Ambuja Cements, ACC report a drastic fall in profits

MUMBAI: Two of the largest cement companies in the country, Ambuja Cements and ACC, reported a drastic fall in profits, missing market expectations, hurt by weak demand, lower price realisations and higher costs.

ACC’s second quarter profit more than halved to Rs 118.90 crore, as higher costs suppressed margins amid poor demand. Ambuja Cements profit fell more than 45% to Rs 166 crore. Net sales at ACC fell by 1% to Rs 2,508.6 crore and by 7% at Ambuja Cements toRs 2,005 crore. Both these cementmakers are part of the world's largest cement maker and Swiss giant Holcim.

Sluggish demand has kept prices under check despite rising expenses. Total expenses at ACC rose about 7%, while Ambuja saw costs rise by 5%. Price realisation at ACC was down 6%.

“The fall is profits at both the companies is due to pricing pressure. Next quarter could be marginally better but I don’t see a major recovery in the next two-three quarters,” said V Srinivasan, research analyst for the cement sector at Angel Broking.

Cement demand has remained under pressure due to prolonged monsoon and a slow off-take in housing and infrastructure projects.

Rival Ultra-Tech Cement also reported a 52% fall in profit earlier this week. ACC expects a gradual but slow improvement in demand for cement and in the overall economy, it said in a statement. Ambuja Cements also said the outlook remained challenging in the difficult economy and it was working to control costs.