Cement business is doing quite okay in terms of volume: ML Pachisia, Orient Paper

ML Pachisia, Managing Director, Orient Paper, in a chat with ET Now gives the outlook for the company’s cement segment.

What is your perspective regarding your cement segment and this time around, how has that been performing for you? Are there any expansion plans in this domain?

First of all, in cement business we have completed our expansion programme from 3 million tonnes to 5 million tonnes. This was completed in January this year and we have already reached close to 90% capacity utilisation. So cement business, in terms of volume, is doing quite okay. In terms of pricing, now markets particularly in the south, the cement prices have been under some little pressure. They had come down and then they improved again during January-March period.

Middle of April onwards, they have been under some pressure but there are signs of stability returning in the prices. Having said all that, I would still say prices are reasonably remunerative and there is no cause for any great impact.

Given that you managed cost pretty well as far as cement capacity is concerned, what about transportation costs? Are you seeing an uptick there as an area of concern that can impact margins?

Transportation cost did go up when the diesel prices went up. But that was factored into our costing and we were not sure that we can get that much cost reduction out of our efficiencyimprovement programmes because the new plant that we have just started is much more power efficient. So therefore, yes, there is some impact on cost because of transportation costs and also because of coal prices being a little volatile. But these are things that we should be able to take in our stride.

How you expect your cement offtake this time around considering that monsoons are expected to be fairly normal and how do you expect the prices to pan out for you?

In the last two years, three years, we have not seen any impact of monsoons. In fact this year, we are feeling that the recent problem in the cement demand has been more related to the intense heat waves that were going through the country which made labour very scarce and people were not able to work during the heat period. So we are in fact expecting that during monsoon the pent-up demand, which was affected during April and May and part of June, would probably come back.

So we do not expect too large an impact during monsoons and we hope that the construction activity will actually not be greatly affected.