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In Focus: Consolidation Mode

Capacity additions to help Gujarat Ambuja enjoy buoyant realizations

Cement companies had never had it so good. An increase in commercial investment in malls, special economic zones, commercial dwellings, apart from other infrastructure projects, is expected to further cement the position of players like Gujarat Ambuja Cements. The company, being one of the most efficient and lowest cost producers of the commodity in the country, is in the midst of Rs 950-crore capacity expansion. On a standalone basis, GACL reported a 50.5 per cent rise in net sales for the September quarter to Rs 984 crore compared with the corresponding period last year. The company expects the demand for cement to grow over 10 per cent per year on the back of sound GDP growth of the country.

The company has well managed to keep the cost of raw material, power, staff, etc under check. Decline in interest costs by 60 per cent to Rs 8.5 crore, depreciation of only 2 per cent to Rs 50 crore and rise in other income helped net profit surge by 225 per cent to Rs 244.7 crore. The capacity additions of 1.2 million to 16 million tonnes by 2007 end will help the company enjoy buoyant realisations from the commodity, the demand of which is expected to remain robust at 10-12 per cent per annum.

Swiss cement major Holcim has increased its stake in Gujarat Ambuja Cements by around 3.6 per cent in mid-November taking it up to 18.4 per cent from about 14.8 per cent. The group is also in the process of merging Ambuja Cement Eastern with itself. When the process gets completed, Holcim's stake in GACL will go up to 27 per cent.