Birla Corporation Limited has, in FY2021-22 achieved its highest ever cement sales by volume, overcoming unprecedented challenges such as cost pressure, sluggish demand and disruptions owing to the Covid-19 pandemic.
Sales for the full year at 14.22 million tons (mt) represent a 6.2% growth over the previous year. The previous highest of 13.65 mt was achieved prior to the pandemic in FY2018-19. The spurt in sales came mostly towards the end of the financial year. March quarter sales at 4.24 mt were up 27% sequentially and 1.7% year-on-year.
Sales in the three months till 31 March were the highest ever for a quarter. Birla Corporation’s capacity utilization for FY2021-22 was one of the best in the industry at 92% against 85% in the previous year.
This translated into a revenue growth of 9.8% for the full year and 8.7% for the March quarter, but even so, profitability came under immense pressure because of the extremely high fuel costs which could not be passed on to consumers.
Market conditions were not conducive for price hike until at the end of the financial year, and it is estimated by rating agency Crisil that margins for the cement industry contracted by 400-500 basis points in FY2021-22.
Though Birla Corporation managed to raise its full-year realization from cement sales to Rs 4,938 per ton, up 2.2% over Rs 4,829 in the previous year, it wasn’t enough to mitigate the cost pressure. The Company’s EBITDA for the full year at Rs 1,208.79 crore was 15.9% lower than the previous year. EBITDA per ton for FY2021-22 declined 25.4% year-on-year to Rs 755.
While Profit before Tax for the March quarter at Rs 153.18 crore was lower by 14.8%, the net profit at Rs 111.08 crore was down 55.5% year-on-year, due to one-off credit adjustment of Rs 124.98 crore in income-tax expense in the previous year. Similarly, profit before tax for the year at Rs 537.75 crore was down 24.5%, while the net profit for the year at Rs 398.59 crore was 36.8% lower than the previous year.
Faced with unfavourable market conditions, Birla Corporation chose to focus on volume growth. While scaling up sales in all key markets, the Company achieved several feats during the year such as registering the highest ever full-year sales in as many as five States, including Uttar Pradesh and Madhya Pradesh—the biggest markets for Birla Corporation.
Alongside, Birla Corporation managed to shore up sales of blended and premium cement. For the full year, sales of blended cement at 12.87 mt represent a year-on-year growth of 4%, while sales of premium cement were the highest ever at 5.69 mt, up 7% over the previous year.
Despite healthy growth in sales by volume in almost every segment and market, Birla Corporation’s profitability was hugely impaired by at least 40% increase in fuel cost and 8% increase in cost of delivery. Freight costs continued to rise through the year as diesel prices were revised in tandem with rising crude prices. To rationalize cost of delivery, the Company worked towards reducing the lead distance for each production unit and dependence on road transport.
During the year, the Company launched a super-premium brand Rakshak, sales of which have gained momentum. In its bid to improve market penetration, the Company has in FY2021-22 appointed close to 2,000 new dealers. However, going forward, it is looking to sharpen focus on the non-trade segment as well with the anticipation that it will emerge as a major growth driver in the current financial year.
“Despite achieving the highest ever production at three of our units—Satna, Maihar and Chanderia—and record sales in five States, our profitability took a hit because of excessive rise in fuel and freight costs, which could not be passed on to consumers,” said Shri Harsh V. Lodha, Chairman, MP Birla Group. “The tide has, however, started to turn from March, and we are hopeful that in the current financial year, our Company will reach new heights. The Mukutban unit which has commenced production at the end of April will add a lot of heft to our cement business in the near future.”
Mukutban: During FY2021-22, Birla Corporation’s subsidiary RCCPL Private Limited commissioned its 3.9 mt cement plant at Mukutban in eastern Maharashtra. This new unit has boosted Birla Corporation’s consolidated annual production capacity to almost 20 mt. Despatch of cement has started from the Mukutban plant and it is expected that the plant’s operating parameters will reach optimum levels by the end of the current financial year, pending further ramp-up.
Mining: As coal becomes more scarce and expensive, Birla Corporation is scaling up extraction from its own captive mines. Production from Sial-Ghoghri coal mine has recently been ramped up to 30,000 tons per month, which is 20% higher than its peak rated capacity. The Company has accelerated the development of its Bikram coal mine, where extraction of coal is expected to start in the fourth quarter of the current financial year. These initiates will insulate the Company from the volatilities in fuel prices to a large extent.
IT initiatives: Birla Corporation continues to focus on IT initiatives across all functions to improve efficiency in operations, optimize costs and to provide better service to consumers. During FY2022-23, the Integrated Logistics Management System will become fully operational at the Company’s integrated plants, which will substantially improve supply-chain efficiencies.
Jute Division: The Jute Division turned impressive profits for yet another year by focusing on and shoring up production of value-added goods. The division clocked a cash profit of Rs 46.16 crore for FY2021-22, more than twice the cash profit of Rs 21.62 crore in the previous year. Despite disruptions in supply of raw jute, the division scaled up production to 30,792 metric tons during the year compared with 24,907 metric tons the previous year. For the March quarter, the division registered a cash profit of Rs 9.36 crore, up 8.8% year-on-year. During the year, close to 3.5 million shopping bags were exported against 1.2 million the previous year. The division is scouting for further opportunities to scale up exports in countries such as the USA, UK and France. Because jute is environment-friendly, the Company sees strong growth prospects in this business.