Mumbai: ACC Ltd and Ambuja Cements Ltd, both controlled by Swiss cement maker Holcim Ltd, released contrasting results on Thursday for the quarter ended 31 March.
Profits at India’s largest cement maker ACC fell 1.6% from the same period in the previous fiscal to Rs392.87 crore as sales fell due to a shortage of railway wagons to ferry the product.
Ambuja Cements posted a 38% jump in profit to Rs462 crore, riding on a 7.8% increase in sales from the same period a year ago to Rs1,990 crore.
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The profit included a one-time gain of Rs72.6 crore from the stake sale in ING Vysya Life Insurance Co. Ltd.
“Several of our cement units faced despatch constraints due to non-availability of railway wagons, as a result of which our sales volumes were near flat,” ACC said in a statement. Its sales fell 2.6% to 5.58 million tonnes from 5.73 million tonnes.
Analysts, however, said the profit numbers were better than expectations as realizations improved in the quarter.
Report card: An ACC cement plant in Barmana, Himachal Pradesh. The company said sales in the January-March period fell due to despatch constraints owing to non-availability of railway wagons. Ramesh Pathania/Mint
They ascribed ACC’s lower consolidated profits to a struggling ready-mix concrete business, which has suffered in the past year due to a slowdown in real estate.
“The cement business on its own has done well with a net profit of Rs405.12 crore versus Rs404.79 crore last year. It was 30% better than market expectations of a Rs312 crore profit,” said Rajan Kumar, an analyst with Centrum Broking Pvt. Ltd.
ACC’s realizations improved to Rs3.767 per tonne compared with Rs3.640 per tonne last year, said analysts, largely because the company could pass on higher fuel and limestone costs to customers, and the fact that the shortage of wagons reduced supply and drove up prices.
“The freight costs have stayed more or less stable which has helped but raw material costs have increased by Rs7-8 per bag mainly because of increased cost of petroleum products,” an analyst from a brokerage said on condition of anonymity.
Ambuja also earned Rs14 crore by selling surplus power though expenses increased 19% due to higher prices of diesel and packing material.
Analysts said challenges for both companies will rise.
“Increase in wagons will increase supply, and hence, drop realizations. Cement demand is growing only by 10% whereas this year there will be a record 16% capacity addition which will also pull down prices,” said Rupesh Sankhe, an analyst with Angel Broking Ltd.
Cement makers are staring at a record increase in capacity this year, and while infrastructure projects have so far supported demand, expectations are that supply may outpace demand in the second half of this year, damping prices.
However, ACC managing director Sumit Banerjee said in a statement: “We look at the market in coming months with confidence and optimism. The challenge for us is to ensure that we are able to maximize despatches to our customers without any constraints as also to commission our ongoing projects on schedule and stabilize them at the earliest.”
A.L. Kapur, managing director of Ambuja, said demand would only dip after June because of the monsoon.
“Input costs, particularly coal, have seen an upward trend in recent months which, if sustained, could put pressure on operating margins in the medium term,” Kapur said in a statement.