6. Cost Developments

The Company witnessed significant pressure on costs due to increase in various input costs. Crude prices, raw material costs and fuel costs saw a rise in prices. Through fuel mix optimization and strategic sourcing, the Company could restrict cost increases.


Major Cost Movements

Raw Material

Cost of raw material constituted 10% of the total expenses, which is similar to last year. On a per tonne basis, raw materials cost was down by 1%.

Major component of raw material is Fly Ash and Gypsum. The cost of both materials was flat during the year due to optimal sourcing and a judicious change in the mix. During the year, clinker purchase was reduced, resulting in overall saving in cost of raw materials.

The Company is working on identifying new sources of materials and alternative low cost materials. Notwithstanding the initiatives, our mining team maintained the consistent quality of limestone, which helped simultaneously the optimum usage of additives in Raw Mix design.

Power and Fuel

Power and fuel costs constituted 25% of the total expenses. Optimizing power and fuel costs is one of the major drivers for improving the Company's operational performance. The Company constantly endeavors to reduce fuel costs by judicious procurement of imported fuel, change in fuel mixes in Kiln and CPP by using a relatively lower cost fuel, higher use of cheaper coal and use of alternative fuels. As a result of these initiatives, in spite of increase in pet coke and coal prices, overall increase of power and fuel cost on a per tonne basis was 2%. Furthermore, the Company consumed 68% of the total power requirement from captive sources, including an increased usage of the Waste Heat Recovery System.

Freight and Forwarding

Freight and forwarding costs constituted 30% of the total expenses. On a per tonne basis, the cost decreased by 5%. This is mainly due to various logistical initiatives such as the reduction of lead by increasing the market share in home markets, benchmarking and renegotiation of contracts with the transporters and continuous efforts to improve efficiency. Though, there was an increase in Clearing and Forwarding charges due to hiring of additional godown space and higher handling of premium products.

Employee Cost

Overall employee costs during the year decreased by 1.1%. This decrease is due to continual efforts to improve productivity and optimize employee cost.

Other Expenses

Other expenses constituted 20% of the total expenses. Stringent fixed cost optimization saw savings in many fixed cost elements. Overall increase in absolute terms was just 1% over the previous year, in spite of increase in branding and promotion cost. Packing cost shows reduction of cost by 8%.