Q2FY16 results analysis by Nirmal Bang-
NCL Industries Ltd reported QoQ decline in operating profit due to seasonal volatility seen in cement prices. Demand across the Southern region continued to remain weak but price discipline is still followed by cement producers in the markets.
1. Revenue during the quarter increased by ~8% QoQ which is led by higher capacity utilization at 65% in Q2FY16 from 60% in Q1FY16. NCL continued to register healthy sales volume growth of ~7% QoQ and ~31% YoY to 2,41,396 Mnt. Though, we believe there is further scope for improvement in utilization rates, which will led by pick-up in demand in its markets would drive the volumes going ahead. However, we have assumed 65% of capacity utilization for full year, any improvement on this would be an upside opportunity for our numbers.
2. EBITDA had declined by 18% QoQ to Rs. 32cr due to higher freight cost (Rs. 27crs in Q2FY16 vs Rs. 22crs in Q1FY16) and drop in cement realization at Rs. 6572 in Q2FY16 vs Rs. 6746 in Q1FY16. The decline in realization was due to seasonal declining in its key markets, where cement prices has seen correction of Rs.50 per bag. Cement EBITDA/tonne fell sharply by ~36% QoQ to Rs. 727/tonne from Rs. 1136/tonne in Q1FY16. General Administrative expenses increased by 85% QoQ to Rs. 14crs in Q2FY16 from Rs. 7.6crs in Q1FY16 which includes onetime expenses also increases in some variable expenses. We expect, it to get normalize from Q3 onwards.
3. Freight/tonne had increased by ~24% QoQ to Rs. 849/tonne from Rs.735/tonne in Q1FY16 due to company entering new location which have lower realization and high lead distance.
Discl: Invested from much lower levels (10% of portfolio at present). As disclosed in Deccan Cements thread earlier, I had sold 1/3rd of my holdings in NCL at 160+, reason being portfolio top slicing from an allocation pov.
Note: I have just pasted the analysis of numbers selectively from the report. Report is in public domain and can be found here (Nirmal Bang NCL Q2FY16 Result Analysis).