Shree Cement Disappoints In September 2013 Quarter

Shree Cement’s Q1FY14* results bring no cheer for the company’s investors. The topline plunged by 4% to Rs 1248 crore as against Rs 1296 crore in Q1FY13, while the bottomline dipped 25% to Rs 172 crore on a yearly basis.

The company has two main revenue generating segments, viz. Cement and Power. The cement revenues declined by 6% to Rs 1087 crore in Q1FY14 as compared to Rs 1160 crore in Q1FY13, while the power segment registered sales growth of 16% from Rs 260 crore to Rs 302 crore on a yearly basis.

During the quarter, Shree Cement’s expenses rose by 11% to Rs 1112 crore as against Rs 1000 crore in Q1FY13. This was due to the increase in raw material cost, employee expenses and freight costs, which grew by 13%, 31% and 17% on a yearly basis.

The EBITDA for the company declined by 36% YoY to Rs 249 crore, while the EBITDA margin dipped from 30% to 20%. Its finance costs plunged by 43% to Rs 31 crore on YoY.

On a YTD basis, Shree Cement’s stock has gone down by 5% to Rs 4460, with a TTM price-to-earnings ratio of 16x.The present situation of the cement industry is pretty disappointing. So far, none of the companies belonging to this sector have been able to post impressive results for the September 2013 quarter. High input costs and freight costs hit the sector overall and hampered its profit margin. Moreover, infrastructure development and construction activities declined in a sluggish economic condition, which in turn reduced the sales of cement. Thus, investors are advised to stay away from this counter.

*The company follows July to June as its fiscal year.