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Cement firms grin as economy groans

Parul Gupta

While the rest of the economy is reeling under a recession, cement companies have reported a significant rise in profits during the April-June quarter in 2001.

Cement majors such as ACC, Gujarat Ambuja Cements, Larsen & Toubro, India Cements and Grasim have shown a bottomline growth, ranging from 87 per cent in the case of Grasim to around 562 per cent for ACC.

The growth in profits is higher than the cement production and despatches recorded by the companies during the quarter. Production for the first quarter recorded a 2.8 per cent increase to touch 26.08 million tonne compared with 25.47 million tonne in the same period last year, according to the provisional estimates available with the Cement Manufacturers' Association.

Cement dispatches also registered a 2.18 per cent increase to touch 26.21 million tonne compared with 25.65 million tonne during the same quarter last year.

Thus, the rise in profits has come largely from increased turnover recorded by the companies, thanks to the uptrend in cement prices. ACC said that net sales jumped by 13 per cent during the period to Rs 8.42 billion from Rs 7.46 billion despite aggregate sale of cement in volume terms being marginally lower.

In the case of L&T, while the average sales realisation during the year increased from Rs 1,478 per tonne against Rs 1,083 per tonne last year, for Grasim it was higher at Rs 2,046 per metric tonne.

Reacting to the huge profits, CMA secretary general AV Srinivasan said: "The growth has come because the firms have stopped undercutting each other and also because prices have firmed up a little."

Some companies, however, reported higher profits, though their turnover dipped during the quarter. Thus, India Cements posted a 105 per cent surge in net profit to Rs 116 million during April-June compared with Rs 57 million during the corresponding period last year, the total income fell by 8.23 per cent to Rs 3.58 billion (Rs 3.90 billion).

The implementation of infrastructure and other projects, push from the central government to utilise all the unutilised funds in ministries and the active construction and road work in Gujarat are all the right signals and can easily ensure an industry growth rate of 7-8 per cent for the whole year, he added.

Srinivasan felt that the second quarter is likely to be as good as the first quarter and the situation is likely to improve in the subsequent quarters.

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