Gujarat 3Q growth flat on demand, India

Gujarat Ambuja Cements Ltd India’s third largest cement maker reported a marginal drop in its fiscal third quarter net profit due to flat cement prices and higher costs. 

Gujarat Ambuja’s net profit in the January-March quarter was down to INR1.43bn (US$32m) from INR1.45 bn in the same quarter a year ago. Revenue in the period rose 14 per cent YoY to INR6.75 bn. 

Gujarat Ambuja said its third quarter net profit in the previous fiscal year was higher as it included an exceptional gain of INR267m. 

Meanwhile, prices of raw materials such as coal and power have risen sharply in the January-March period due to demand from the manufacturing sector, say analysts.

Prices of coal rose 17-18 per cent on year. Cement prices, in comparison, rose only 1.5% per cent in the same period.
“Unseasonal rains in February led to a slowdown in construction work,” said Anil Singhvi, executive director. 

Rains affect construction activity in India which traditionally sees peak cement consumption during summer. 

Gujarat Ambuja’s operating profit was INR2.11bn, compared with INR1.89bn. 

“Although fiscal year 2004-2005 saw a weak growth of just about 2% in the first quarter, demand has picked up very well from September 2004 and is growing 10 per cent since then. We are witnessing good construction growth and it is expected that the growth will continue in the current year as well,” Gujarat Ambuja said in a statement. 

Cement consumption in India is expected to grow at a rate of 7-8 per cent due to the state-aided infrastructure projects. 

Separately, encouraged by an exciting outlook for the future, Gujarat Ambuja said its board has approved a bonus issue of one share for every two held.