• NOVEMBER 12, 2001

Gujarat Ambuja: Reaping the benefits

Gujarat Ambuja recently reported a 19% increase in turnover and a 112% rise in net profit for the first quarter ended September 30 2001. Margins have also shown marked improvement in light of favorable cement prices and various cost cutting initiatives taken by the company.

(Rs m)1QFY011QFY02Change
Sales 2,516 2,993 19.0%
Other Income 37 89 144.1%
Expenditure 1,668 1,938 16.2%
Operating Profit (EBDIT) 849 1,055 24.3%
Operating Profit Margin (%)33.7%35.3% 
Interest (Net) 322 247 -23.4%
Depreciation 312 335 7.4%
Profit before Tax 251 562 124.4%
Tax - 30  
Profit after Tax/(Loss) 251 532 112.4%
Net profit margin (%)10.0%17.8% 
No. of Shares (eoy) (m) 155.1 155.1  
Earnings per share (Rs)* 6.5 13.7  

Production and sale of cement during the aforesaid quarter increased by 15.8% and 13.8% to 1.5 million tonnes (MT) respectively. While cement sales have increased by 13.8%, turnover has gone up by 19.0% in 1QFY02, which indicates that growth was also led by higher realisations thanks to the cartelisation effort. Interest costs, for the second consecutive quarter have been on the decline. The company has been reducing its debt burden from the private placement proceeds in an effort to improve on profit margins.

Key numbers...
(MT) 2QFY012QFY02Change
Clinker 1.1 1.3 16.9%
Cement 1.3 1.5 15.8%
Clinker 0.0 - -
Cement 1.3 1.5 13.8%

During the quarter, the company has allotted 8 m shares at a price of Rs 225 per share on preferential allotment basis to Affinity Investment Ltd., an afilliate of Warburg Pincus. It has also issued 8 m warrants to the same party. Each warrant would be convertible into one share at any time upto September 2002 at a price of Rs 225 per share.

The scrip is currently trading at Rs 160 on a P/E multiple of 11.6x annualised 1QFY02 earnings. In the short term, the buoyancy in cement prices is expected to subdue in the coming quarters in light of a slowdown in the economy and weakness on the industrial production front. However, in the long run, the renewed focus of the government on the infrastructure front would benefit players like Gujarat Ambuja, which are poised to take full benefit of any upturn in cement demand.

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