ACC’s Q1 net down on high input costs

On future outlook, the company said that it continued to maintain a "healthy outlook" for overall growth in demand for cement in the national economy during the year

Mumbai: Steep escalation in input and transport costs pulled down cement major ACC's net profit to Rs350.17-crore in the first quarter of FY11 against Rs392.88-crore in the year-ago period, reports PTI.

Its profit before tax also declined to Rs481.21-crore in the reporting quarter as against Rs563.58-core in the year-ago period, the company said in a press release issued here.

Sales turnover, however, increased to Rs2,556.21-crore in the January-March 2011 quarter as against Rs2,240.33-crore in the year-ago period.

"While the company's operations benefited from better volumes, realisations remained challenged by steep escalations in input costs," the cement major said.

Manufacturing costs rose sharply as a result of increases in the cost of energy, fuel and raw materials like fly ash and slag. Coal became dearer in both the national and international markets while transport costs also shot up, it said.

On future outlook, the company said that it continued to maintain a "healthy outlook" for overall growth in demand for cement in the national economy during the year.

"With increased availability of cement from our newly-expanded plants at Wadi and Chanda, we expect the company will remain well-placed to benefit from this growth," the company said.

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Headline inflation to average 8.6% in 2011-12: Nomura

In its 'Asia Economic Alert', global banking giant Nomura said that the Reserve Bank of India is likely to hike the short-term lending (repo) rate by 100 basis points in 2011 with the purpose of curbing inflationary pressure

New Delhi: India's headline inflation is likely to remain high this year too, registering an average of 8.6% in 2011-12 as manufacturers are likely to pass on input costs to consumers, reports PTI quoting global banking giant Nomura.

In its 'Asia Economic Alert', the banking and asset management behemoth also said that the Reserve Bank of India (RBI) is likely to hike the short-term lending (repo) rate by 100 basis points in 2011 with the purpose of curbing inflationary pressure.

"We expect Wholesale Price Index (WPI) inflation to average 8.6% year-on-year in FY11-12 from 9.4% in FY10-11," it said.

The high projection is on account of the fact that costs have not yet been fully passed on to the consumers.

"Countering expectations of a moderation inflation accelerated to (almost) 9% in March 2011... The negative surprise owed largely to manufacturers' passing on the higher input costs to consumers, amid strong demand.

"Our analysis suggests that the cost pass through is still incomplete and both headline and core WPI inflation will accelerate further in the first half of FY11-12 before retreating in the second half," it said.

The report also added that while output prices have risen sharply, margins continue to remain under pressure. This is specially so in case of tea and coffee, man-made fibres, wood products, machinery, transport equipments and fuel segments.

Headline inflation has been above the 8% mark since February 2010. The March numbers of 8.98% was much above the government and RBI's projection of 8%.

"We are pencilling in 100 basis points of additional repo interest rate hikes in 2011, taking the terminal rate to 7.75%," Nomura said, without making any projections about the RBI's short-term borrowing (reverse repo) rates.

The RBI has already hiked the key-policy rates eight times since March 2010. Experts have said the central bank is likely to go for another mild hike at its next quarterly review on 3rd May as inflationary pressure still persists.

The rate hikes are intended to suck out excess liquidity from the system and tame demand.

The repo and reverse repo rates currently stand at 6.75% and 6.25%, respectively.

Regarding fuel prices, it said the biggest disconnect between input cost and output price exists in that segment.

"The local price of LPG cylinder, petrol, kerosene and diesel prices need to be hiked by around 90%, 8%, 300% and 50%, respectively, in order to offset the losses of oil marketing companies which sell these fuels at subsidised prices," Nomura said.

Nomura said margins are under pressure compared with average high levels "suggesting that if input costs do not fall, a further rise in output prices is likely'.

"A global shortage has pushed up cocoa prices, which should propel domestic coffee prices higher. Supply disruptions in China have inflated India's raw cotton prices by 36% so far in 2011, but cotton fabric prices are up only 10%," it said.

Nomura said that core inflation, which do not take into account price rise of food items, have also started accelerating. In March, core inflation stood at over 7%.

"We expect core inflation (non-food manufactured WPI) to accelerate to around 8% by September," it said.

The increase in core segment numbers will lift headline inflation from 8.9% in the first quarter of this fiscal, and take it further to 9.1% in Q2 and 9.6% in Q3, before moderating again, Nomura's report said.

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Max New York Life expects to turn profitable in FY11

Max New York Life is hoping to turn profitable in 2010-11 on the back of its high product performance and growth in renewals

Private insurer Max New York Life is hoping to turn profitable in 2010-11 on the back of its high product performance and growth in renewals, a top company executive has said.

"We are expecting to turn profitable in FY11, following increase in new product sales and rise in renewals, which grew by almost 25%," Max New York Life director and chief marketing officer Anisha Motwani told PTI.

The company's renewals from April 2010 to February 2011 stood at Rs3,238 crore, a growth of 26% compared to the year-ago period.

Similarly, the total new business premium collected during the April 2010 to February 2011 period witnessed a 12% growth at Rs1,789 crore.
"We expect to collect over Rs2,000 crore new business premium in FY11," Motwani said.

The company, which has a product portfolio split is Traditional 86% and unit-linked 14%, plans to focus on enhancing its productivity.

"We are planning to focus on mass affluent segment representing 80% of new premium and whose average disposable income may to go up to Rs25.3 trillion in 2015 from Rs6.7 trillion in 2005. Going forward, the 10-year-old company, will also stress on long-term savings and protection with a minimum tenure of 10 years," she said.

The company will also focus on multi-channel distribution and quality agency distribution, she said.

The private insurer, who focuses on traditional offerings, plans to add six new products this year with a 50:50 split between traditional and ULIPs to its existing 21 offerings, she said.

Besides this, Max New York Life also has six products offerings and seven riders in group insurance business.

Max New York Life Insurance is a joint venture between Max India Limited and New York Life International, the international arm of New York Life and a Fortune 100 company.

The total capital infused is Rs1,976 crore, she said adding, it is sufficient and there will be no additional capital required for the business. The company has 521 offices spread across 389 cities across the country with about 7,500 employees.

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