Shree Cement January-March Quarter Net Profit Contracts By 19%

Income from operation of the company stood at Rs 1664.9 crore with an increase of 15.4% during the March quarter CY’14 as against Rs 1442.8 crore in same period of previous year. Further operating EBITDA recorded marginal growth of 2.5% and stood at Rs. 431 crore in the said quarter. However net profit of the company decreased by 18.8% to Rs 222.5 crore in Q1CY14 from Rs 274.1 crore in Q1CY13.

The company witnessed sharp increase in its major expenditure during the quarter (Jan-March CY14). Freight and forwarding expenses of the company reached to 20.6% of total operating income in the said quarter from 16.6% of total operating income in same period of previous year. Moreover, other expenses for the company came up to 19% of total operating income in the period from 17% in the same quarter of previous year. But one positive thing is that, the company’s power and fuel cost showed marginal improvement and came down to 23% of total operating income in Q1CY14 from 24% in Q1CY13.

The sharp hike in expenditure has resulted in low profitability margin for the company. Operating EBITDA came down to 25.8% in Q1CY14 from 29.2% in same period of the last quarter. Further net profit margin for the company fell to 13.5% in the said quarter from 19% in corresponding quarter of previous year. Main reason for fall in net profit is increase in exceptional item of the company. During the quarter Shree Cement had written off pre operative expenses incurred on certain projects to Rs 11.24 crore and made provisions toward statutory liabilities amounting Rs 29.62 crore. Moreover it made another provision of Rs 32.87 crore during the quarter. If we ignore the exceptional item the net profit of the company would show growth of 8% for the said quarter. 

Coming to segment wise performance, cement division (which contributes 82% of operating revenue) of the company showed a strong growth of 29% in Q1CY14 despite of slow growth of infrastructure and real estate sector and reached to Rs 1487.4 crore during the quarter but power division of the company performed badly and dropped by 21% to Rs 339 crore in the preceeding quarter. 

At CMP of Rs.5732.8 per share, the stock is trading at 23.6x times of its trailing 12-months earning.