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Birla Corp. posts lower Q1 net profit

World Cement,

Birla Corp. Ltd, a flagship company of the M P Birla Group and cement major, has announced a lower net profit of Rs 111.88 crores in the first quarter ended 30 June 2011, against Rs 118.28 crores in the previous corresponding quarter. The turnover for the quarter was Rs 642.12 crores (Rs 651.99 crores).

The lower turnover and profit has been attributed to reduced ex-works realisation in the cement division, as well as higher power and fuel costs.

Shri Harsh V Lodha, Chairman of Birla Corp. Ltd, said that profitability was affected because of growing input costs and poor off-take of cement. He referred to the steep increase in coal and freight costs, which have been putting pressure on profit margins. Realization was affected in the central and eastern marketing regions covered by the company’s units at Satna and Durgapur.

Shri Lodha stated that the demand for cement was also affected on account of elections held in five States during the first-half of the quarter under review. Additionally, bunching of capacities, coupled with poor demand for cement from the government and the infrastructure and realty sectors, were affecting the profitability of cement companies.

However, the Chairman remained optimistic that the government’s planned expenditure in the infrastructure sector, if implemented, would have a positive impact on the sales of cement in the medium to long-term.

In a statement released on its website, Birla Corp. confirmed that all of the debottlenecking projects undertaken at the company’s clinker manufacturing units at Satna and Chanderia, have been completed, and operations at the units have stabilised. The company’s cement capacity currently stands at 7.5 million t.

Work is progressing on the 1.2 million t brownfield expansion at Chanderia and the 0.6 million t grinding capacity addition at Durgapur. After these expansions are completed, the effective annual capacity will stand at approximately 9.3 million t within this financial year. The company has also applied to the Ministry of Environment and Forests at New Delhi for further increase in the capacity at Chanderia by 1.5 million t and all necessary monitoring activities as per the statutory regulations are in progress. This will take the company’s total cement capacity to 10.8 million t.

Meanwhile, work to set up the 5 lakh tpa coal washery at Satna for ensured supply of sustained quality of processed coal is progressing as planned, and it is expected to be completed this year.

Birla Corp. believes that diligent execution of the capacity enhancement and infrastructural projects, as well as the ongoing capex plans, will help the company achieve better operational efficiency and volume growth.

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