Indian cement manufacturer ACC Ltd said its third-quarter net profit rose 30% on higher cement prices and sales volumes, and analysts expect robust growth on strong demand for the commodity for the rest of the year.
The company said the domestic cement industry had grown by 7.8% on year from January to September, and the continued strong growth shown by the housing, construction and infrastructure sectors will have a positive impact on cement demand going forward.
Average gross domestic product growth of 8.6% in the Indian economy over the past four years has fueled unprecedented demand for homes, offices and infrastructure, boosting cement demand.
Unconsolidated net profit for the July-September quarter was INR2.92 billion, compared with INR2.25 billion in the same quarter last year.
Net sales for the quarter grew 22% to INR16.79 billion on year, from INR13.74 billion.
A Dow Jones Newswires poll of five analysts expected net profit at INR3.19 billion, on net sales of INR17.94 billion.
"The earnings have been affected by higher power and fuel charges, which moved up due to rising coal and freight costs," said Manak Gaushal, a cement industry analyst with Mumbai-based brokerage Religare Securities Ltd.
As a result, manufacturing costs had increased by 21% to INR2,622 per metric ton of cement from INR2,160 per ton in the year-ago quarter, he said.
Power and fuel costs for the quarter increased by 46% to INR3.27 billion from INR2.23 billion in the year-ago quarter.
Prices of cement rose by about 2.5%, or INR5, per 50-kilogram bag, during the quarter despite it traditionally being a period of lower sales due to the onset of the monsoon, Gaushal said.
Cement demand in India is seasonal and usually dips during the June-September period when the monsoon is active, halting most construction activity.
Demand is expected to pick up with the onset of the festival season and cement companies may hike prices again in the October-December quarter, analysts said.
"Prices have already begun going up in south India and soon you’ll probably see a price hike over the rest of the country by about INR5 per bag," Gaushal said.
Sales volumes for the quarter increased almost 10% to 4.68 million tons from 4.26 million tons during the comparable year-ago quarter.