Ambuja Cements Q1 profit falls 25.5% as rising fuel prices hurt margins

Ambuja Cements Ltd, part of Swiss building material major Holcim Group, said on Thursday standalone net profit for the first quarter ended March 31 fell 25.5% from a year earlier as rising fuel prices hurt its margins.

Profit slipped to Rs 495.2 crore from Rs 664.6 crore a year earlier, the company said. This, however, market estimates of Rs 450-460 crore.

Net sales for the first quarter rose 8% to Rs 3,855 crore from Rs 3,579 crore a year earlier.

The cement maker, which is also the parent of ACC Ltd, said the January-March quarter was impacted by rising fuel prices. This dragged EBITDA 19% lower to Rs 790 crore. This was partly mitigated by boosting efficiencies and by reducing logistics costs.

On the cost, freight cost per ton declined 5% year on year supported by logistics efficiencies. Despite this gain, total operating cost per ton rose by 15%, due to increased fuel costs

Other key highlights

1) ACC net sales during the quarter increased by 3% to Rs 4,322 crore from Rs 4,213 crore last year

2) ACC profit after tax at Rs 396 Crore.

3) Ambuja consolidated net sales Rs 7,754 crore versus Rs 7,617 crore.

4) Consolidated net income attributable to Ambuja Group Rs 659 crore versus Rs 947 crore.

5) Consolidated EBITDA margin narrows to 18.4% in Q1 from 24.1% a year earlier.

6) Consolidated operating EBIT Margin shrinks to 14.4% from 20.6% a year earlier.

Outlook

The company said it remains “very optimistic” on cement demand growth with key indicators such as GST collection, power demand and e-invoice pointing towards a recovery of the domestic economy.

The government's focus on infrastructure and housing and the PLI (Production Linked Incentive) scheme for the manufacturing sector will further provide impetus to cement demand growth, Ambuja said.

Management Commentary

Neeraj Akhoury, CEO, Holcim India and Managing Director and CEO of Ambuja, said that the India Strategy 2025 for both Ambuja and ACC is under execution. “Under this plan we will realise industry leading position in cost excellence, asset optimization and sustainability, he said.

Akhoury said Ambuja’s new Marwar cement plant is now operating at full capacity. “Our additional cement capacity expansions of around 9 million tons at Ropar and Bhatapara are on track. Our plan is to grow cement capacity to 100 million tons per annum,” he said.

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