Mangalam Cement Reports Decent Numbers For March 2012 Quarter

Mangalam Cement, a B K Birla Group company, has reported its results for the March 2012 quarter. The net sales of the company have gone up by 50 per cent on a YoY basis to Rs 200 crore. The operating profit grew by 17 per cent on a YoY basis. The jump in the top line was on the back of increase in the sales volume during the quarter. The sales volume of the company increased by 18 per cent on a QoQ basis to 0.511 million tonnes. Further the realisation has moved up by 23% on YoY basis to Rs 3931/tonne. However despite better dispatches and higher realisation the net profit of the company declined by 7.4 per cent on a YoY basis to Rs 18.04 crore. 

Higher raw material cost (up by 28 per cent on a YoY basis) and power & fuel expenditure (up by 63 per cent YoY) impacted the EBITDA margin of the company which declined by 300 bps to 15.7 per cent as against 18.8 per cent in the same period last year. However, a higher impact was seen on the net profit of the company which declined by 550 bps to 9 per cent on a YoY basis. This was largely on the back of an increase in the tax charges which included the reversed deferred tax asset amount.  The management said that the high coal prices and high pet coke prices impacted the margins of the company during the quarter. Pet coke prices went up by 10% to Rs 7550/ tonne vs. that of Rs 6900/tonne in the previous quarter.

On the demand side management said that demand will slow down in the next two quarters due to monsoon.  The management also mentioned that in the April month the construction activity has slowed down because of issues such as sand availability and labour problems.

In conclusion we believe with demand slowing down the cement price will also start reducing in the June quarter. Therefore the Lower cement prices coupled with problems of high input cost such as coal, Pet coke, and high Freight charges the margins of the cement companies will come under pressure in the June quarter 2012.

Mangalam Cement is an integrated cement manufacturing company based in the northern region. It primarily caters to the markets of Rajasthan, Madhya Pradesh, Haryana and western Uttar Pradesh. The company has a cement plant of 2 MTPA capacities and a coal-based power plant of 35 MW for captive consumption. After the result announcement the stock is currently down by 3 per cent on the BSE.