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ACC trims employee base, still lags sector leaders - Views on News from Equitymaster
 
 
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  • Feb 21, 2000

    ACC trims employee base, still lags sector leaders

    According to newspaper reports, Associated Cement Companies Limited (ACC) has been successful in trimming its employee base by over 5,000 employees since FY97. However, as our research shows, the company still has a long way to go as far as employee productivity is concerned.

    ACC is India's second largest cement company with a capacity of 11.6 m tonnes per annum. The company commands an 11.5% stake in the Indian cement market.

    Still lagging on the productivity front...

    Source: Quantum
    All figures as per employee

    ACC has done well from the point of view of sales per employee. The company posted a growth of 29% in this aspect, leading Gujarat Ambuja (16%) and Madras Cements (11%). However, wages per employee at AC shot up 34% as compared to the more moderate 12-14% in the other two companies.

    The last two years (FY98, FY99) have not been very good ones for the Indian cement sector. This was mainly due to the economic slowdown, which reduced demand from both the industrial and housing sector. The commissioning of large cement capacities compounded the problem. The net profit per employee at these three companies fell over the period reflecting the grim scenario. However, ACC (down 14%) and Madras Cement (down 53%) were the worst affected. Gujarat Ambuja on the other hand recorded a modest decline of 2%.

    ACC has been successful in reducing its employee base by 5,000 numbers. However, the company needs to now focus on improving efficiency and productivity levels. Introducing the latest technology could be one of the factors that the company needs to consider.

    Market View:
    Analysts have rated the stock as a 'BUY' in view of the recovery in the cement sector and the entry of Gujarat Ambuja Cements as a strategic investor in the company.

     

     

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