MUMBAI, April 19 ACC Ltd, India's No. 2 cement maker, reported a 57 percent fall in quarterly profit after a one-time charge, with higher costs of fuel and transportation also squeezing margins even as sales volumes rose.
Demand for cement in India, the world's largest producer after China, is expected to rise 7-8 percent over this year as lower interest rates help construction activity, analysts said, but companies face daunting challenges to raise prices.
The Competition Commission of India, an anti-trust body, is set to rule this month on whether cement companies have colluded to push prices higher. No names have been mentioned but any such findings could mean penalties for the companies.
ACC, 46 percent owned by Switzerland's Holcim, the world's second-largest cement producer, reported net profit of 1.52 billion rupees ($29.4 million) for its first quarter ended March, compared with 3.5 billion rupees a year earlier.
The drop was mainly due to a retrospective change in depreciation on captive power plants which resulted in an additional charge of 3.41 billion rupees.
Net profit would have been 3.8 billion rupees under the earlier method, the company said.
The figure was still well below 4.3 billion rupees expected by analysts, according to T homson Reuters I/B/E/S.
"Margins are lower on a year-on-year basis but given the volume growth and current cement prices we expect profitability to increase," said Rajesh Kumar Ravi, analyst with Karvy Stock Broking in Mumbai.
Rising costs of fuel, raw materials and transport forced manufacturers to increase cement prices by 10 percent over the last year.
ACC said it sold 6.72 million tonnes of cement in the March quarter, up from 6.16 million tonnes in the year-earlier period. Net sales rose 19 percent to 30.15 billion rupees from 25.41 billion.
"Manufacturing costs and realisations were affected by steep escalations in the cost of inputs such as coal, fly ash and gypsum," the company said. "The cost of transportation also rose significantly as a result of the hike in rail freight and increase in diesel prices."
Shares in ACC, which has a market value of $4.7 billion, closed down 3.8 percent at 1,247.60 rupees in a Mumbai market that rose 0.6 percent. ($1 = 51.7250 Indian rupees) (Reporting by Aditi Shah; Editing by Ranjit Gangadharan)