In spite of sluggish demand from real estate and construction sector during January-March period, cement makers have registered growth in profits for the quarter ended March 2012. Courtesy: high cement prices, which hovered above Rs 300 per 50 kg bag during the quarter bringing improved realisations for the cement makers.
Cement makers including India Cements Ltd, Aditya Birla Group firm - UltraTech Cement Ltd, Ambuja Cements Ltd have registered over 18 per cent growth in the net profits for the quarter ended March 2012.
While India Cements fourth quarter net profits jumped 18 per cent to Rs 65 crore, UltraTech Cement's net profits rose by 19 per cent to Rs 867 crore during the March quarter.
Ambuja Cement Ltd, which follows a January-December financial year, has registered a decline of over 23 per cent in the net profits at Rs 312 crore against Rs 407 crore in the corresponding period in the same period last year. However, the operating margins of the company have increased during the quarter.
"The profit after tax for the current quarter would have been higher by Rs 195.29 crore, if the company continued to use the earlier method of depreciation. During the quarter, the company has with retrospective effect changed its method of providing depreciation on fixed assets related to captive power plants from the straight line to the written down value method at the rates prescribed in the companies act," an Ambuja Cement statement informed.
Volumes growth remained lower than the growth in profits of the cement companies. JK Lakshmi sold 1.41 MT cement during March quarter, higher by about 12 per cent. against 1.25 MT sold during January-March, 2010-11. Similarly, Ambuja Cements sales volumes rose by 9.8 per cent to 6.05 MT against 5.51 MT in the corresponding period last year. UltraTech Cement produced 11.54 million tonnes (MT) during March quarter against 10.70 MT in the same period last year, up by 8 per cent.
According to Cement Manufacturers' Association of India (CMAI) data, cement production during March 2012 stood at 17.99 million tonnes, while despatches during the month was 18.07 million tonnes. Cement prices crossed Rs 300 per bag during March quarter in parts of southern, western and northern markets in India. Cement prices across country rose from an average of Rs 260 per 50 kg in fourth quarter of fiscal 2010-11 to an average of Rs 275 per 50 kg for the fourth quarter of fiscal 2012.
"Cement prices touched a high of Rs 300 in select markets in India, including Western and Southern markets. This has helped companies achieve better realisations. However, high input costs of fuel and logistics restricted the growth in profits," informed a senior official of a leading cement manufacturing company.
Companies JK Lakshmi Cement has registered a marginal decline in net profit at Rs 30.30 crore for the fourth quarter ended March 31, 2012, down from Rs 31.96 crore in the year-ago period, showing a decline of about 5 per cent.
"Companies managed growth in profits, however some failed to meet market expectations. Even as real estate demand remained weak during the quarter, but high prices fetched better realisations compared to previous quarters," said an analyst with a leading brokerage firm.
A latest research report by Emkay Global Financial Services Ltd noted that since second quarter of the fiscal 2011-12, cement prices started heading northwards. Average cement price in the country stood at Rs 247 per 50 kg during second quarter, which rose to Rs 268 per 50 kg during third quarter, giving a positive outlook for the fourth quarter realisations. "This year, we expect cement prices to remain under pressure, which would reduce realisation for cement makers. In the first quarter of the current fiscal so far, the prices have started declining and with monsoon approaching in the second quarter, there will be further downward pressure on cement prices," said an analyst with Emkay Global.
"Going forward, realisations to be impacted due to several factors. There was an expectation of 9 per cent volume growth in the fiscal 2013, but with dismal demand scenario and approaching monsoon, volume growth may be restricted to 7 per cent. This would also hit companies margins," added the analyst.
