ACC Ltd, India’s biggest cement maker, reported third quarter profit that missed analyst estimates after fuel and freight costs surged. The company’s shares slid the most in more than six years.
Net income rose 30% to Rs292 crore ($74 million) in the three months ended 30 September from a year earlier, the Mumbai-based company said on Thursday. Six analysts polled by Bloomberg News had expected a median profit of Rs339 crore.
Rising fuel and transport costs eroded earnings even as ACC, an affiliate of Switzerland’s Holcim Ltd, raised cement prices. Coal prices have been driven up this year by Asian demand and supply bottlenecks in producing countries such as South Africa and Australia. “It is really surprising,” said Rajan Kumar, an analyst with Networth Stock Broking Ltd in Mumbai. “They might have shifted to using imported coal whose prices have risen sharply.”
ACC fell 14% to Rs1,036, the biggest drop since 13 March 2001, at the close of trading today on the Bombay Stock Exchange (BSE), wiping out the year’s gain of 11% as of Wednesday’s close. The benchmark Sensitive index fell 3.8%, the most in two months, data showed.
Sales for the quarter rose 22% to Rs1,680 crore, ACC said, lower than the median estimate of Rs1,740 crore.
Power and fuel costs rose 46% to Rs326 crore in the quarter from Rs223 crore a year earlier, the company said. Freight costs gained 12% to Rs216 crore from a year earlier.
Coal prices may have risen to an estimated Rs700 per tonne in the period from Rs536 a year earlier, Kumar said.
“The increased cost of coal and, in some cases, the increase in power tariff has resulted in a rise in fuel cost,” R. Nand Kumar, an ACC spokesman, said in a phone interview in Mumbai, without elaborating. “Rail and road tariffs were also higher.”
India aims to invest $492 billion (Rs19.4 trillion) by 2012 in infrastructure, spurring demand for cement, allowing manufacturers to charge higher rates. Asia’s third biggest economy may expand by more than 9% in the current fiscal period for a third year in a row, the government estimates.
Holcim, the world’s second largest cement maker, in May increased its stake in ACC to about 42%. The Swiss company also owns 36% in Ambuja Cements Ltd, India’s fourth largest maker of the material, which is scheduled to report earnings on Friday.
Through its stakes in the two companies, Holcim controls a quarter of the Indian cement market, which has recorded 8% annual growth in the past decade.