With prices picking up since mid-May in Andhra Pradesh, the current fiscal could well signal a recovery for the cement industry in the South.
Terming the reversal in prices in Andhra Pradesh as ‘a significant development’, N. Srinivasan, Vice-Chairman and Managing Director of The India Cements Ltd., said there “is a decent chance for the recovery to continue”.
Addressing a press conference here on Thursday, he expressed optimism that “there will be sanity in the marketplace for sometime — at least a year”.
Fielding a range of questions, he said prices in Hyderabad had now moved up to Rs.295 from Rs.195 a bag couple of months ago. The Andhra Pradesh market, he said, had seen price slump to maximum levels. The price recovery had enabled the company to improve the capacity utilisation to 77 per cent in the last two months or so, he pointed out. The capacity use during the same period last year was 67 per cent, he said.
With capacity creation slowing down considerably, he expected the price recovery to continue in the coming days. To a question, he said the capacity ‘over-hang’ was not much in the North. In this context, he pointed out that a quarter of the country’s limestone deposit was in Andhra Pradesh. Though cost had gone up quite substantially due to higher power tariff and freight rates in the State, he expected things to improve once the 50-MW captive power plant in Andhra Pradesh went on stream sometime next month. The price correction that was happening in Andhra Pradesh would help improve EBIDTA (earnings before interest, depreciation, tax and amortisation) depending on the sales volume going forward, he said.
To a question, he said, “in terms of leadership, we are strong as ever before”. He felt the drop in market cap would at best be “very temporary”, and asserted that the company’s fundamentals were very strong. Mr. Srinivasan also informed presspersons that the company was evaluating every business it was in. Asserting that it was more to re-focus efforts, he said “We are evaluating how we can trim our business”. Queried further, he merely said, “We are taking steps. We will make announcements as we go forward”.
