Cement major, Gujarat Ambuja Cements Limited (GACL) has announced an 85% jump in bottomline for 2QFY00. The company has benefited from an improvement in realisations and a sharp growth in operating profit margins.
GACL is the largest manufacturer of cement in Gujarat and Punjab. The company recently bought a 14.4% stake in one of India's leading cement producers, Associated Cement Companies (ACC). It is India's most efficient cement manufacturer due to high degree of mechanisation in its products and mining activities. It has controlled freight costs by moving bulk of its production through the sea route.
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GACL results come in sharp contrast to those of ACC and L&T, both leading domestic cement producers. Unlike GACL, both these companies have posted a sharp erosion in bottomline. While in the case of ACC it is low realisations and a rise in expenditure that caused the fall in bottomline, L&T suffered mainly on account of 150% jump in interest costs.
GACL, unlike its competitors, has benefited from a rise in realisations per bag even as cement production fell marginally as compared to the corresponding period last year. The firmness in prices in the western and northern markets, where GACL's facilities are concentrated, has been largely responsible for this. However, the significant reduction in operating costs, as reflected in the higher operating profit margins, has further improved the profitability of the company vis a vis its competitors.
The fact that GACL is India's most efficient producer of cement has led the analyst to rate the stock as a 'BUY'. The management quality of the company is considered to be another factor in favour of the company.
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