Mumbai-based cement manufacturer Ambuja Cements has reported a better-than-expected profit in Q4 2023, aided by increased government spending on infrastructure and lower raw material costs. The company, which is owned by the Adani Group, reported a profit after tax of INR 5.02 billion ($61.3 million) for the quarter ended March 31, up from INR 4.94 billion in the previous year. This exceeded analysts’ expectations of INR 4.55 billion. The margins on earnings before interest, taxes, depreciation, and amortization also expanded to 22.6% from 17.3% a year earlier after kiln fuel costs fell 10%.
Cement manufacturers in India have seen prices of key raw materials such as coal and petcoke drop in recent months, which has helped to boost their profits. Ambuja’s revenue from operations climbed 8.4% to INR 42.56 billion, even though it halted operations at its plants in Himachal Pradesh state for 50 days. The company said it is encouraged by the government’s increased spending on infrastructure development and expects strong volumes and elevated demand in the coming quarters.
The increase in revenue comes as the Adani Group faces allegations about its debt levels and use of tax havens, raised by US-based short-seller Hindenburg Research in late January. The group denies the allegations, but Ambuja’s shares have fallen about 14% since then. The Adani Group acquired Holcim AG’s cement businesses in India – Ambuja and ACC Ltd – for $10.5 billion last year and was reportedly looking to sell a 4-5% stake in Ambuja Cements to cut its debt. However, Ambuja said the company remains debt-free.
Ambuja’s larger rival, Ultratech Cement, reported a 32% slump in March-quarter profit last month. The Indian cement industry has been impacted by the COVID-19 pandemic, which led to a decline in demand in 2020. However, with the government increasing spending on infrastructure projects and a pickup in construction activities, cement manufacturers are expected to see improved demand in the coming quarters.
“We are encouraged by the government’s push towards infrastructure development and the pickup in construction activities across our markets. We see the continuation of the elevated demand and strong volumes in the coming quarters as well,” said Ambuja’s Chief Executive Ajay Kapur in a statement.
The company’s board recommended a final dividend of INR 2.50 per share for the fiscal year that ended in March. Ambuja’s shares closed 1.2% higher at INR 327.60 on Tuesday after the earnings announcement.
The COVID-19 pandemic has significantly impacted the Indian cement industry, with a decline in demand in 2020. However, with the government increasing spending on infrastructure projects and a pickup in construction activities, cement manufacturers are expected to see a surge in demand in the coming quarters. This is good news for the industry, which has been struggling due to the pandemic-related disruptions.
Ambuja Cements has been proactive in its approach to dealing with the challenges posed by the pandemic. In addition to implementing safety measures at its plants and offices, the company has also been working on improving its digital capabilities. It launched a new mobile app last year to make it easier for customers to place orders and track their deliveries, which has helped to improve the customer experience.
Despite facing allegations about its debt levels and use of tax havens, Ambuja Cements has remained focused on its growth plans. The company plans to increase its capacity by 30% over the next few years, which will help it to meet the growing demand for cement in India. It is also exploring opportunities to enter new markets and diversify its product portfolio.
In conclusion, Ambuja Cements has reported a better-than-expected profit in Q4 2023, aided by increased government spending on infrastructure and lower raw material costs. Despite facing allegations about its debt levels and use of tax havens, the company remains debt-free and expects strong demand in the coming quarters. With the government increasing spending on infrastructure projects, cement manufacturers are expected to benefit from improved demand.
