Orient Cement banks on declining operating cost, leveraging benefits for growth in second half of fiscal

Orient Cement on Thursday said that its financial results for the April to June 2023 period were “distorted” when compared sequentially, but the cement maker expects low costs to show impact for the October quarter onwards.

“The benefits of the softening fuel prices and petcoke prices are still flowing in and from the third and fourth quarter. We will have the full impact of the lower cost. Hopefully, post monsoon the demand should stay as strong as we are expecting it to be and with volumes. Operating leverage being available and fuel costs going down. All trends keep us completely on track for what we are chasing in this financial year,” Deepak Khetrapal, MD and CEO, Orient Cement told CNBC-TV18.

Khetrapal’s remarks come a day after the C K Birla group firm reported a marginal decline in its net profit at Rs 37.03 crore in the June quarter. It had posted a net profit of Rs 37.41 crore in the April-June quarter a year ago, Orient Cement said in a regulatory filing.

Its revenue from operation was up 15.58 percent at Rs 825.17 crore during the quarter under review as against Rs 713.93 crore in the year-ago period.

Orient Cement's total expenses were at Rs 772.39 crore in the first quarter of the fiscal, up 17.73 per cent.

Khetrapal told CNBC-TV18 that his firm was undergoing a maintenance shutdown at Karnataka’s Gulbarga plant in April. However, the overall impact in terms of volumes was managed well as the company saw 15 percent growth over the same quarter last year despite the shutdown, he said. He added that for the quarter, the impact of freight plus the maintenance costs put together would be about Rs 125-130 per tonne.

Orient Cement CEO also said that at the Gulbarga plant, the firm is utilizing 100 percent clinker capacity and that means it needs to build additional capacity.

“We are only awaiting the final clearances from the government for environment and the related to mining clearances. That will be the first expansion project we will be taking up within this year. We are still targeting that and before the end of the calendar year, we should start some construction activity and that is the aim that we are working towards,” he said.