Guj Ambuja Net Growth Seen At 10%

As a result of the downward pressure on cement prices over the last nine months, analysts are expecting Gujarat Ambuja Cements to register a net profit growth of around 10 per cent in the first six months of 1996-97 ending December 31, against a 15-20 per cent growth of the cement industry in general.

The company will also have to provide for minimum alternate tax (MAT). It paid only a wealth tax of Rs five lakh in 1995-96. Analysts are however uncertain whether the company will be able to avail of tax benefits due to setting up of a plant in an unutilised backward area in Himachal Pradesh.

Gujarat Ambuja Cements had registered sales of Rs 730.4 crore in 1995-96 and a net profit of Rs 147.8 crore. Sales were Rs 429.4 crore in 1994-95 and a net profit of Rs 100.4 crore.

Prices had begun to fall as a result of an oversupply in the industry, which first affected the markets in the north and later in the western markets as well. Gujarat Ambuja, which has a major market in the west, has also been hit badly, analysts feel.

At the same time, cost of inputs like power, freight costs, indirect taxes, etc, have also risen. This is primarily due to the administered nature prices of major inputs.

The industry is facing an over-supply crisis, analysts feel. Major players like ACC, L&T, Gujarat Ambuja and India Cements are expec-ted to add around 2.75 million tonnes to their installed capacity by the end of FY 1997-98.

The total installed capacity in the country is expected to go up to 94.17 million tonnes. If the average 80 per cent capacity utilisation is taken into account, production is likely to be around 76 million tonnes in 1996-97. This translates into a demand gap of around 6 to 10 million tonnes, as most estimates have the total demand at around 68 to 72 million tonnes.