Cogencis, Friday, Apr 21
[C] Earnings Review: ACC Jan-Mar consol PAT hit as operating costs surge
NEW DELHI - Significantly higher power, freight and excise duty costs
proved to be a drag on the bottomline for ACC Ltd during the quarter ended
March. The cement major's consolidated net profit fell 8.9% on year in the
quarter to 2.11 bln rupees, even though total income rose by a similar
Total income in Jan-Mar showed a year-on-year rise for the first time in four quarters, and was up 8.8% at 36.63 bln rupees.
Freight and forwarding costs surged 13.4% to 8.26 bln rupees, accounting for 23% of total expenses. The cost of packing materials and freight hardened during the reporting quarter, the company said.
"There was a shortfall in regular availability of flyash, a part of which was procured over longer leads, entailing higher transportation costs," the company said after its earnings today.
Power and fuel expenses, which accounted for 18% of total costs, also rose sharply--by 14.1% on year to 6.48 bln rupees.
The rise in total income after a gap of three quarters reflected how the company has fared in cement sales during the period. After falling 1.3%, 9.6%, and 9.2% on year in the last three quarters, cement sales rose 3.8% on year to 6.60 mln tn in Jan-Mar.
Growth in sales volumes of ready-mix concrete, however, slowed down in the reporting quarter compared to Oct-Dec. ACC sold 0.72 mln cu mtr ready-mix concrete in Jan-Mar, up 7.5% on year. In the previous quarter, ready-mix concrete sales had risen by 13.6% on year to 0.67 mln cu mtr.
ACC was expected to report a consolidated net profit of 1.60 bln rupees on net sales of 29.89 bln rupees, according to an average of estimates made by 11 brokerages.
Brokerage firm KR Choksey noted in a post-earnings note that ACC's cement volume growth was exceptional in a quarter that was significantly affected by demonetisation.
ICICIdirect said the 3.8% on-year increase in volumes came in as a positive surprise, since core industry data in Jan-Feb had shown pan-India production volumes fell 15% on year.
Analysts were also expecting higher operating costs to hit ACC's consolidated net profit, and the results were in line with this. "Net profit remained above our expectation due to higher than expected operating margins," said ICICIdirect in its note.
The consolidated operating margin in Jan-Mar stood at 11.6%. Although this was lower than 13.9% in the year-ago quarter, it was higher than the operating margins of 9.4% and 10.9% in the quarters ending December and September.
Apart from surge in power and fuel and freight costs impacting ACC's bottomline, the 5.5% on-year rise in raw material costs also had an impact. Each of the preceding three quarters had seen raw material costs record on-year declines.
ACC attributed the rise in material costs to the hardening in petcoke prices in the reporting quarter. In Jan-Mar, raw material costs accounted for 13% of total expenses.
ACC's Managing Director and Chief Executive Officer Neeraj Akhoury said the company launched two new products during the quarter and continued to build its specialised building products segment.
The company will continue to invest in new capacity at its Jamul plant which stood fully commissioned in the March quarter and was catering to the cement major's customers in the eastern region of the country, he said.
Today, the shares of ACC closed 1% lower at 1,495.45 rupees on the National Stock Exchange. The company announced its earnings after market hours today.End

Reported by Rajesh Gajra
Checked by Niladri Bhattacharya
Edited by Tanay Sukumar

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