Strong prices boost profits

Strong prices boost profits
Published: 29 July 2004

Two of India’s top three cement groups reported on Wednesday forecast-beating profit growth for the last quarter, as prices revived in the world’s second-biggest market due to a seasonal pick-up in construction.  Grasim Industries Ltd, flagship of India’s third-largest family-run conglomerate, the Aditya Birla group, said net profit in the quarter to June jumped 68 percent to 2.2 billion rupees ($47 million).  Gujarat Ambuja Cements Ltd, the nation’s fourth-biggest maker by capacity and third-biggest listed group, said profit in its fourth fiscal quarter jumped 49 percent to 1.17 billion rupees.

The two groups account for about a third of India’s total installed capacity. Grasim, which is No.3 producer on its own, is the largest including its recent purchase of a majority stake in UltraTech, the country’s biggest cement acquisition. Both companies expect robust demand for the commodity this year, but Grasim Chief Financial Officer D.D. Rathi said cement prices were expected to be soft in the current quarter compared with the last, as monsoon rains dampen construction activity.  Cement output in India rose a modest two percent in the past quarter, but analysts said cement prices had been 10 to 12 percent higher compared to a year earlier.

Grasim expects cement demand to grow by 7 to 8 percent in the year to March 2005, despite lower-than-expected growth in the first three months, while Ambuja saw demand rising 6 percent compared with 5.6 percent growth last year.

With India’s economy expected to grow by more than 6 percent in the current fiscal year to March, analysts said demand was likely to be strong. Ambuja and Grasim both expect growth in the housing sector and a government push for rural and urban infrastructure development to drive demand for cement.