ACC beats profit estimates for Q3 despite cost spike

ACC Ltd, which is part of Holcim (formerly LafargeHolcim), has reported strong earnings for the quarter ended September 30, beating street estimates, even though high fuel costs increased its operational expenses.

ACC churned out 23.6% growth in net profit to Rs 450 crore as against Rs 364 crore in the year-ago period. Analysts had expected the company to post around 15% earnings growth on a year-on-year basis.

Net sales growth, however, fell a tad short of estimates, likely due to poor growth in volume sales of cement. Net sales rose 5.3% to Rs 3,653 crore for the three months ended September as against expectations of around 7% rise.

The July-September quarter—the third quarter for ACC’s financial year—is cyclically a weak period for cement makers as construction activity slows due to monsoon season.

The ACC scrip declined 2.5% ahead of the announcement of the results for the quarter in a nearly flat Mumbai market on Tuesday. The company’s share price is around 10% below its 52-week peak and closed at Rs 2,245.50 apiece.

ACC Q3 other key numbers:

1) Cement sales volume rose 1.2% to 6.57 million tonnes. This affected top-line growth.

2) Sales volume for ready mix concrete shot up nearly 50% to 0.68 million compared to year-ago period.

3) EBITDA margins rose to 19.5% from 19.4% in the same quarter last year.

4) EBITDA margin, however, is lower than the 20.9% for the nine months ended September 30.

5) Fuel costs rose 25% year-on-year. This is higher than rival UltraTech’s 17% increase in fuel costs.

ACC management commentary:

Sridhar Balakrishnan, managing director and CEO of ACC, said that the company recorded “solid performance” during the quarter through operational excellence and focus on sustainability while meeting customers’ needs.

“Despite a steep increase in fuel costs, our cost efficiency measures under project ‘Parvat’ have enabled us to maintain robust performance. I am confident that our relentless focus on execution of cost efficiency and capacity expansion projects will enable us to deliver strong shareholder value,” he said.

The company also said that economic activity is gaining momentum driven by accelerated progress in the Covid-19 vaccination drive and reduction in Covid-19 cases.

“We believe that government impetus on infrastructure and housing will augur well for cement demand in the next quarters. We are positive that the cement sector would benefit from increasing demand in various sectors such as housing, commercial and industrial construction,” ACC said.