Holchim group company, Ambuja Cement posted a 10% growth in revenue to Rs. 2222.47 crore during the quarter ended March 2011. OPM declined by 410 basis points to 28.2%. PBT was down by 8% to Rs. 559.2 crore, but effective tax jumped by 300 basis points to 27% leading to 12% de-growth in PAT to Rs. 407.48 crore.
Cement demand growth was subdued during the quarter, registering a 5% y-o-y growth versus 10% witnessed in the corresponding quarter. The southern region had a contraction in demand, demand in north was moderate, while demand in west and east was strong. The export market continued to remain depressed.
Production of cement for the quarter went up by 4.8% to 5.59 million tonnes compared to 5.33 million tonnes for the same quarter last year. Overall sales (domestic and saleable clinker) increased by 6.8% y-o-y from 5.28 to 5.64 million tonnes. Domestic cement sale volumes increased by 5.5%. Cement exports were 89000 tonnes compared to 129000 tonnes last year, a decline of 31%.However, clinker sale were 134000 tonnes as compared to 18000 tonnes in the corresponding period.
Clinker production registered a good growth of 20% y-o-y backed by investment in new kiln lines. Accordingly, clinker purchases were negligible during the quarter in comparison during the corresponding period. This brought down clinker purchase cost substantially. Although the cost of other raw material increased, the overall raw material cost decreased by 21% to Rs. 145 crore.
Operating Costs increased substantially during the quarter driven by increase in power and fuel costs on account of sharp increase in coal prices, higher grid tariff and increase in freight rates. With the capex initiative taken in the previous quarter, there was an overall efficiency improvement in substituting own clinker with purchased clinker, improvement in thermal and electrical efficiency and gains in power generation and logistics efficiency. These operational efficiencies, to a large extent negated steep increase in input costs.
Power and fuel increased 36% y-o-y, partly as a result of higher clinker and cement production, substantial increase in coal and pet coke prices and increased grid power purchase rate. This increased were partly mitigated by favorable efficiency gains in both thermal and electrical energy consumption. Freight and forwarding expenses increased by 23% y-o-y impacted by higher freight rates, growth in sales volume and increased sales transfers. However, on y-o-y basis, the net selling price increase of 4%, increase in clinker production and efficiency gains were not sufficient to mitigate the steep increase in the input cost.
Performance during the full year ended December 2010
During the year revenues were up by 5% to Rs. 7517.55 crore, but there was a 150 basis point decline in OPM to 26%. PBT after EO was down by 8% to Rs. 1661.87 crore, but an 800 basis point drop in the effective tax rate to 24% helped the PAT grow by 4% to Rs.1263.61 crore.
For the full year ended December 2010, sales were up by 5% to Rs. 7517.55 crore. The growth was only 5% since the growth in volumes was offset by reduction in average realizations. The production for cement was up by 7% to 201 lakh tonnes. The Raw Material cost for clinker was down by 78% to Rs. 123.7 crore, being 640bps less at 1.6% as a % of sales. While the other raw material cost was up by 20% to Rs. 472.58 crore which is 70bps more at 6.2% as a % of sales. The power & fuel expenses grew by 19% to Rs. 1697.34 crore and freight charges also by 19% to Rs. 1610.08 crore, each being 250bps and 240bps more at 22.4% and 21.3% as a % of sales respectively. Other expenses grew by 19% to Rs. 1373.51 crore, being 200bps more at 18.1% as a % of sales. These factors dragged the OPM down 150 basis points to 26%. The operating profit was down by 1% to Rs. 1950.96 crore, which included Rs. 29.17 crore for sale of power during the current year and Rs. 42.51 crore for the previous year.
The other income declined by 20% to Rs. 120.26 crore. The interest cost for the previous year included Rs. 46.16 crore being discount on pre-payment of an outstanding deferred sales tax loan. After providing for the interest cost and the depreciation which grew by 117% to Rs. 48.69 crore and 30% to Rs. 387.19 crore respectively, the PBT before EO declined 9% to Rs. 1635.34 crore during the period under review. The EO gain stood at Rs.26.53 crore which included profit on sale of investment in ING Vysya Life Insurance of Rs.72.63 crore and provision of Rs. 46.1 crore consequent to change in policy of recognizing provision for slow moving inventories of spares based on the age of inventory. PBT after EO slipped 8% to Rs. 1661.87 crore. The 800 basis point decline in the effective tax rate to 24%, helped in the 4% growth in PAT to Rs. 1263.61 crore.
Recent Development
During the quarter, the company has commissioned 5 wind turbine generators having total capacity of 7.5 MW at Kutch in the state of Gujarat.
Outlook
With steep increase in energy costs driven by increase in coal cost, higher freight rates and higher expected inflation, profit margins are expected to remain under pressure. However, due to executed and ongoing capex investments, ACL continues to work on high productivity and improved operational efficiency thereby partly mitigating the pressure. Revival of good demand and improvement in realization to absorb the additional burdens are critical in the next quarters.
Ambuja Cement: Results
| Particulars | 1103(03) | 1003(03) | Var. (%) | 1012(12) | 0912(12) | Var. (%) |
| Sales | 2222.47 | 2018.76 | 10 | 7517.55 | 7181.48 | 5 |
| OPM (%) | 28.2 | 32.3 | 26.0 | 27.5 | ||
| OP | 627.00 | 651.25 | -4 | 1950.96 | 1971.49 | -1 |
| Other income | 52.09 | 25.98 | 101 | 120.26 | 151.23 | -20 |
| PBIDT | 679.09 | 677.23 | 0 | 2071.22 | 2122.72 | -2 |
| Interest | 13.79 | 10.78 | 28 | 48.69 | 22.43 | 117 |
| PBDT | 665.30 | 666.45 | 0 | 2022.53 | 2100.29 | -4 |
| Depreciation | 106.11 | 76.72 | 38 | 387.19 | 296.99 | 30 |
| PBT before EO | 559.19 | 589.73 | -5 | 1635.34 | 1803.30 | -9 |
| EO | 0.00 | 20.08 | -100 | 26.53 | 0.00 | |
| PBT after EO | 559.19 | 609.81 | -8 | 1661.87 | 1803.30 | -8 |
| Tax | 151.71 | 147.62 | 3 | 398.26 | 584.93 | -32 |
| PAT | 407.48 | 462.19 | -12 | 1263.61 | 1218.37 | 4 |
| EPS (Rs)* | 10.7 | 11.7 | 8.1 | 8.0 |
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