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India Cements plans fresh VRS to cut costs

BS Bureau

India Cements Ltd, in a bid to control operating cost, is planning to implement a fresh voluntary retirement scheme. The company's earlier two schemes saw 2,000 employees off the rolls.

N Srinivasan, chairman and managing director, said the company has decided to significantly reduce manpower this fiscal, but said details were yet to be firmed up.

During the first quarter ended June 30, 2001, the company incurred Rs 185.9 million on salaries and wages against Rs 175.3 million in the corresponding period of last fiscal.

However, the cement major has posted a 106 per cent growth in net profit despite a 8.3 per cent fall in turnover. Net profit stood at Rs 116.1 million on a turnover of Rs 3.59 billion against a net profit of Rs 56.7 million on a turnover of Rs 3.91 billion during the corresponding period of the previous fiscal.

On distribution costs, he said: "We are going to put in place systems that will optimise the existing logistics infrastructure. Substantial savings is expected from this." Earlier, the company hired the services of Ernst and Young for fine-tuning its operations.

To a query, he said that at the moment there was no plans to acquire companies and said that the company had already critical size in the earlier acquisitions.

"We embarked on acquisitions based on certain expectations like the growth of the company. The economy did not grow as expected in the last years. Hence, we have decided to wait and watch."

Srinivasan said that Sri Vishnu Cement would be merged in the current fiscal and added that there were no plans to sell the unit.

Srinivasan said the turnover in the first quarter declined mainly because demand fell in Tamil Nadu, its major market, and Andhra Pradesh. While the demand in Tamil Nadu, declined by 16.83per cent, it fell by 7 per cent in Andhra Pradesh.

He said the company was able to post better profits mainly because of firm cement prices when compared to April-June 2000 and also due to better control on production and distribution costs.

Operating profit during the reported period was Rs 889.7 million against Rs 721 million in the quarter ended June 30, 2000, registering a 23 per cent growth.

Of the operating costs, power and fuel cost has declined to Rs 792 million in the first quarter of the current fiscal from Rs 998 million in the same period previous fiscal.

Interest and depreciation charge during the first quarter were at Rs 572 million and Rs 201.6 million.

Asked about the increase in interest cost, company officials explained that it was due to additional borrowing resorted in the previous fiscal for upgradation and working capital requirement. They said there was no big capital expenditure during this fiscal.

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