The performance of Ambuja Cements in the March quarter reflects the current state of the cement industry. On the one hand, lower demand has resulted in a decline in revenues, and on the hand higher freight costs have led to drop in margins for the company.
The March quarter has been the most disappointing for Ambuja Cements since the company recorded its lowest Ebidta margin during the past five quarters. In the quarter under review, cement demand has been subdued as construction failed to pick up pace. The company’s cement volumes declined 4% y-o-y to 5.8 MT. On a sequential basis too, the company’s performance has been lacklustre.
Its realisations fell 3% quarteron-quarter to Rs 4,400 per tonne. It appears that the company may have slightly lowered prices over the previous quarter. In addition to this, higher freight costs further added to the woes of the company this financial year.
Subsequently, its Ebidta fell by 27% to Rs 553 crore. Over the past five quarters, the company’s Ebidta margins have been steadily decreasing from 32% in March 2012 quarter to 21% in the current quarter.
Adjusting for the exceptional item for change in depreciation method last year, the company’s net profits fell 17% to Rs Rs 488 crore. Despite the weak performance, the company’s stock looks reasonably priced at the current market price. This is because the present price seems to discount most negative factors relating to weak demand.
Source : The Economic Times