(Mumbai, India) -- India's No.2 cement maker, ACC Ltd, today beat forecasts with a 32 percent rise in 2009 net profit on higher prices and lower costs and analysts expect a pick-up in construction to boost the outlook.
- Profit up a third on higher prices, lower costs
- Sees industry demand up 8-10 pct in 2010
- Shares down 3 pct in weak Mumbai market
Cement demand in India has revived after a sluggish December quarter, helped by accelerating industrial activity. But industry plans to add 90 million tonnes of new capacity by 2011 have raised concerns of pressure on prices in the long term.
"In 2010, we expect demand to grow 11-12 percent. In the last two months, industry volumes have risen 11.5 percent, and I expect this trend to continue as there are so many drivers," said Rupesh Sankhe, sector analyst at Angel Broking.
ACC, 46.22 percent owned by Switzerland's Holcim, said its capacity would expand to 30 million tonnes by the third quarter of 2010 from 26 million tonnes now.
The company said it expected the cement industry to grow by 8 to 10 percent this year, helped by the government thrust on infrastructure and increased construction activity in Asia's third-largest economy.
Last month, Holcim, which controls about a fifth of India's 240-million-tonne cement production capacity through ACC and Ambuja Cements, said it aimed to spend $1.1 billion to boost capacity by a further 10 million tonnes in 3 to 5 years.
Bigger rival Aditya Birla Group is considering to spend about 70 billion rupees ($1.4 billion) over 3-4 years to expand its cement operations to 62 million tonnes, the Economic Times reported on Thursday.
In November, the group said it would consolidate cement operations under group firm UltraTech Cement, making it the largest cement producer in the country with capacity of 49 million tonnes by end-March.
OPERATING MARGINS JUMP
ACC said standalone net profit rose to 16.07 billion rupees in 2009 from 12.13 billion a year ago. Net sales rose 10 percent to 80.27 billion rupees, helped by a 2.4 percent growth in cement volumes and better realisations.
A Reuters poll of brokerages had estimated standalone net profit of 15.4 billion rupees on net sales of 81.1 billion.
Operating margins rose to 30.4 percent from 23.3 percent.
"Better price, exacting control on production, distribution and other costs has enabled ACC to achieve these results," the company said in a statement.
ACC said it had agreed to buy 45 percent stake in Asian Cement & Concrete, which operates a 300,000 tonne cement grinding unit at Himachal Pradesh in north India. The capacity will be increased by 1 million tonnes in future.
The company did not disclose the value of the deal, but said the transaction was likely to be completed by the end of March.
Last week, ACC said it had acquired the entire stake in a 200,000 tonne slag grinding unit in south India.
Shares in the company fell 2.9 percent to 856.75 rupees in a weak Mumbai market that ended down 1.6 percent.
ACC, valued at $3.5 billion, had risen 82 percent in 2009, mirroring the 81 percent rise in the main stock index .BSESN for the year. ($1=46.2 rupees)
By: Prashant Mehra
Source: http://www.reuters.com/article/idUSSGE6120JV20100204