* ACC Q1 profit falls 57 pct to $29 mln
* Ambuja Q1 profit drops 23 pct to $60 mln
* Both companies hit by one-time depreciation charge
* Expect stable demand, cost pressures continue
(Adds Ambuja Cements results)
By Aditi Shah
MUMBAI, April 19 Indian cement producers ACC Ltd
and Ambuja Cements reported a fall in
quarterly profit, hit by a one-time charge, with higher costs of
fuel and transportation also squeezing margins even as sales
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 kickstart construction activity,
analysts said, but rising costs will force companies to increase
prices to protect margins.
Cement makers are also under pressure ahead of a ruling from
the Competition Commission of India (CCI), an anti-trust body,
on whether companies have colluded to push prices higher. No
names have been mentioned but any such findings, expected later
this month, could mean penalties for the companies.
ACC and Ambuja, both 46 percent owned by Switzerland's
Holcim, the world's second-largest cement producer,
along with rivals Jaiprakash Associates and Ultratech
account for around 50 percent of the cement produced
Ambuja, India's No. 3 cement producer, reported a 23 percent
fall in net profit to 3.12 billion rupees ($60.32 million) for
the first quarter ended March, compared with 4.07 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 2.89 billion rupees.
Net profit would have been 5.07 billion rupees under the
earlier method, the company said, which would have exceeded the
4.5 billion rupees expected by analysts, according to Thomson
"Continuity in overall current demand would be key to
maintain the current momentum," Ambuja said in a statement. "In
spite of improved realisation, cost push from higher energy cost
and rail freight increase is expected to keep the profit margin
Ambuja's net sales rose 19 percent to 26.3 billion rupees
backed by a 10 percent rise in volumes and improved prices, the
ACC, India's No. 2 cement producer, reported net profit of
1.52 billion rupees ($29.4 million) for the same period compared
with 3.5 billion rupees a year earlier - also impacted by a
retrospective change in depreciation method.
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.
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
Shares in Ambuja, which is valued by the market at $5
billion, closed down 0.9 percent at 164.85 rupees, whereas 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
($1 = 51.72 rupees)
(Reporting by Aditi Shah; Editing by Ranjit Gangadharan,