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Oriental Tiles exploring cost optimization measures to address gas price fluctuations

Oriental Tiles exploring cost optimization measures to address gas price fluctuations

Fluctuations in fuel prices – primarily gas prices – have become a concern for ceramic and tile maker, Orientbale Tiles. Volatility is expected to continue through at least the first half, prompting the company to explore “investments in new processes” that include low power consumption machinery and buying power from IEX (the exchange).

Gas consumption accounts for 30-35 percent of the cost of ceramic and tile manufacturers. And in fiscal 2012, the company saw fuel costs increase by 50 percent.

According to Orientbell CEO Aditya Gupta, the trend of price growth in the fourth quarter (January-March) continued in April and May.

“We see a similar increase in our fuel cost. For example, gas prices in Morbi (Gujarat) have nearly doubled in the last seven to eight months to ₹72 per cubic meter in April. business Line,

To protect margins, the company is increasing prices by 3-5 per cent every quarter for manufactured products in its factories and 6-8 per cent in case of merchandise products in FY22. EBITDA stood at 9 per cent in FY22.

In Q4FY22, EBITDA improved by 12.5 per cent versus 10.8 per cent, YoY.

Average receipts increased from ₹239 per square meter to ₹266 per square metre, driven by price corrections along with better product mix.

“We are taking price hikes, including the one in the April to June quarter. We have also been able to achieve 3.5 per cent savings through various cost-cutting measures in factories and also by replacing some of the raw material and power sources. So, I think the current gas cost means that what we are seeing in this quarter, we have increased the prices to cover that,” Gupta said.

Elaborating on the cost saving measures, Gupta said, the moment open access was allowed in Uttar Pradesh, the company started the business of IEX. The power mix — trading in solar combined — is now up 44 percent versus the past 15 percent; With the savings reflected in the bottom line.

At the same time, Orientbale has been able to sustain the rise in prices, mainly because smaller and unorganized players – especially from Morbi, which is considered a ceramic and tile manufacturing hub – are struggling. The steep increase in gas prices by Gujarat Gas has also affected their working capital calculations.

“I think there has been a decline in Morbi, we have seen a number of shutdowns in the fourth quarter. And also, a large number of units remain closed in April as well. So, all this is for the benefit of the organized players,” he explained.

Published on

22 June 2022

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Oriental Tiles exploring cost optimization measures to address gas price fluctuations

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