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Binani Cement Ltd has admitted that it has faced heavy pressure on cement price realisation and high input costs. However, the company has reported a modest growth in net sales
Binani Cement Ltd has admitted to pressure on price realisation for cement due to over capacity, low demand from the commercial real-estate segment and high input costs. The company has registered a modest 12% growth in net sales of Rs423 million, from Rs3,600 million in Q3FY2009 to Rs4,023 million in Q3FY2010.
“In this quarter, the realisation of cement was less on the pricing side. There is a pressure on cement pricing everywhere. In addition, input costs—especially logistics costs—have increased,” said Vinod Juneja, managing director, Binani group of industries.
According to Mr Juneja, if it were not for the Dubai crash and the Andhra Pradesh turmoil, net sales could have been better by around 10%.
Mr Juneja attributed the pressure on cement prices to the turmoil in Andhra Pradesh. “For the last quarter, we do not have capacities in the south, but cement companies operating in (the) Telangana (region) and (the rest of) Andhra Pradesh started diverting supplies to Maharashtra and Gujarat. This resulted in a drop in the realisation of prices for cement. But we have still not incurred any loss.”
Cement prices all over India have stabilised, backed by the peak demand season for cement. Mr Juneja expects this rise in price to continue up to June 2010. The rise in cement prices started in December 2009, with significant price rise registered in the southern and western regions. Analysts expect this rise in price to continue till March-April 2010.
Before the recent rise in prices, cement prices all over the country were on a continuous downfall. In a short span of time between August to October 2009, cement prices had fallen from Rs230 per bag to Rs140 per bag. The southern region was worst affected by the downfall.
Binani also has huge investments in cement plants in Dubai. Cement production from Dubai has now been diverted to other countries. “Binani Cement Ltd was a major supplier to real estate in Dubai. To overcome the problem in Dubai—at least for the next one to two years—we are immediately opening our African markets and markets in Sudan, Kuwait and South Africa. Iraq and Oman will also be tapped,” added Mr Juneja.
On the fall in cement prices in Dubai, he added, “In good times, we were able to sell cement at around 350 dirhams per tonne of cement, which has now come down to roughly 240 to 250 dirhams per tonne. We are not selling it for a loss, but there are hardly any margins left.”
Binani Cement has reported an increase of 573% in profit after tax from Rs84.90 million in Q3FY2009 to Rs571.70 million in Q3FY2010.
Consolidated marketing & distribution costs down by 50%, but other expenditure rises 41%
There is a widespread belief that if the stock market does well over a prolonged period, TV18’s revenues would rise sharply. The assumption is that CNBC TV18’s extensive market coverage is bound to attract audiences to the channel and its various other properties, thereby boosting advertisements. TV18’s managers encourage this belief and analysts propagate this avidly too. However, this has turned out to be a false belief, as per its December quarter results. The Sensex has rallied by more than 100% from March 2009 to January 2010.
However, even after this strong rally, TV18’s revenue for the December quarter was down from Rs130 crore to Rs129 crore. Revenue from the core broadcasting operations was up by only 10%. Meanwhile, TV18 is still reeling from large losses. On a nine-month basis, coinciding with a massive bull market, the net loss has jumped 139% to Rs148 crore from Rs62 crore for the corresponding period of the previous fiscal.
In fact, losses have become so deep set that TV18 has had to slash costs in all four business segments it operates in. It slashed its distribution, advertising and business promotion costs by 50% in the December 2009 quarter, but clearly it still does not have its costs aligned to its weak business model. Its other expenditure has rocketed for the December 2009 quarter. TV18’s marketing and distribution costs are down by 50% to Rs13 crore for the December 2009 quarter from Rs26 crore in the corresponding year-ago period. Staff costs for the quarter are down by 31% to Rs39crore (from Rs57 crore). However, other expenditure has shot up to Rs71 crore from Rs48 crore, a rise of 41%. Saving on staff cost and distribution expenses on one hand and increase in other expenditure on the other hand leaves the company in no better position.
TV18’s flagship news channels, CNBC TV18 and CNBC Awaaz have registered a net loss of Rs21 crore in the December 2009 quarter from a net profit of Rs4.6 crore in the corresponding quarter of the previous year, which was boosted by Rs27 crore of other income. On a consolidated basis, TV18 has registered a net loss of Rs42 crore, up from Rs30 crore. TV18 has under its umbrella business brands like CNBC TV18 and CNBC Awaaz, Web18, Newswire 18, Infomedia 18 and IBN18, most of which are in the red since inception, irrespective of market conditions.
Last year, Infomedia launched the Forbes magazine in India. The magazine was priced at Rs50 in an inaugural offer, which is now sold at Rs100. Subsequently, it launched Entrepreneur, a magazine for the small-business segment priced at Rs75. These ventures have been a big drag on revenues.