The Director Board of Malabar Cements Ltd (MCL) has since April 14, 2011 stopped the freight, volume and wagon discounts that were given to its dealers during the last seven months. The Director Board of the company at its meeting here on March 28, 2011, decided to stop the dealer discounts as it was found unnecessary in the wake of high demand for cement and its rising prices.
On July 30, 2010, the new Managing Director had chaired a meeting of the Marketing Department and taken a decision to restore the discounts that were stopped way back in 2004 after it was found to be a drain on the company profit. Sources said the company had been losing Rs.30 lakh every month since August 1, 2010 by way of discounts given to dealers.
MCL cement is sold at Rs.289 ex-factory price which was the same price as other major cement brands sold in the State, company sources said. The daily production of cement at its factory at Walayar was 1,500 to 2,000 tonnes. The company gave freight discount of Rs.15 a bag in Kozhikode; Rs.17 in Ernakulam; Rs.13 in Thrissur and Rs.10 in Malappuram. Wagon discount was Rs.7 a bag and volume discount, Rs. 3. Company sources said a minimum of 4 lakh bags of cement were sold by the MCL every month.
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They said these discounts had invited audit objections as they were found unnecessary and a big financial burden on the company. In the 2004-05 fiscal, the company had given a discount of Rs.5.77 crore. In 2005-06, a record discount of Rs.13.08 crore was given when the profit of the company plunged to an all-time low of Rs.2.5 crore.
Taking into account this situation, the then Managing Director had brought down the discount percentage and gave only Rs.5.95 crore in 2006-07. In 2006-07, the company's profit rose to Rs.27 crore compared to Rs.2.5 crore during the previous year. However, in August 2010 the present Managing Director restored all the three discounts and the company's profit had come down in 2010-11, the company sources said.