Swiss cement company Holcim’s Indian arms, ACC, and Ambuja Cements, have begun the calendar year on a poor note.
ACC posted a decline of 57 per cent in its March quarter consolidated net profit, at Rs 151.55 crore, compared to Rs 350.17 crore in the corresponding quarter the previous year. Net sales grew by 18.6 per cent to Rs 3,015 crore, from Rs 2,541 crore.
Ambuja Cements, ACC’s sister concern, met the same fate, as its profitability fell by 23 per cent to Rs 312 crore, compared to Rs 407 crore in the year-ago quarter. Net sales rose 19 per cent to Rs 2,633 crore, from Rs 2,213 crore.
The weak performance of the two companies was due to a change in the method of providing depreciation on fixed assets related to captive power plants from the “straight line” to the “written-down value,” with a retrospective effect at the rates prescribed in schedule XIV to the Companies Act, 1956.
Ambuja Cements said in a statement the change would result in a more appropriate presentation and give a systematic basis of depreciation charge.
The January-March quarter was the best quarter for the industry in terms of cement sales in the financial year 2011-12. The quarter reported 9.35 per cent growth in industry’s sales. The prices remained firm close to Rs 300 for a 50 kg bag which should have added to the profits of the companies.
According to ACC, had these changes not made, the company would have reported net profits of Rs 383 crore.
In case of Ambuja, the actual profitability should have stood at Rs 507 crore which would mean a rise of 25 per cent.
In its outlook, Ambuja said continuity in overall current demand would be key to maintaining the current momentum. According to the company, in spite of improved realisation, cost push from higher energy cost and rail freight increase is expected to keep the profit margin under pressure.
On the Bombay Stock Exchange, shares of ACC on Thursday closed at Rs 1,246.65, down 3.89 per cent, while those of Ambuja lost 0.81 per cent to close at Rs 164.75.
