India Cements to acquire coal mine in Indonesia

India Cements, a Chennai-based cement company, is developing a coal mine in Indonesia that will start mining from the first quarter of the next calendar year. On the current status of the development, the company said that the construction of roads/bridges connecting the ports are in an advanced stage of completion, and tenders have been floated for mining.

The acquired coal mine will help the company to integrate its supply chain, as more than 50% of the coal requirement is met through imports. Further, it will also help it to reduce its exposure to the fluctuating coal prices.

India Cements is also in the process of setting up a 50 MW power plant near Tirunelveli in Tamil Nadu, which is expected to get completed by December 2011. This will help the company to reduce its power and fuel costs.

During September this year, the company witnessed a disturbance in the availability of coal in Andhra Pradesh on account of agitations, which lead to the purchase of high cost imported coal at these plants.

N Srinivasan, the company's Vice Chairman, was quoted as saying, “The coal mine acquisition is a strategic decision; it will reduce our exposure to the fluctuating coal price internationally”.

The margins for cement companies have remained under pressure during the fiscal year, largely due to higher coal prices and power and fuel costs. However, with the acquired coal mine and the 50 MW power plant, India Cements will get some relief on the overall cost, and can expect some improvement in the operating margins from Q4 of the fiscal year.

In its September 2011 quarter results, the company reported a jump of 25.02% in its net sales to Rs 1092 cr, as against Rs 843 cr in Q2 FY11. The jump in the net sales was largely on account of higher sales realisation, which was up by 44% to Rs 4500/tonne, as against that in the previous year same quarter. The net profits of the company stood at Rs 70 cr, against a loss of Rs 31 cr during the corresponding quarter last year.