Higher input costs have dented the top cement majors’ profits in the quarter ended March. Despite maintaining high prices irrespective of a poor demand scenario throughout the quarter, companies could not post strong quarterly numbers.
Domestic giant UltraTech, part of the conglomerate Aditya Birla group, managed to meet industry analysts’ expectations. However, Swiss cement major Holcim-owned ACC and Ambuja Cements had to settle with a decline of around 10 per cent in their profits.
UltraTech Cement, the country’s largest cement maker with a capacity of 52 million tonnes per annum, posted a rise of 218 per cent in its net profit for the March quarter at Rs 726.77 crore, compared with Rs 228.54 crore in the previous corresponding quarter. The company’s net sales during the period too jumped 135 per cent to Rs 4,490.13 crore from Rs 1,909.35 crore in the same quarter last year.
For the financial year ended March, UltraTech’s consolidated net profit stood at Rs 1,367.35 crore against Rs 1,095.20 crore in 2009-10, a rise of 24.85 per cent. Its consolidated net sales were up 90.8 per cent at Rs 13,691.15 crore compared with Rs 7,175.13 crore last year. However, the results are not comparable given the amalgamation of Grasim Industries’ cement assets with UltraTech with effect from July 1, 2010.
Taking into account the like for like (LFL) comparison, the company’s quarterly net sales witnessed a nominal growth of 6.76 per cent at Rs 4,490.13 crore compared with Rs 4,205.85 crore. On the same basis, profit before interest and tax (PBIT) stood at Rs 903.70 crore, up 5.36 per cent, against Rs 857.72 crore. Similarly, on LFL basis, UltraTech’s consolidated net sales for the year rose by less than one per cent to Rs 13,691.15 crore against Rs 13,567.53 crore while its PBIT witnessed a decline of 38.5 per cent.
The company said the year saw the lowest growth in the decade. “This was primarily on account of subdued growth in various key cement consuming states driven by lower infrastructure spending, slowdown in the realty sector, an extended monsoon and non-availability of railway wagons,” the company said in a statement. Moreover, during the March quarter, variable cost rose 14 per cent while imported coal prices were up 27 per cent.
On the other hand, the net profits of ACC and Ambuja Cements dipped around 11 per cent and 12 per cent respectively during the March quarter. Both the companies follow the calendar year as their accounting year. ACC’s quarterly net profit stood at Rs 350.17 crore against Rs 392.87 crore in the previous corresponding quarter while Ambuja’s net profit was down to Rs 407 crore compared with Rs 462 crore last year.
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However, Holcim companies managed to post better net sales during the quarter. The consolidated net sales of ACC were up 14 per cent in the quarter at Rs 2,556.20 crore compared with Rs 2,240.32 crore, thanks to the commissioning of the company’s new units, which helpd boost cement sales. Ambuja too saw its net sales grow by 11 per cent to Rs 2,207 crore against Rs 1,990 crore.
The cost of power and fuel was up 22 per cent for ACC while Ambuja faced a 35 per cent increase in its energy costs.
On the Bombay Stock Exchange, the share price of UltraTech closed firmed with a gain of 2.43 per cent to settle at Rs 1,060.65 on Tuesday. Shares of ACC and Ambuja firmed up by over a per cent to close at Rs 1,122.60 and Rs 1,57.50 in a weak Bombay market.
WEAK OUTLOOK
Cement players have painted a weak outlook. According to the Birla firm, the pricing environment may remain challenging and with the impact of surplus capacity, margins may continue to remain under pressure. Ambuja Cements, in a statement said, “With steep increases in energy costs, driven by an increase in coal costs, higher freight costs and higher expected inflation, profit margins are expected to be under pressure.” Cement prices, which rose 25 per cent in the March quarter alone, have started softening a bit. So far in the current month, prices have slipped around Rs 7-10 for a 50-kg bag.
