India’s ACC net profit dips, sees slowing demand

India’s ACC net profit dips, sees slowing demand
Published: 06 February 2009

India’s top cement maker ACC Ltd on Thursday reported a 23 per cent drop in net profit in 2008 as a slowing economy curbed consumption and high input prices dented margins, and expects demand to ease this year.

ACC said it would not embark on new expansion projects as a downturn in Asia’s third-largest economy during the second half of the year had resulted in a crash in demand from housing and construction sectors.

"While ACC is focusing on completing ongoing projects, we have, for the time being, deferred new commitments on other expansion projects in the pipeline," it said in a release.

The company is expanding capacity by a third to 30Mt.

India’s ACC Ltd expects capital expenditures of about INR16 billion in 2009 and INR13 billion in 2010 on the projects already under execution, the cement producer’s managing director said.

Prices have fallen a bit in the eastern region, but are stable in north and southwest regions, he added.

"Our outlook is that there will be range-bound movements in prices," Banerjee said. "There will not be any sharp movements either upwards or downwards."

The company posted a 23% drop in its consolidated net profit for the year ended Dec. 31 as power and fuel costs rose, and said it expects demand for cement to drop in 2009.

ACC, which is 46.22 per cent owned by Holcim, said consolidated net profit fell to INR10.99bn ($225m) in 2008, including one-time gains of INR425m from the sale of land and units.

Net sales rose 9.5 per cent to INR77.20bn, helped by a 5.2 per cent growth in cement volumes.

Operating margins slipped to 25.4 percent from 28 percent in the previous year, as input costs as well as power and fuel expenses, jumped by a third. ACC, which is India’s single largest producer with 22.4Mt of capacity, said it expects cement consumption to grow 6-8 per cent in 2009, compared to an average 9.3 percent over the past five years, although prices are seen stable.