Malabar Cements back in Red again with Rs23cr loss

THIRUVANANTHAPURAM: Malabar Cements Ltd (MCL), an industrial unit wholly owned by the Government of Kerala, has plunged into ‘red’ once again in 2022-23 (FY23) with a loss of Rs23.30 crore.

Very few public sector undertakings (PSUs) from the industrial sector of the state are capable of generating profit and MCL is said to have the potential to generate profit and it has proved it as well in the past.

MCL earned an operating income of Rs231.83 crore for 2022-23 compared with Rs272.30 crore it generated for the previous year.

FY22 profit

The company has reported a net profit of Rs9.69 crore for the previous year when it generated an operating income of Rs272.30 crore.

The construction sector faced a slowdown in the past because of economic recession, with several projects getting delayed or cancelled.

“Intense competition in the industry may continue to constrain scalability, pricing power and profitability,” said CRISIL rating agency.

Operating margin

MCL has witnessed its operating margin fluctuating over the past few years. It stood at -8.6 per cent in FY20, 4.7 per cent in FY21, 5.8 per cent in FY22 and  again -8.4 per cent in FY23, when the company reported a net loss of over Rs23 crore.

Big challenge

A more challenging aspect noticed during the financial year 2023-23 is that the company’s interest coverage ratio (ICR) for the period was -18.65 per cent, which is viewed seriously by financial analysts.

A negative value (-18 in this case) means that the company has a negative earnings before interest and taxes (EBIT), which implies it is making losses from its core operations, and the loss is 18 times greater than its interest obligations.

“This suggests severe financial distress, as the company is not generating enough operational income to meet its interest payments, making it reliant on other forms of financing or capital to service its debt,” added the financial analyst.

Brands

MCL, incorporated in 1978, is owned and managed by the Government of Kerala (GoK). The company manufactures cement such as Ordinary Portland Cement (OPC) 43, OPC 53, Portland Pozzolana Cement and Portland Slag Cement.

The products are marketed under brands, Malabar Super, Malabar Classic, and Malabar Aiswarya.