Q2 versus Rs 432 crore; operating profit margins too were down on a YoY basis at 17.4 percent versus 26.4 percent. The power and fuel expenses were up 22 percent at Rs 360 crore this quarter compared to Rs 295 core for the same quarter last fiscal. However, YoY revenues were up 16 percent at Rs 1,895 crore versus Rs 1,634 crore.

Rajnish Kapur, COO, JK Cement, in an interview with CNBC-TV18, shared the outlook in terms of price and volumes, going forward.
On margins, he said, “In the last quarter there was maximum pressure because of a couple of factors, one is industry-specific factors in terms of the steep rise in fuel prices, in terms of petcoke and diesel rate increases, which impacted everyone and second, company-specific one-offs. We had an impairment of an old asset which we modernized and that hit our books. We are in the process of establishing a new market and the new integrated plant is coming up, so we made some investments in brand building.”
“Keeping all those things in mind, the margins would certainly improve going forward. As the newly upgraded plant kicks in, the cost savings would happen,” said Kapur.
He said the margins would continue to be in the 24-25 percent range.
Kapur said, “Post-Diwali, volume growth for the industry slowed down a bit although usually post-Diwali, market tends to pick up. This could also be because October witnessed quite a steep increase in volumes pre-Diwali and so month-on-month, the drop looks significant.”
However, volumes are expected to pick up in the second half of this month, said Kapur.
He further said, year-to-date, the company has seen about 39 to 40 percent volume growth in the grey cement business, and going forward the expectation is to maintain the growth this year as well. “So, we are looking at 20 to 25 percent growth over last year’s volumes.”
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On price increase, he said, “We have been wanting to increase prices because of cost pressures but we have not been able to do that. In fact, there has been a bit of a cooling down of prices in most of the markets; cooling down was in the range of Rs 5-10, and on an average, it’s been around Rs 5.”
When asked if Q3 prices would be higher, Kapur said, “It could be a little difficult to state at this point of time but Q3, on an average, should be at least 4-5 percent higher than Q2.”
For the full interview, watch the video
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