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Ambuja Cements + Grasim – Quarterly Results Outlook

July 26, 2008

Ambuja Cements: Ambuja’s adj PAT came in at Rs3.4bn, 20% lower yoy on the back of a sharp rise in costs. Revenues grew 8% to Rs15.7bn on higher realizations. Margin pressures continued with EBITDA margins at 30% vs 38% last year and 31% in 1QCY08.

Volumes were almost flat at 4.4m tonnes. While domestic volumes grew 5%, exports fell 70% to 76,000 tonnes as a result of the export ban during the quarter. Realizations increased 9% yoy to Rs3,587/t (4% qoq). There was a significant jump in raw material, power and fuel and staff costs. Raw material costs increased 65% yoy. Power and fuel costs rose 35% yoy and 25% qoq to Rs730/t. With 30% of its coal requirements being met via imports.

According to consensus estimates, future looks bleak for Ambuja cements as it is likely to witness negative growth in EPS to Rs 7.2.

Grasim Industries: Grasim’s PAT came in at Rs5.1bn. EBITDA fell 5% yoy to Rs7.5bn and margins fell to 29% vs 32.5% last year. Cement & VSF margins declined yoy, while chemicals & sponge iron improved.

The cement division saw a decline in margins to 30% from 36% in 1QFY08, impacted by rising costs. Volumes grew marginally to 4m tonnes and realizations rose 9% yoy to Rs3,366/t (3% qoq) VSF’s margins fell to 31% from 36% in 1QFY08. Chemicals benefited from an increase in realizations (+30%) and volumes (+11%). Sponge Iron business EBITDA margins rose to 30% from 16% on the back of strong realizations (+62% yoy).

In-line with Ambuja Cements, Grasim is also likely to witness negative growth in EPS as it is likely to report an EPS of Rs 248 for FY09.

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