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ACC: Great turnaround in FY01

Apr 30, 2001

ACC has posted a net profit of Rs 475 m in FY01 as compared to a loss of Rs 589 m in the previous year. This marks a turnaround in the fortunes of the cement major, which has off late been benefiting from the surge in cement prices.

(Rs m) FY00 FY01 Change
Sales 27,018 29,590 9.5%
Other Income 586 727 24.1%
Expenditure 25,330 26,262 3.7%
Operating Profit (EBDIT) 1,688 3,329 97.2%
Operating Profit Margin (%) 6.2% 11.2%  
Interest 1,618 1,702 5.2%
Depreciation 1,245 1,413 13.5%
Profit before Tax (589) 941  
Other Adjustments - (430)  
Tax - 37  
Profit after Tax/(Loss) (589) 475  
Net profit margin (%) -2.2% 3.1%  
No. of Shares (eoy) 170.9 170.9  
Diluted Earnings per share#* (3.44) 2.78  
*(annualised)      

The main contributor to the turnaround was, as mentioned earlier, the rise in cement prices. However, there have been several initiatives on the cost side which seem to have had a significant impact. These include reductions in manpower cost, fuel cost and power cost. Together these factors have enabled the company to post a sharp jump in operating margins.

Our projections for the year had put the company’s operating margin at 11.7% and sales growth of 10%, both of which are higher marginally as compared to the actual results. Our profit forecast, however missed by a wider margin on account of the higher than anticipated other income and lower than projected interest expenditure.

During FY01, ACC recorded a 2% growth in cement production at 10.2 million tonnes, while sales grew by a marginally higher 3%. In the coming months supply is anticipated to increase further with the company's Wadi plant going commercially operational.

An important announcement by the company is its intention to focus on the cement business. This will augur well for ACC, firstly by bringing a sense of focus into its operations and, secondly, raising resources which could help bring down the debt burden.

ACC presently trades at Rs 151, implying a P/e multiple of 54.4x.

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