Birla Corp posts 207% pre-tax profit surge in Q3 amid muted demand scenario

Efforts to keep costs under check, higher capacity utilisation along with sales push of premium cement helped Birla Corporation post a whopping 207 per cent rise in Q3 pre-tax profit at Rs 129 crore. However, revenue went up a tad 10 per cent to Rs 1,715 crore, amid a muted demand scenario.

Profit before tax and net income in the third quarter of the previous financial year stood at Rs 42 crore and Rs 1,557 crore, respectively. Net profit increased by 200 per cent to Rs 81 crore compared to Rs 27 crore on a year-on-year (YoY) basis.

Even as overall sales volume increased by seven per cent, sales of premium cement surged 17 per cent (by volume).

In the December quarter, share of premium cement in sales by volume through trade channels was 41 per cent compared to 37 per cent a year earlier.

Besides, the share of blended cement in total sales jumped from 89 per cent to 90 per cent.

“Higher capacity utilisation, continued focus on trade sales, blended cement and premium products helped post healthy numbers. We also saved power and fuel costs as well as optimised logistics costs which yielded substantial savings,” said Sandip Ghose, chief operating officer at Birla Corporation.

Compared to the industry average of 70 per cent capacity utiliation, Birla Corporation registered 87 per cent utilisation for the December quarter, which is five per cent higher on a YoY basis.

Though prices remained weak in key markets in the December quarter, the company was able to garner higher market share in West Bengal and Bihar. This was by expanding distribution reach and leveraging cross-branding from multiple plants. Its sales in eastern India grew 27 per cent by volume over the previous year.

According to the company, during the December quarter, green shoots were visible in the infrastructure sector with demand in the non-trade segment growing faster than the trade segment.

Birla Corp aims 20 MT to become fifth largest cement company in India

Birla Corporation is increasing its total manufacturing capacity to around 20 million tonnes per annum (mtpa) spread across western, northern and central India in the next three years which will provide the company ample markets to scale up its other products as well as roll out new ones.

It is already constructing a new 3.9 mtpa plant, a 40MW plant and a 10.6MW waste-heat recovery plant at Mukutban in Maharashtra with an investment of Rs 2,450 crore, which is expected to be commissioned by the second quarter of the FY2021–22. Once completed, it will catapult the company’s installed capacity from the existing 15.58 mtpa to 19.48 mtpa which would bring it neck-to-neck with Ramco Cement. The latter has a current installed capacity of 16.69 mtpa.

According to brokerage firm Anand Rathi, another 1.2 mtpa expansion of its cement grinding plant at Kundanganj in Uttar Pradesh is also on track which may be commissioned by the end of the next fiscal year. Besides, the clinker expansion of 480,000 tons at the NCCW plant at Chanderia has begun to fulfill the additional clinker needs of the Kundangunj grinding unit.

Birla Corporation declined to comment on this development.

However, sources added that Birla Corporation is also considering adding another production line at its existing unit at Maihar in Madhya Pradesh although a final call is yet to be taken.

While the Mukutban project has been financed by a Rs 1,625 crore term loan stretching 12 years from a consortium of four banks led by the Bank of Baroda at less than 9 per cent interest, another Rs 2,500 crore will be invested over other projects.

According to Yes Securities, the capacity addition plan of 5.2 mtpa in Uttar Pradesh and Maharashtra will translate into growth of 33 per cent in capacity to 20.5 mtpa, making it the fifth largest cement group in India. Currently, the MP Birla Group company is ranked seventh in the country in terms of installed capacity.

However, Sandip Ghose, chief operating officer at Birla Corporation, is of the view that once the company is able to scale up its installed capacity, which in turn, would translate into market share gains and more visibility, it could give the company the opportunity to enter new categories within cement as well as emerge as a serious player in building and construction solutions.

“For example, we are not present in concrete and do not have any research facility now. We can look at those things once we have a sizeable installed capacity and an increased exposure to the market”, Ghose told Business Standard.

It has already ventured into the construction chemicals market with wall putty products and waterproofing compounds. Water repellents and other products are under consideration.

Industry officials suggested that the additives market in the country is estimated at around Rs. 1390 crore and is growing at a rate of 12–25 per cent depending on the category of the chemical. While wall putty which has a 60 per cent market penetration, and offers a 25 per cent margin, construction chemicals has an extremely low level of market penetration of seven per cent, but offers a 40 per cent cut for the company.

Birla Corp contests UltraTech's copyright violation claim over use of name

Birla Corporation is contesting UltraTech Cement’s claim on copyright infringement over the use of the word ‘Ultra’ in its products. Its argument is based on the grounds that it is neither a violation of any copyright, nor does UltraTech have exclusive rights over the word under dispute.

Sources aware of the development told Business Standard that according to the Trade Marks Act, 1999, copyrighted words have to be used in the complete context and not in isolation.

Thus, while the word ‘ultra’, even if copyrighted by UltraTech, can be used by this company freely for its products and branding, like UltraTech Concrete, UltraTech Ready Mix, UltraCem and others; the same word can also be used by Birla Corporation for its products as well like MP Birla Cement Ultimate Ultra and others.

The word in question, sources argued, is a composite trademark where the protection of the name is provided to the entire word and not in part of a trademarked word.

Birla Corporation, sources said, is basing its case on this premise that usage of the word ‘ultra’ is not limited exclusively to UltraTech.

Legal experts pointed out that according to the Trade Marks Act, if a trademark is registered as a series and consist of more than one feature, and if the applicant claims exclusive rights over all of the features separately, then the company has to seek registration for each of the parts separately and thus each of the words will have to be trademarked separately.

Asked about the same, a Birla Corporation spokesperson said, “Since the matter is sub judice, Birla Corporation would not like to make any detailed statement on the dispute. However, the company is confident of defending its trademark MP Birla Cement Ultimate Ultra against any legal challenge.”

In August this year, UltraTech had moved the Bombay High Court complaining of the copyright infringement and alleged that Birla Corporation has been wrongfully infringing on its rights from July this year after launching the ‘MP Birla Cement Ultimate Ultra’ and ‘MP Birla Cement Ultimate Ultra 2’.

Against UltraTech’s claim, a Birla Corporation spokesperson said, “MP Birla Cement Ultimate Ultra is a super-premium brand of cement, which is being sold by Birla Corporation in multiple markets since early 2018. It was wrongfully alleged that Birla Corporation had started to use the trademark only in July 2019.”

An UltraTech spokesperson was not available for comments.

After the acquisition of Reliance Cement, the MP Birla Group’s flagship company has been heavily investing on reshaping its product category and come up with strong national brands which is led by the ‘MP Birla Cement Perfect’ brand of cement.

Moreover, it’s argument is also based on the fact that the word ‘ultra’ is within the scope of its own copyright wherein it has secured the rights on the words ‘MP Birla Cement Ultimate Ultra’ and ‘MP Birla Cement Ultimate Ultra 2’ which is understood in totality and not in isolation.

Sources cited a similar instance in 2016 when UltraTech had filed similar petition with the Bombay High Court against Dalmia Cement over the usage of the word ‘ultra’ in the latter’s products. The court, then had ruled that the word in dispute, has to be understood in combination and wholly and not in isolation.

Birla Corporation’s premiumisation drive and focus on higher sales of blended cement helped the company post a steep 450 per cent rise in its net profit at Rs. 88 crore for the quarter ended September 30, 2019 while revenue shot up by 10.9 per cent at Rs 1,647 crore.

The same during the similar quarter of the last fiscal year stood at Rs 16 crore and Rs 1,485 crore respectively.

A company official said that the tax had already been paid by the company before the union finance minister, Nirmala Sitharaman announced tax benefits and thus the company’s results doesn’t reflect tax benefits.

The company’s cash profit for the September quarter more than doubled to Rs. 229 crore from Rs. 112 crore in the same period last year, while EBITDA grew 61 per cent to Rs 332 crore. The EBITDA margin also jumped from 13.9 per cent to 20.15 per cent on a year-on-year basis.

Despite an extended monsoon and depressed demand, its sales volume during the quarter rose by 4.1 per cent to 3.2 million tonnes.

Premium cement accounted for 41 per cent of sales through the trade channel, compared to 37 per cent in the same period last year. The share of blended cement in total sales was scaled up to 93 per cent from 87 per cent in the September quarter last year.

Birla Corp to increase focus on premium cement brands to boost profits

Birla Corporation is focusing on increasing the sale of its premium cement, aiming to make the segment its key driver for profits. The company plan to invest more in its new flagship brand: Perfect Plus. The premium portfolio accounted for 22 per cent of the company’s total sales three years back, but now comprises 39 per cent of annual revenue.

The company introduced several premium brands in the first quarter of this fiscal year. While Perfect Plus and MP Birla Ultimate were introduced in northern India, Ultimate Ultra - a premium cement with water repellent properties - was launched in the central zone.

The Unique brand of cement, another premium slag variant, also strengthened its hold in the eastern region. This brand now accounts for around 42 per cent of the trade sales in West Bengal.

Birla Corporation has rolled out Perfect Plus nationally which has now become its flagship brand. Nevertheless, Chetak and Samrat - both from the economy category - still hold strong market share in the north zone.

“The Perfect brand is now our flagship brand and we will be putting in more money on this brand in the future as well. The way we are standardising our brands, one cannot tell from which factory a particular brand has been manufactured”, Sandip Ranjan Ghose, the company’s chief operating officer told Business Standard.

The Perfect brand of cement, previously owned by Reliance Cement Company (RCC), landed up with Birla Corporation as part of the Rs 48-billion takeover deal in 2016.

“On one hand we have been focussing on increasing the share of blended cement and on the other, we have been encouraging customers to upgrade their purchase to premium cement”, Ghose said.

The company has now increased the share of blended cement from 71 per cent to 88 per cent on a year-on-year basis, while in the Q1 period, sales of premium products grew 12 per cent by volume to account for 37 per cent of total sales.

“That shows how well we were able to integrate the operations of RCC with ourselves”, Ghose said.

As a result of these initiatives and a larger volume play in its core markets, the MP Birla Group’s flagship company’s June quarter net profit jumped 68 per cent to Rs 141 crore while EBIDTA for the quarter stood at Rs 402 crore – a 49 per cent increase over the last year. Revenue also jumped by 14 per cent to touch Rs 1,844 crore.

The company has been aggressively adopting technology to reduce its per tonne per kilometre (ptpk) cost from Rs 2.48 to Rs 2.35 via the road and rail mode and from Rs 3.25 ptpk to Rs 2.82 ptpk via the road mode.

It is also stepping up use of modern technologies like robotics, blockchain, data analytics, artificial intelligence, internet of things and others to further improve operations and reduce logistics costs.

Birla Corporation posts its best ever pre-tax profit of Rs 219 crore in Q3

Birla Corporation, on Friday, posted its best ever pre-tax profit in a quarter helped by volume growth and higher realisations from cement sales. The company's pre-tax profit jumped Rs 89 crore in the June quarter (Q1) to Rs 219 crore, rising 147 per cent.

The M P Birla Group flagship company’s June quarter net profit jumped 68 per cent to Rs 141 crore, while Q1 EBIDTA stood at Rs 402 crore – a 49 per cent increase over the corresponding period last year. Revenue jumped by 14 per cent to touch Rs 1,844 crore.

Aggressive pricing in key markets and upgrading consumers to premium brands helped the company have a larger play in both volume, which increased by four per cent in the quarter under review, and pricing, while maximisation of sales of blended cement ensured better margins.

Even as the company focussed on the individual home-builder segment, pushing its sales via trade channels, a major thrust was given to sales of premium brands, which accounted for 37 per cent of total cement sales through trade channels and registered a 12 per cent growth on a year-on-year basis. The share of less profitable non-trade channels fell from 21.2 per cent to 17.7 per cent over the last year, directly boosting profits.

“The results are a reflection of our long-term strategy of enhancing profitability and competitiveness with the aim of becoming one of the best-in-class players in the industry. We have also increased our leadership bench strength and built all-round competencies in preparation for our next phase of growth”’, chairman Harsh V Lodha said.

Following encouraging results of test-marketing in Madhya Pradesh and Uttar Pradesh, the company’s MP Birla Cement Perfect Plus range of wall putty and construction chemicals was launched in Rajasthan as well. The company is of the view that apart from increasing the share of wallet, these brand extensions are expected to supplement the equity of the Perfect Plus franchise.

Over the years, Birla Corporation has been focussing on several cost reduction measures including operational and fuel efficiency. The Waste Heat Recovery System in its Maihar has been commissioned while solar power projects in Chanderia, Satna and Maihar, for a total capacity of 16 MW is in progress. Alternative fuels are being tied up through long-term contracts to ensure continuity of supplies and reduction of costs.

Also, the company is doubling captive coal production in the Sial Ghogri mine which currently meets one-third of the fuel requirement of the Maihar unit. The rest of the requirement is fed by coal auctions and linkage auctions.

According to the company, Softening of pet coke prices, better availability of auction coal from linkage auctions and ramping up of production at the captive coal mines is expected to lower power and fuel costs in the coming quarters.

Besides, for the Rs 2450 crore Mukutban project, the company was able to negotiate an interest rate lower than nine per cent from a consortium of four banks who are funding this project.