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Ambuja Cem: Lower Power Costs Boost Margins - Views on News from Equitymaster
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Ambuja Cem: Lower Power Costs Boost Margins
Jul 27, 2016

Ambuja Cements has announced its results for the second quarter of the calendar year 2016. During the quarter ended June 2016, while the company's sales growth was flat, net profit rose sharply by 76.5% YoY. Here is our analysis of the results:

Performance summary
  • On a standalone basis, net sales during the quarter reported flat topline growth of 1.9% YoY.
  • While cement prices improved by 3.8% YoY, sales volume declined by 2% YoY to 5.76 million tonnes during the quarter.
  • Power and fuel expenses reported a sharp drop of 19.7% YoY due to low fuel prices and increased usage of pet coke in kiln at 60% as against 45% in 2QCY15.
  • Lower power and fuel expenses and improved sales price gave a big boost to operating profits.
  • At the bottomline level, net profit margin expanded from 9.1% in 2QCY15 to 15.7% in 2QCY16.
  • During the first six months of the calendar year 2016, while sales remained flat, net profit grew by 29.3% YoY

    Standalone financial performance snapshot
    (Rs m) 2QCY15 2QCY16 Change 1HCY15 1HCY16 Change
    Net sales 24,928 25,412 1.9% 49,173 49,595 0.9%
    Expenditure 21,245 19,598 -7.7% 40,776 39,547 -3.0%
    Operating profit (EBITDA) 3,683 5,813 57.8% 8,398 10,048 19.7%
    EBITDA margin 14.8% 22.9%   17.1% 20.3%  
    Other income 1212 1,368 12.8% 2548 2,993 17.5%
    Depreciation 1,485 1,511 1.7% 3,063 2,988 -2.5%
    Finance costs 316 205 -34.9% 529 387 -26.9%
    Profit before tax & exceptional items 3,094 5,465 76.6% 7,353 9,667 31.5%
    Exceptional gain/ (loss) - - - - -  
    Profit before tax 3,094 5,465 76.6% 7,353 9,667 31.5%
    Tax 831 1,470 77.0% 1,913 2,634 37.7%
    Effective tax rate 26.8% 26.9%   26.0% 27.2%  
    Profit after tax 2,264 3,995 76.5% 5,440 7,033 29.3%
    PAT margin 9.1% 15.7%   11.1% 14.2%  
    No of shares (m)         1,551.9  
    Diluted EPS (Rs)*         6.2  
    P/E (times)         43.0  

    *trailing twelve month earnings

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