Saurashtra cement looks on road to recovery with two consecutive quarters in profits

MUMBAI: With two consecutive quarters in profits, the worst seems to be over for Saurashtra Cements. Due to high debt, the company has been posting losses since June 2010 quarter to December 2011 quarter.

Saurashtra cements’ debt at end of December 2008 had reached to tune of Rs 337 crore on the back of capacity expansion and capex for a power plant. With this, its debt-to-equity ratio at that time reached to 12:7.

Because of this high debt, the company was been posting losses in the majority of quarters since December 2008. However, over the years, the company has been able to reduce its debt through operations. In the quarter ending june 2012, the company wrote back a sum of Rs 160 crore as exceptional items for reversal of interest and penalty as per One Tine Settlement (OTS) under the Scheme for relief to the sick industrial companies registered with BIFR.

Due to lower coal costs presently the company can maintain its operating profits in the next few quarters. However, to sustain its earnings, a lot would depend on the company’s ability to repay its debt in the coming quarters. The company as of March 2012, had a negative net worth of Rs 35 crore and a gross debt of Rs 102 crore.