Somany Ceramics reports a sharp recovery in margins driven by increased plant utilisation and joint venture profits, even as geopolitical tensions and gas shortages in Morbi threaten to slow industry growth and margin recovery.
Somany Ceramics said its margins improved sharply in the June quarter as plant utilisation rose and its joint ventures moved back into profit, even as the company warned that volatile gas prices and a slowdown in exports from Morbi could continue to weigh on the wider industry.
Managing director and chief executive Abhishek Somany told analysts that capacity utilisation climbed to 83% from 72% a year earlier, helping offset cost pressure in the tile business. He also said the group’s joint ventures swung to a profit of ₹3 crore from a loss of ₹10 crore in the same period last year, a change he expects to build further in coming quarters.
The recovery comes against a difficult backdrop for Morbi, Gujarat’s ceramic hub, where the West Asia conflict has already disrupted export flows and fuel supplies. The New Indian Express reported in March that 170 ceramic factories in Morbi had shut and that the strain on propane availability was rippling through the cluster. Maritime Gateway separately reported that shipments have been stuck at ports and that war-risk surcharges, shipping levies and demurrage costs have been eroding margins.
Somany said Morbi exports have fallen by 50% to 60% from peak levels because of geopolitical tensions and that the weakness is likely to persist in the near term. He added that the company has taken price increases to pass on higher gas costs, but noted that fuel prices rose again in July and August, leaving margins exposed if the higher costs cannot be fully recovered. Channel inventory, he said, has normalised since May but remains lean as dealers wait to see whether gas prices ease.
The company’s own volume growth was just 3% in the quarter, held back by an April shutdown at Morbi that disrupted supply of some products. Even so, Somany was upbeat on demand, saying pricing had been accepted by the market and that the business was maintaining growth in bathware and building materials, where margins are slightly ahead of the tile division. He said the company expects mid-single-digit volume growth for the full year, describing that as a cautious target after past overpromises.
Looking ahead, Somany Ceramics plans to invest about ₹275 crore in new capacity and debottlenecking. The biggest project is a new plant in south India with annual revenue potential of about ₹350 crore, while existing facilities are set to gain another 4 million to 5 million square metres of capacity through equipment upgrades. The company said 65% to 70% of the spending will come from internal accruals, limiting pressure on the balance sheet.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
