Gujarat Ambuja Cements has reported third quarter results which are much above market expectations. Strong growth in volumes and higher price realisation has helped the company to substantially improve margins.
For the third quarter ended 31 March 2006, Gujarat Ambuja has reported a standalone net profit of Rs298.59 crore, a growth of 108.64 per cent as compared to Rs143.11 crore for the same quarter of previous year. Standalone revenues for the quarter increased by 44.76 per cent to Rs978.13 crore from Rs675.7 crore, a year ago.
The company realised a profit of Rs35.8 crore during the quarter from sale of subsidiary companies. Other income also included Rs6.43 crore in exchange gains and Rs11.61 under other heads.
Adjusted for the one-time income on sale of subsidiaries, profits for the quarter have increased by 83.63 per cent when compared to previous year quarter.
Gujarat Ambuja had reported a net profit of Rs87.9 crore on total revenues of Rs765.56 crore for the second quarter ended December 2005.
The significant improvement in operating leverage as a result of higher volumes and the impact of higher price realisations are visible in the quantum jump in operating margins. The company's operating margins improved nearly 500 basis points to 34.76 per cent of net sales during the March quarter from 29.83 per cent for the previous year quarter.
Operating profits increased 61.37 per cent during the quarter, helped by better realisations and tighter control on other expenses. Total production cost expanded by 30.7 per cent when net sales increased 38.49 per cent. Increase in other expenses as compared to the previous year quarter was 19 per cent while staff costs jumped 52 per cent. On a consolidated basis, the company has reported a net profit of Rs315.7 crore, an increase of 102.9 per cent from Rs155.6 crore reported for the year ago quarter. Consolidated revenues for the quarter increased by 8.7 per cent to Rs989.65 crore from Rs910.32 crore.
The consolidated numbers are not comparable as the company disposed off some subsidiaries while companies like Ambuja Cements Eastern and Ambuja Cements India ceased to be subsidiaries during the quarter.
The company said infrastructure development and robust construction growth would see the growth rate in cement sales continue this year as well. European cement major Holcim, the second largest cement producer globally, has acquired a 15 per cent stake in Gujarat Ambuja. Holcim's offer for an additional 20 per cent in the company is now open.