Ambuja Cement, part of the LafargeHolcim group, reported that improving sales volumes, combined with favourable pricing contributed to positive 1Q17 results despite rising costs.
Cement sales volume and price realisation improved in each consecutive month of the 1Q17, backed by good cement demand compared to the corresponding period a year, leading to a 5.3 per cent increase in net sales to INR25.33bn (US$395m).
“With demonetisation largely behind us, we are well placed to serve both small and large customers," said Ajay Kapur, managing director and CEO of Ambuja Cement, said.
Production costs were impacted by higher petcoke and imported coal prices. The sourcing of fly ash from longer leads and an increase in diesel prices led to higher freight costs. This impact was partlly offset by cost reduction initiatives and lower gypsum costs, Ambuja highlighted.
Net profit after tax increased by 357 per cent in 1Q17 mainly on account of amortisation of goodwill in the March 2016 quarter.
The most recent quarter also marked the opening of the Chenani-Nashri tunnel, India’s longest highway tunnel, located in the country’s northern state of Jammu and Kashmir. Ambuja Cement was awarded the contract to develop tailor-made logistics to ensure regular delivery of more than 300,000t of high-quality cement to the remote mountain area. "We are proud of having been the largest supplier of cement and a key partner in this project," Mr Kapur noted.
Economic improvements expected
On the outlook for the Indian cement industry, Ambuja said the domestic economy is expected to return to a higher growth trajectory due to the government's continued focus towards infrastructure development, affordable housing, smart cities, concrete roads and highways, coupled with remonetisation and structural reforms pursued by the Union Government in the form of GST (Goods and Service Tax). "Hence, the medium-term outlook for cement demand remains positive," Rajiv Gandhi, company secretary of Ambuja Cement said in a statement.
"With its continuing operational excellence programmes, combined with segmented marketing and value added special cement products and building solutions, Ambuja is well placed to benefit from the economic growth trajectory," he added.
