April 22, 2017

Analysis of ACC's Jan-Mar 2017 earnings

A story I wrote yesterday analysing ACC's earnings figures for Jan-Mar 2017:

ACC Jan-Mar consol PAT hit by surge in input costs

    Significantly higher increases in power and freight costs,and excise duty, proved to be a drag on the bottomline of ACC Ltd in Jan-Mar.
    The cement major's consolidated net profit fell 8.9% on year in the March
quarter to 2.11 bln rupees despite the fact that total income increased 8.8%
on year to 36.63 bln rupees.
    Freight and forwarding costs surged 13.4% on year to 8.26 bln rupees and
accounted for 23% of total expenses during the reporting quarter. The company
said in a statement accompanying the earnings release that the cost of
packing materials and freight had hardened in Jan-Mar.
    "There was a shortfall in regular availability of flyash, a part of which
was procured over longer leads, entailing higher transportation costs," the
company further said.
    Power and fuel expenses, which accounted for 18% of total expenses, also
rose sharply by 14.1% on year to 6.48 bln rupees in Jan-Mar.
    The 8.8% on-year rise in consolidated total income in the March quarter
came each of the preceding three quarters recording on-year fall.
    This was mainly due to consolidated cement sales gaining traction for the
first time in four quarters. The Jan-Mar cement sales increased 3.8% on year
to 6.60 mln tn.
    In the quarters ending December, September and June, cement sales volume
had recorded on-year declines of 9.2%, 9.6% and 1.3% respectively.
    Growth in sales volume of ready-mix concrete, however, slowed down in the
reporting quarter compared to the Oct-Dec quarter. 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 11 brokerage firms'
estimates. The reported figures came above the analysts estimate.
    Brokerage firm KR Choksey noted in a post-earning research note that
ACC's cement volume growth was exceptional in a quarter which was
significantly affected by demonitisation.
    ICICIdirect noted in its post-result research note that ACC beat its
topline estimate as the 3.8% on year increase in volumes came in as a
positive surprise as core industry data in the first two months of CY17
showed pan India production volumes to have fallen by 15.0% on year.
    Analysts were also expecting rise in operating costs to hit ACC's
consolidated net profit and while it did, ACC's net profit was above the
analysts' average estimate. "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
    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
since 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 CEO Neeraj Akhoury said during the reporting
quarter the company launched two new products and continued to build its
specialised building products segment. He said 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.

Story also at: 
Higher power/fuel & freight costs (together accounting for 41% of total expenses) hit net profit -- http://www.cogencis.com/differentiators/ShareNews.aspx?newsId=901962


April 11, 2017

IT/software companies' top management pay ratios

In the wake of Naryana Murthy's recent dissent on rise in management pay at Infosys, here are some interesting stats on Infosys and 4 other large-cap IT companies:

Aggregate remuneration of Infosys' top management was 1,190 times the median remuneration level at

Infosys, much higher than TCS's 592 times, Wipro's 663 times and HCL Tech's 954 times. It was lower only than Tech Mahindra's 4330 times.

Top management included CEO, COO, CS, Chairman, Vice Chairman, Chief Strategy Office etc.

Median mean remuneration Key management persons' KMP remuneration
remuneration over median
(in rupees) (in mln rupees) (number of times)
Infosys 521000 619.9 1190
TCS 558000 330.2 592
Wipro 525000 347.9 663
HCL Tech 587000 559.9 954
Tech Mahindra 522000 2260.1 4330
Figures pertain to financial year 2015-16 (Jul-Mar) for HCL Tech
and 2015-16 (Apr-Mar) for rest