ACC Ltd (updated - 09 Feb 2010)
One of India’s largest cement makers, ACC, reported lower-than-expected quarterly results last Thursday. While the company declared only its annual results, the December 2009 quarter results were derived from the same. These indicate that its standalone net sales were up a mere 2 per cent to Rs 1,922 crore while net profit was down 6.6 per cent to Rs 281 crore.
The 1.8 per cent dip in quarterly volumes was compensated by a near 2 per cent rise in average cement realisations; hence, operating profit margins were a shade lower at 22.4 per cent. Lower other income, a 51 per cent jump in interest costs to around Rs 18 crore and 37 per cent rise in depreciation to Rs 105 crore, were the key reasons for the fall in net profit. Compared to the September 2009 quarter (sequentially), however, ACC’s Ebidta (earnings before interest, depreciation, tax and amortisation) margins were down 1,150 basis points and Ebidta per tonne fell 35.5 per cent to Rs 813, as average cement realisation was down 6.9 per cent to Rs 3,625 per tonne and other expenses were higher.
During the December 2009 quarter, the company’s expansion in Karnataka (2.7 million tonne grinding units) were commissioned. It expects the clinker unit and 50Mw plant to be commissioned by mid-2010. Another threemillion-tonne unit in Maharashtra is expected to go onstream by September 2010. The ramp-up will take ACC’s standalone capacity to 30 million tonnes from 26 million tonnes currently.
For the year ended December 2009, though, the company posted a year-onyear net profit growth of 36 per cent to Rs 1,607 crore and a 10.2 per cent increase in sales to Rs 8,027 crore, helped by 8 per cent rise in realisations.
Cement prices have risen Rs 5-15 per 50 kg bag in many parts of the country during January 2010. The most increase was in Bangalore, where rates surged Rs 15. Analysts expect the company’s profitability to be under strain as they say cement prices will remain under pressure and fuel and freight costs will continue to remain high.
Analysts point out that since more capacities are expected to be commissioned in 2010, stagnation in prices and lower capacity utilisation will be trend going ahead. Hence, most of them are either neutral or maintain reduce on the stock. ACC’s stock ended at Rs 841.90 on February 8, 4.6 per cent lower than its close on last Wednesday (pre-results) and trades at EV/Ebidta multiple of around eight times its 2010 consensus earnings.
Source - Business Standard
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ACC Ltd (updated - 26 Oct 2010)
Cost pressures, monsoon hitting demand and excess capacities were expected to take a toll on the profitability of cement players in the September quarter. However, ACC has reported ahigher-than-anticipated dent.
The company posted its lowest margins in the past seven years, as average realisation dropped to `3,476 per million tonne (mt). Operating margins declined to 13.1 per cent from 35.1 per cent in the year-ago period, as raw material costs surged to `703/mt. Net profit slipped 77 per cent year-on-year to `100 crore. However, analysts say the worst seems to be over for the company. Work at the threemillion-tonne-per-annum (mtpa) clinkering plant in Chanda is on track and it is expected to be commissioned by December, taking the cement capacity to 30 mtpa. Its captive power capacity will increase 25 Mw to 346 Mw, which will lead to strong volume growth in calendar year 2011 (CY11), say analysts at Anand Rathi.
A series of price rises since September, coupled with a pick-up in construction activity after the monsoon, are expected to bring respite.
However, sustaining higher prices may be difficult due to excess capacities. Nevertheless, analysts say price realisation in the December quarter will be much better than the September quarter.
Angel Broking expects the company’s top line to grow at a compounded annual rate of two per cent over CY2009-11, courtesy capacity addition, while operating and net profits are likely to decline 15.9 per cent and 22.8 per cent, respectively. The stock ended four per cent higher at `1,024 on Monday and trades at 15.7xCY10 and 13xCY11 estimated earnings.
Source - Business Standard
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