ACC and Ambuja Cements, both part of Holcim group, posted sharp drops in net profit in the March, first, quarter. While ACC's net profit halved, Ambuja's profits dipped 23 per cent following higher depreciation and rising operation costs. Both companies changed their policy on providing depreciation on captive plants from ‘Straight Line' to ‘Written Down Value' with retrospective effect. Under the straight-line method, depreciation is charged on the original cost of goods, while in ‘written-down' it is charged on depreciated value of the goods.

“The management believes that the change in depreciation method will result in a more appropriate presentation,” said Mr Onne van der Weijde, Managing Director, Ambuja Cement.

ACC recognised an additional depreciation charge of Rs 341 crore, which includes Rs 6 crore for the March quarter. The net profit would have been higher by nine per cent at Rs 383 crore had the depreciation following the straight-line method.

The sales volume was up nine per cent at 6.72 million tonnes (6.16 mt). Its expenses were up six per cent at Rs 2,535 crore (Rs 2,397 crore) because of higher raw material, freight and fuel costs.

Ambuja Cement recognised additional depreciation of Rs 289 crore including Rs 10 crore for the March quarter. The net profit would have increased by 25 per cent to Rs 507 crore under the earlier depreciation method.

“In spite of improved realisation, cost-push from higher energy cost and rail freight increase is expected to keep the profit margin under pressure,” said Mr Weijde. Shares of ACC and Ambuja Cement were down at four per cent and 0.81 per cent at Rs 1,247 and Rs 165, respectively.

>suresh@thehindu.co.in

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