What is your quick take on the quarterly numbers of Shree Cements for the Dec-21 quarter?

For the Dec-21 quarter, Shree Cements reported 2.25% higher sales at Rs.3,637 crore. During December 2021 quarter, Shree Cements sales slowed down due to the Omicron variant impact the construction sector, especially in North India. Shree commenced commercial production at its clinker grinding unit in Pune district. Shree Cements has declared an interim dividend of Rs.45 per share. Sales showed sequential momentum.

Let us turn to the operating performance of Shree Cements, where most of the input cost pressure was visible for the company. Operating profits were down -30.37% at Rs.560 crore in the Dec-21 quarter. There was a sharp spike in the cost of power and coal. For instance, the power and fuel expenses for the latest Dec-21 quarter was up by 39.5% on a yoy basis at Rs.914 crore, which put tremendous pressure on the operating numbers.

Apart from the steep rise in the power and fuel costs, the cost of raw material inputs was also 15% up yoy while the transport and freight costs surprisingly trended lower. The lower levies by the centre and states appear to have had an impact on tapering the transport and freight costs this quarter. Operating margins tapered sharply from 22.61% in Dec-20 quarter to 15.39% in the Dec-21 quarter. Even sequentially, the OPMs were lower by 330 bps.

Net Profits were down -23.6% yoy at Rs.482 crore in the Dec-21 quarter as the operating pressures were effectively transmitted to the bottom line. PAT margins tapered from 17.73% in the Dec-20 quarter to 13.25% in the Dec-21 quarter. Not surprisingly, the PAT margins were lower even on a sequential basis.