Earnings Review:ACC volume up but PAT down on operating costs surge

14 Jul 2022
 
ACC Ltd had everything going for it in the quarter ended June with regard to demand-driven growth, but a surge in key input costs overwhelmed its profitability. The company even took a 4% hike in the net selling price but said that this could only marginally offset cost inflation.
 
Little wonder then that the company’s operating profit for the three months dived 50% to 4.3 bln rupees and the operating margin shrunk to 9.7% from 22.1% a year ago.
 
As a result, the consolidated net profit for the cement manufacturer was down 60% on the year to 2.3 bln rupees, well below the 3.4 bln rupees had expected on average.
 
In contrast, ACC’s Apr-Jun topline grew strongly by 15% on the year to 44.7 bln rupees, well clear of the average analysts’ estimate of 43.3 bln rupees.
 
This came on the back of a 11% growth in cement sales volume to 7.56 mln tn and a 43% rise in sales of ready mix concrete to 0.83 mln cu mtr. Revenue from cement sales was up 13% on the year to 41.5 bln rupees while ready mix concrete sales jumped by 50% to 3.9 bln rupees.
 
Aiding the topline growth was a 4% hike in the cement price to 5,337 rupees per tn, said the company which is currently being acquired by the Adani group.
 
But there was no respite from inflationary pressures on the key input costs during the June quarter. As a result, ACC’s operating profit, derived as earnings before interest, tax, depreciation, and amortisation, halved to 4.26 bln rupees.
 
The company said “soaring global energy prices led to a significant cost increase” in its power and fuel expenses, which surged 58% on the year to 13.12 bln rupees. Coal and petcoke costs make up for a bulk of the power and fuel costs for cement producers.
 
Power and fuel expenses, which accounted for nearly one-third of the total operating costs, rose 44% on the year to 1,708 rupees per tn.
 
Managing Director and CEO of ACC, Sridhar Balakrishnan, said that the company maintained “a positive outlook” for demand in the coming months on the back of government’s efforts to stimulate investments across several sectors and the impact of a likely normal monsoon on the rural economy.

ACC’s consolidated cash and cash equivalents stood at 45.17 bln rupees at the end of Jun 30.