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ACC: Better volumes and prices aid growth - Views on News from Equitymaster
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ACC: Better volumes and prices aid growth
Feb 17, 2012

ACC has announced its results for the quarter and calendar year ended December 2011. The company has reported 22% YoY and 18% YoY rise in sales and net profits respectively during the year. Here is our analysis of the results.

Performance summary
  • On a standalone basis, net sales increase by 28% YoY during the quarter.
  • Lower other expenditure leads operating profits to soar by 86% YoY.
  • Despite higher interest expenses, tax credit causes bottomline to rise by 84% YoY.
  • During the calendar year 2011, sales and net profits increase by 22% YoY and 18% YoY respectively.


(Rs m) 4QCY10 4QCY11 Change CY10 CY11 Change
Net sales 19,576 25,027 27.8% 77,173 94,387 22.3%
Expenditure 17,488 21,134 20.9% 61,634 77,396 25.6%
Operating profit (EBITDA) 2,089 3,893 86.4% 15,540 16,991 9.3%
EBITDA margin 10.7% 15.6%   20.1% 18.0%  
Other income 1554 982 -36.8% 3569 4135 15.9%
Depreciation 1119 1270 13.5% 3927 4753 21.0%
Interest 137 192 39.7% 568 969.09 70.7%
Profit before tax/(loss) 2,386 3,413 43.0% 14,615 15,404 5.4%
Tax -173 -1291 - 3414 2152 -37.0%
Net profit 2,559 4,704 83.8% 11,200 13,253 18.3%
Net profit margin 13.1% 18.8%   14.5% 14.0%  
No of shares (m)       187.7 187.7  
Diluted EPS (Rs)*         70.6  
P/E (times)         19.3  
*trailing twelve month earnings

What has driven performance in CY11?
  • On a standalone basis, ACC’s net sales rose by 22.3% YoY during the quarter ended December 2011. The rise in revenue was led by 11.9% YoY rise in sales volume and improvement in cement realisations.

  • On the cost front, barring employee cost and other expenditure, all cost heads reported a rise. Power and fuel costs witnessed a rise of 2.4% as a percentage of net sales. As a result, operating profit grew at a slower rate of 9.3% YoY. Operating margins declined from 20.1% in CY10 to 18% in CY11.

  • Interest costs were significantly higher by 70.7% YoY during the year. However, the effective tax rate was lower by 9.4% YoY on account of tax credit arising from reversal of tax provisions relating to prior years. As a result, net profits rose by 18.3%.The net profit margin declined marginally from 14.5% in CY10 to 14% in CY11.

  • The company’s board of directors has recommended the payment of a final dividend of Rs 17 per share. Including the interim dividend of Rs 11 per share, the total dividend for the calendar year 2011 amounts to Rs 28 per share.

What to expect?
Though ACC managed to grow its topline during the year, its margins declined marginally on account of higher operating costs and interest expenses.

On the demand front, there is some pressure on account of overall slowdown in housing and construction. However, infrastructure investment for the 12th Five-Year Plan is expected to be about US$ 1 trillion. This will augur well for cement demand and help in balancing the current overcapacity scenario. On the cost front, some pressures may continue to persist.

At the current price of Rs 1,359 the stock of ACC is trading at 19.3 times its trading twelve-month earnings, making it expensively valued. We maintain a cautious view on the stock from a 2-3 year perspective.

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