Freight, raw material costs hurt cement firms

JK Lakshmi, UltraTech, ACC report drop in net profit; Ambuja Cements, JK Cement post increase
Comment E-mail Print Share
First Published: Thu, Feb 07 2013. 10 06 PM IST
Cement prices rose to a record `330 per bag in western India in mid-2012, but fell to `309-310 in December, according to dealers. Photo: Mint
Cement prices rose to a record Rs.330 per bag in western India in mid-2012, but fell to Rs.309-310 in December, according to dealers. Photo: Mint
Updated: Fri, Feb 08 2013. 01 00 AM IST
Mumbai: India’s top cement makers have reported an increase in revenue on lower volumes in the quarter ended 31 December, although profit growth was crimped because of rising freight rates and raw material costs.
The nation’s largest cement maker ACC Ltd on Thursday reported a consolidated net profit of Rs.251.24 crore for the quarter, down 46% from a year ago. However, revenue gained 2% to Rs.2,768 crore. “Profits have been under pressure due to (higher) input costs and a change in the method of providing depreciation on fixed assets pertaining to captive power plants,” said an ACC spokesman.
ACC shares rose 1.15% to Rs.1,345.40 on BSE, while the benchmark Sensex fell 0.3% to 19,580.32 points. ACC reported earnings after the end of trading.
Ambuja Cements Ltd, however, reported a 5.33% rise in its December quarter profit at Rs.1,293.21 crore from a year ago. Revenue increased by 14.3% to Rs.9,795.03 crore.
On Thursday, Ambuja shares fell 2.68% to Rs.200.05 on BSE. Its earnings were declared after market hours.
JK Cement Ltd, too, saw a 25% rise in net profit at Rs.54.38 crore in the December quarter. Revenue, at Rs.688.08 crore, was up 12% from the same quarter a year ago. Shares of the company fell 3.14% to Rs.307 on BSE.
JK Lakshmi Cement Ltd saw net profit drop 16.24% to Rs.41.24 crore in the December quarter from a year ago, while revenue rose 12.2% to Rs.493.68 crore.
“The results are in line with expectations as volume growth has been bad,” said V. Srinivasan, an analyst at Angel Broking Ltd.
Market conditions have been muted for cement manufacturers since last year with slower sales of newly constructed buildings in many parts of the country following slower economic growth, according to cement dealers and analysts.
Also, a fine of over Rs.6,000 crore levied by fair trade watchdog Competition Commission of India (CCI) in June on allegations of cartelization resulted in volatile prices that hurt companies.
“The shrinking of profit was expected,” said Teena Virmani, vice-president (private client group) research at Kotak Securities Ltd. “Overall costs also continue to stay high.”
Cement prices rose to a record Rs.330 per bag in western India in mid-2012, but fell to Rs.309-310 in December, according to data from a dealer in Mumbai. One bag is 50 kg.
UltraTech Cement Ltd reported a net profit of Rs.600.81 crore in the December quarter, down 2.6% from a year earlier. Revenue rose 6.5% to Rs.4,882.08 crore.
Shares of UltraTech fell 1.67% to Rs.1,929 on BSE.
Most of the companies made no provision for the CCI fine, stating that they were confident the matter will be resolved favourably.
The matter is being heard by a tribunal.
“Based on the advice of external legal counsel, the company believes it has good grounds for a successful appeal,” ACC said in its Thursday press statement. “Accordingly, no provision is considered necessary in the above results.”
Looking ahead, the pressures that bogged down companies last year, are expected to stay this year as well, analysts said.
“As far as input costs are concerned, freight charges will keep going up as diesel and petrol prices are likely to stay high,” Angel Broking’s Srinivasan said. For ACC, total expenses stood at Rs.2,518.69 crore in the December quarter, up 5% from the same period a year earlier.
Comment E-mail Print Share
First Published: Thu, Feb 07 2013. 10 06 PM IST
More Topics: Cement | earnings | ACC | JK Lakshmi | CCI |
blog comments powered by Disqus
  • Wed, Nov 26 2014. 05 35 PM
  • Wed, Nov 19 2014. 04 58 PM
Subscribe |  Contact Us  |  mint Code  |  Privacy policy  |  Terms of Use  |  Advertising  |  Mint Apps  |  About HT Media  |  Jobs
Contact Us
Copyright © 2014 HT Media All Rights Reserved