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Ambuja Cements under high cost pressure

August 11, 2008

Ambuja Cements Ltd (ACL) Q208 sales increased 8.2% yoy; however, EBITDA margin slumped 755 bps yoy and adjusted net profit declined 19.8% yoy as the Company could not shield its margins and profits from the rising cost pressures. Power and fuel costs per tonne shot up 34% yoy as domestic and imported coal prices rose 35% yoy and 85% yoy, respectively.

Analysts expect ACL’s EBITDA margin to fall 557 bps yoy in CY08E to 30.8%, compared with 36.3% in CY07. ACL is working at a high capacity utilization rate of 90% and has already increased its blending ratio to a high level of 1.45. Expect revenues to grow at 9.9% in CY08E, compared with 32.2% in CY07. EPS is expected to remain flat or go down to Rs 8.4 from Rs 8.7 in previous year.

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