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Monday July 17, 6:37 PM Indian cement firms eye big profit, outlook good MUMBAI, July 17 (Reuters) - Indian cement companies are set to report their best quarterly performance in five years after prices jumped by 25 percent on the back of a construction boom in Asia's third-largest economy. Analysts expect cement prices to remain firm in the coming quarters, with fresh capacity lagging rising demand as India pours money into new bridges, homes and roads to support an economy expanding at about 8 percent a year. India is estimated to have consumed 34.3 million tonnes of cement in the April-June quarter, 12.7 percent higher than a year earlier. "With fresh capacity failing to keep pace with incremental demand, operating rates are expected to remain over 90 percent for the next 15-18 months, implying firm cement prices," R. Amarnath of ICICI Securities said in a report. Higher freight costs because of rising fuel prices and a court order against over-loading of trucks were more than offset by the rise in cement price. Analysts estimated that freight costs rose 50-60 rupees a tonne, while cement prices jumped by about 500 rupees a tonne. India has the capacity to produce 158 million tonnes of cement a year, the world's largest after China. Fresh capacity of more than 40 million tonnes is expected to come onstream over the next two years, analysts said. Demand for cement will outstrip supply until early 2008, they added. "On account of large-scale capacity additions, cement prices will start softening from 1Q FY08, and FY08 will have a decline in net realisation of the companies," Motilal Oswal Securities said in a report. Associated Cement Companies Ltd. , a third owned by Swiss-based Holcim , is expected to report on Wednesday that net profit rose to 2.64 billion rupees ($$56.7 million) in the June quarter, up 90 percent from a year ago, a Reuters poll showed. To read the poll on expected results for companies in the sector, doubleclick on [ID:nBOM217463]. ACC, India's number-two cement producer, will also report a one-off income of 1.4 billion rupees before taxes from a land sale in New Delhi. Diversified Grasim Industries Ltd. , which gets more than half its its revenue from cement, will not post spectacular results because its viscose staple fibre, used for textiles, division is a drag on earnings. The firm is expected to report a net profit of 2.64 billion rupees, up 5.18 percent from 2.51 billion a year earlier. Grasim along with its unit UltraTech Cement Ltd. , is the largest cement maker in India with a combined capacity to produce more than 30 million tonnes a year. Revenue from its fibre division will be hurt due to a 45-day shutdown at one of its plants because of water shortage during the June quarter. Third-ranked Gujarat Ambuja Cements Ltd. , which is about 15 percent owned by Holcim, is expected to report an 87.6 percent rise in net profit to 2.72 billion rupees. Gujarat Ambuja will release its results on July 20. Grasim has not yet set a date for its earnings report. All of the cement stocks fell during the quarter as investors backed out of emerging markets worldwide, but they outperformed the benchmark Sensex, which fell 5.95 percent. ACC lost 0.2 percent, Gujarat Ambuja 3.63 percent and Grasim 5.96 percent. For the year to date, however, ACC has gained some 47 percent, Grasim 39 percent and Gujurat Ambuja 25 percent, outperforming the Sensex's 9.53 percent gain. Most analysts still have a "buy" rating on the sector. ($1 = 46.6 rupees)