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ACC: Demand picks up, but prices fall - Views on News from Equitymaster
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ACC: Demand picks up, but prices fall
Apr 30, 2016 | Updated on May 10, 2016

ACC has announced its financial results for the first quarter of the calendar year 2016. During the quarter ended March 2016, while the company's standalone sales increased marginally by 1.5% YoY, net profit declined by 3.5% YoY respectively. Here is our analysis of the results:

Performance summary
  • On a standalone basis, net sales reported growth of 1.5% YoY during the quarter driven by higher volumes, but lower realisations restricted growth.
  • Operating profit decreased by 10.6% YoY; EBITDA margin contracted from 14.3% in 1QCY15 to 12.6% in 1QCY16.
  • Lower operating profit and sharp drop in other income resulted in 32.2% YoY drop in profit before tax during the quarter.
  • Net profit margin contracted from 8.3% in 1QCY15 to 7.9% in 1QCY16.

    Standalone financial performance snapshot
    (Rs m) 1QCY15 1QCY16 Change
    Net sales 28,854 29,274 1.5%
    Expenditure 24,718 25,578 3.5%
    Operating profit (EBITDA) 4,137 3,696 -10.6%
    EBITDA margin 14.3% 12.6%
    Other income 2,538 1,121 -55.8%
    Depreciation 1,698 1,434 -15.6%
    Finance cost 226 164 -27.7%
    Profit before tax & exceptional items 4,750 3,220 -32.2%
    Exceptional gain/ (loss) -1,532 0
    Profit before tax 3,218 3,220 0.1%
    Tax 813 898 10.6%
    Effective tax rate 25.2% 27.9%
    Profit after tax 2,406 2,322 -3.5%
    Net profit margin 8.3% 7.9%
    No of shares (m) 187.7 187.7
    Diluted EPS (Rs)* 31.1
    P/E (times) 46.4

    *trailing twelve month earnings

  • What has driven performance in 1QCY16?

    • On a standalone basis, ACC's net sales were marginally higher by 1.5% YoY during the quarter ended March 2016. Sales volumes in 1QCY16 stood at 6.36 million tonnes as compared to 5.82 million tonnes in 1QCY15, registering a growth of 9.3% YoY. The capacity utilisation rate improved to about 85% during the quarter. However, the cement prices were volatile owing to surplus industry capacity. The company's average realisations were down 8% YoY during the quarter.
    • There was a significant dip in Power & Fuel Expenses (as a percentage of net sales). This was aided by higher petcoke consumption, and lower cost of imported coal and petcoke.
    • Freight and Forwarding Expenses were higher on account of increase in rail freight.

      Operating cost break-up
      (Rs m) 1QCY15 1QCY16 Change
      Raw materials consumed 4,637 4,364
      Purchases of stock-in-trade 360 213
      Change in inventory -733 83
      Total raw materials cost 4,264 4,660 9.3%
      % of net sales 14.8% 15.9%
      Employee expenses 1,710 1,892 10.6%
      % of net sales 5.9% 6.5%
      Power & fuel expenses 6,214 5,672 -8.7%
      % of net sales 21.5% 19.4%
      Freight & forwarding expenses 6,859 7,332 6.9%
      % of net sales 23.8% 25.0%
      Other expenses 5,672 6,022 6.2%
      % of net sales 19.7% 20.6%
      Total operating expenditure 24,718 25,578 3.5%
      % of net sales 85.7% 87.4%
    • Other income reported a dip of 55.8% YoY during 1QCY16.
    • Depreciation charges and finance costs decreased by 15.6% YoY and 27.7% YoY respectively.
    • Profit before tax and exceptional items declined by 32.2% YoY.
    • It must be noted that in 1QCY15, the company had reported an exceptional loss of Rs 1,532 m.
    • At the bottomline level, net profit declined by 3.5% YoY. Net profit margin contracted from 8.3% in 1QCY15 to 7.9% in 1QCY16.
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