Cement makers Ambuja Cements Ltd and ACC on Thursday met estimates for 2010 earnings, but said oversupply and rising input costs would keep margins under pressure in the short term.

Both firms, 46 percent-owned by Switzerland's Holcim, said they continued to bet on long-term demand growth from India's housing and infrastructure sectors, but growing excess supply would result in pricing pressure in the near term.

"The industry utilisation is currently 77 percent and demand growth is in single digits, which indicates a price rise will be capped from current levels. Pressure on margins should continue," said Rupesh Sankhe, sector analyst at Angel Broking in Mumbai.

ACC, India's No 2 cement maker, posted a 31 percent decline in consolidated net profit to 10.78 billion rupees as selling prices dipped and cost of major inputs such as coal and power increased.

Sales fell 2.6 percent to 82.6 billion rupees.

A Reuters poll of brokerages had estimated net profit of 10.75 billion rupees on net sales of 80.9 billion.

"We foresee demand for cement will grow in the coming year at 9-10 percent. (But) we also expect that pressure on selling prices will be maintained in the near term," ACC said in a statement.

The company said its capacity has been ramped up to 30 million tonnes in the year.

India is the world's second-largest cement producer after China, with annual capacity of 270 million tonnes, but rising interest rates and inflation in 2010 slowed investments in new projects and an extended monsoon also moderated cement demand.

Holcim controls a fifth of the Indian market through ACC and No. 3 producer Ambuja, but global rivals Lafarge and Mexico's Cemex are increasingly eyeing the fast growing Indian market.

India's largest cement producer UltraTech holds 20 percent of the market, and has earmarked investments of $1.2 billion to boost capacity by 10 million tonnes from 59 million.

Earlier on Thursday, Ambuja said its cement capacity will rise to 27 million tonnes during 2011 from 25 million now.

AMBUJA PROFITS ALMOST FLAT

Ambuja said local volumes rose 8 percent in the year to 19.5 million tonnes.

"The cement demand-supply imbalance is set to continue for some time, and we could therefore see periodic market and price instability," the company said in a statement.

Ambuja said net profit rose to 12.6 billion rupees in 2010 from 12.2 billion a year ago. Net sales rose 4 percent to 73.90 billion rupees, helped by higher cement volumes but realisations were lower from the previous year.

A Reuters poll of brokerages had estimated net profit of 12.45 billion rupees on net sales of 75.3 billion.

Operating profit fell 1.1 percent to 19.5 billion rupees.

Power and fuel cost increased largely as a result of rising international coal and freight prices, Ambuja said, adding non-availability of new local supplies forced higher coal imports.

"Prices have gone up in January, which should help boost realisations in the current quarter," said Mihir Jhaveri, sector analyst at Religare Securities.

Shares in Ambuja, valued at $4.1 billion by the market, closed up 3.1 percent in a firm Mumbai market. The stock has declined 12.4 percent so far in 2011, compared to a 10 percent fall in the main stock index.

ACC shares, valued at $4.1 billion, ended 0.3 percent lower.