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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
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
for 23% of total expenses during the reporting quarter. The company
said in a
statement accompanying the earnings release that the cost of
materials and freight had hardened in Jan-Mar.
"There was a shortfall in regular
availability of flyash, a part of which
procured over longer leads, entailing higher transportation costs," the
Power and fuel expenses, which accounted
for 18% of total expenses, also
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
of the preceding three quarters recording on-year fall.
This was mainly due to consolidated cement
sales gaining traction for the
in four quarters. The Jan-Mar cement sales increased 3.8% on year
to 6.60 mln
In the quarters ending December, September
and June, cement sales volume
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
quarter compared to the Oct-Dec quarter. ACC sold 0.72 mln cu mtr
concrete in Jan-Mar, up 7.5% on year. In the previous quarter,
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
of 29.89 bln rupees, according to an average of 11 brokerage firms'
The reported figures came above the analysts estimate.
Brokerage firm KR Choksey noted in a
post-earning research note that
cement volume growth was exceptional in a quarter which was
affected by demonitisation.
ICICIdirect noted in its post-result
research note that ACC beat its
estimate as the 3.8% on year increase in volumes came in as a
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
net profit and while it did, ACC's net profit was above the
average estimate. "Net profit remained above our expectation due to
expected operating margins," said ICICIdirect in its note.
The consolidated operating margin in
Jan-Mar stood at 11.6%. Although
lower than 13.9% in the year ago quarter, it was higher than the
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
the 5.5% on-year rise in raw material costs also had an impact
of the preceding three quarters had seen raw material costs record
ACC attributed the rise in material costs
to the hardening in petcoke
the reporting quarter. In Jan-Mar raw material costs accounted for
ACC's managing director and CEO Neeraj
Akhoury said during the reporting
company launched two new products and continued to build its
building products segment. He said the company will continue to
new capacity at its Jamul plant which stood fully commissioned in
quarter and was catering to the cement major's customers in the