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ACC: Margins lift bottomline

Jan 25, 2002

For the quarter ended December 31, 2001, ACC has posted a 3.5% growth in net revenues and a 15.6% growth in profits. The higher growth in profits is largely a result of better control on operating costs and lower interest expenditure.

(Rs m)3QFY013QFY02Change
Net sales 6,801 7,039 3.5%
Other Income 126 91 -28.0%
Expenditure 5,973 6,028 0.9%
Operating Profit (EBDIT) 829 1,010 21.9%
Operating Profit Margin (%)12.2%14.4% 
Interest 447 408 -8.9%
Depreciation 361 400 10.9%
Profit before Tax 146 293 100.4%
Tax - 124  
Profit after Tax/(Loss) 146 169 15.6%
Net profit margin (%)2.2%2.4% 
No. of Shares (m) 170.9 170.9  
Diluted Earnings per share* 3.4 4.0  
P/E Ratio  41.4  

ACC posted a 17.0% growth in cement sales in volume terms (excluding traded cement). This growth has been triggered by the commissioning of its 2.6 million tonne per annum cement plant at Wadi. However, due to lower price realisation, the company’s revenues grew by a much lower 12.0%.

What is notable is that ACC continues to post an improvement in its operating margins, which had touched a low of 7.2% in FY00. Presently the OPM stands at 14.4% (3QFY02). The rise in margins has in part been achieved by initiatives taken by the company to control costs. Apart from this, the coming together of cement manufacturers to support prices in the market has also benefited the company.

The cement sector is anticipated to grow at 8% or thereabouts in the foreseeable future. A booming housing sector, recovery in the rural economy and the highway construction activity are all anticipated to support this growth in demand. However, in recently several large plants have gone on stream and this could create a temporary mismatch in demand and supply.

ACC presently trades at Rs 164, implying a price to earnings multiple of 41x.

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