Market to remain sluggish

Market to remain sluggish

The macro economic conditions indicate a sluggish market due to challenging conditions and subdued demand.

The financial results of most cement companies showed a dip in net sales and profit margins. However, the companies see a positive outlook on a long term perspective due to the government´s steps on various infrastructure segments.

Ambuja Cements
Ambuja Cements reported 45 per cent fall in its June quarter net profit at Rs 226 crore. Net sales were down eight per cent at Rs 2,493 crore (Rs 2,706 crore). Sales volume increased marginally by two per cent to 5.88 million tonne (5.79 mt) in June quarter.The decline in cement prices by 10 per cent coupled with additional depreciation of Rs 22 crore led to lower profit, according to the company. Its logistics cost was up five per cent at Rs 715 crore (Rs 681 crore) largely due to increase in railway freight rates. The raw material cost was down marginally at Rs 217 crore (Rs 220 crore), while that of power dipped six per cent to Rs 584 crore (Rs 624 crore). Finance cost of the company increased to Rs 32 crore (Rs 20 crore).

Lower raw material prices and the company´s attempt to improve operational efficiencies helped contain the overall cost, but it could not mitigate the impact of sharp fall in cement prices in certain states, it said. Earnings before interest, tax, depreciation and amortisation was down 35 per cent at Rs 384 crore (Rs 588 crore).

Ambuja Cements expects cement demand to remain weak in the September quarter with the onset of monsoon across the country. In the short-term, the macro-economic indicators point to sluggish cement demand, it said.

However, it added, the government´s initiatives towards housing, concrete roads, smart cities and emphasis on infrastructure development should boost demand in the long run. The company will continue to focus on improving operation efficiencies, it added.

UltraTech Cement
Ultratech Cement reported a 6 per cent fall in consolidated net profit at Rs 591 crore for the first quarter ended June 30, 2015-16. The group firm had posted net profit of Rs 628 crore in the year-ago period.

Its consolidated net sales rose by 6 per cent to Rs 6,372 crore in April-June quarter of 2015-16, from Rs 5,989 crore in the same quarter of 2014-15 fiscal, UltraTech said in a filing to the BSE. During the quarter under review, cement and clinker sales stood at 12.14 million tonne against 11.70 mt, it said.

"Energy costs improved by 7 per cent. The reduction in fuel prices was partially offset by the increase in railway freight. Input prices remained stable, except for the rise in royalty for limestone and levies under the Mines and Minerals (Development & Regulation) (MMDR) Amendment Act, 2015," it added. UltraTech shareholders and creditors have approved the firm´s acquisition of Jaiprakash Associates Ltd´s (JAL) cement units at Bela and Sidhi in Madhya Pradesh that have a cement capacity of 4.9 million tonne per annum (MTPA) and a thermal power generation capacity 180 MW TPP, the company said.

"The Competition Commission of India has already approved the transaction. The transaction is now subject to approval from the High Court and getting all regulatory approvals," it added. UltraTech has also commissioned 15 MW waste heat recovery system, taking the company´s total power generation capacity from waste heat recovery to 48 MW.

ACC Ltd
ACC reported a 45 per cent drop in its consolidated net profit at Rs 133.5 crore for the second quarter ended June 30, on account of challenging market conditions and subdued demand. The firm had posted a net profit of Rs 243.2 crore in the corresponding quarter a year-ago, it said in a regulatory filing.

Total consolidated income fell marginally by 1.5 per cent to Rs 3,015.3 crore in April-June quarter from Rs 3,059.9 crore in the same quarter of 2014 fiscal, it added. The company attributed the decline in net profit to ´challenging´ market conditions.

"Overall construction activity remained dull with weak expenditure on infrastructure and housing sectors leading to lower demand for cement. Surplus capacity in the industry heightened competition and made cement prices volatile," it said.

During the quarter, the company´s cement sales fell by 2.4 per cent to 6.20 million tonne (mt) from 6.35 mt in the year-ago period.

Source: Economic times and moneycontrol.com

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