For JK Lakshmi Cement, the recent resumption of work at its Chattishgarh cement plant is a positive development. The company’s stock price had fallen by 62 per cent compared to the average fall of 42 per cent of its mid-size peers, making it attractive among mid-size cement companies. The profitability of cement companies has been under pressure owing to lower demand – reflected in the stock price of these companies.
JK Lakshmi Cement, which has close to 60 per cent exposure to the northern region and 40 per cent to the western region in terms of capacity, showed a decline of 14.5 per cent in revenues to Rs 456 crore in the June 2013 quarter on a y-o-y basis.
Consequently, its net profit fell by 68 per cent to Rs 15 crore in the June 2013 quarter. However, most of these concerns have been factored into the company’s stock. The company’s 2.7-mt cement plant at Chattisgarh has resumed operation and its expansion is expected to be completed by the first half of next fiscal.
Except the southern region, where supply exceeds demand, most regions are struggling with relatively lower supply and subdued demand. In the western and northern regions, scarcity of water and the economic slowdown have impacted demand. According to estimates, demand fell by 5 per cent on a year-on-year basis in the June 2013 quarter.
Most cement companies, which are already struggling to boost business due to low construction activities in these regions, have reported a weak financial performance in the June 2013 quarter.