Ambuja profit falls on one-time charge
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Ambuja Cement reported a fall in quarterly profit on Thursday, hit by a one-time charge, with higher costs of fuel and transportation also squeezing margins even as sales volumes rose.
Demand for cement in India, the world's largest producer after China, is expected to rise 7-8% over this year as lower interest rates help kickstart construction activity, analysts said, but rising costs will force companies to increase prices to protect margins.
Cement makers are also under pressure ahead of a ruling from the Competition Commission of India (CCI), an anti-trust body, on whether companies have colluded to push prices higher. No names have been mentioned but any such findings, expected later this month, could mean penalties for the companies.
Ambuja, 46% owned by Switzerland's Holcim, the world's second-largest cement producer, along with rivals Jaiprakash Associates and Ultratech account for around 50% of the cement produced in India.
Ambuja, India's No. 3 cement producer, reported a 23% fall in net profit to Rs 312 crore for the first quarter ended March, compared with Rs 407 crore a year earlier.
The drop was mainly due to a retrospective change in depreciation on captive power plants which resulted in an additional charge of Rs 289 crore.
Net profit would have been Rs 507 crore under the earlier method, the company said, which would have exceeded the Rs 450 crore expected by analysts, according to Thomson Reuters I/B/E/S.
"Continuity in overall current demand would be key to maintain the current momentum," Ambuja said in a statement. "In spite of improved realization, cost push from higher energy cost and rail freight increase is expected to keep the profit margin under pressure".
Ambuja's net sales rose 19% to Rs 2,630 crore backed by a 10% rise in volumes and improved prices, the company said.
Copyright: Thomson Reuters 2012