Q2FY2009 results – Ahead of expectations

Shree Cement’ (Shree) Q2FY2009 pre exceptional PAT of Rs1.17 billion is sharply
ahead of our expectations mainly on account of higher than expected realizations,
additional contribution from the power segment and higher contribution from
other income. Sales for the quarter witnessed a rise of 34.9% yoy to Rs6.29 bn on
account of a 16.2% increase in cement volumes and 13.7% yoy increase in
realizations. The realisations where higher on account of higher proportion of
cement volumes in sales. However the benefits of higher prices and volumes
could not flow to the operating levels on account of steep increase in power and
fuel cost (Rs918/ton up 55% yoy) and freight cost (Rs652/ton up 47% yoy).
Consequently operating profit witnessed a 9.1% yoy decline to Rs1.83 bn and
OPMs declined by 1408 bps to 29%. As international coal prices have cooled off
substantially, it seems by and large the Indian cement industry has passed the
worst phase of cost pressures.

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