The Hindu Business Line : Ambuja Cement net falls 42% on high input cost

Mumbai, April 25 Reeling under high coal prices, Ambuja Cement has reported a 42 per cent dip in net profit at Rs 326 crore (Rs 566 crore) in the first quarter ended March 31, 2008.

Gross profit has dropped 7 per cent to Rs 483 crore (Rs 779 crore) which is a clear indication that the company could not pass on the entire rise in input cost to end consumer.

Net realisation has come down to Rs 3,518 a tonne (Rs 3,541) in the quarter. Net sales were up 17 per cent to Rs 1,655 crore.

Mr A.L. Kapoor, Managing Director, Ambuja Cement, said, “Coal prices have risen from $66 a tonne to $130/ tonne in one year. Overall there was an increase of 13 per cent in input cost, while the sale price increased only by 3 per cent.”

The bottomline was also impacted by temporary shut down of five kilns for annual maintenance and the company had to buy clinker at a higher price from the open markets, he added.

Export ban

Saying that the ban on cement exports will not have any impact on prices, the company said transporting export consignments from Gujarat, which accounts from 90 per cent of the exports, to other parts of the country will be a costly proposition.

Ambuja Cement, which has orders to export about 2 lakh tonnes of cement, will have to find a way to overcome the penalty clause in the agreement with the buyer.

“We may negotiate to enforce force majeure with both the buyer and shipping company,” said Mr Kapoor.

Force majeure is a common clause in contracts which essentially frees both parties from liability or obligation in an extraordinary event or circumstance beyond the control of the parties.

Mines acquisition

As a long term plan to bring down the production cost, the company is scouting for coal mines in India. “Acquiring mines is a time consuming process. Given to understand that traders were given mining rights in a few cases, we only hope the government gives priority to cement companies,” Mr Kapoor said.

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