X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
ACC Vs Lafarge Vs Holcim - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Sep 30, 2003

    ACC Vs Lafarge Vs Holcim

    Global cement majors have been eyeing the Indian cement market for some time now. In their bid to do so, they will be competing with established national players like ACC, Gujarat Ambuja and Grasim. In this article, we will try and compare ACC with two of the biggest names in the international cement industry, Lafarge and Holcim.

    ACC

    ACC is the largest producer of cement in the country with a total capacity of 16 million tonnes (MT) (11% of the total capacity in the country). The company has a pan India presence and is particularly strong in the northern and the eastern regions. ACC has a legacy of old plants and excess workforce and as a result, suffers from lower operating margins as compared to its peers.

    However, in recent times, the company has upgraded its plant to almost 50% of its existing capacity and has exited from some of its non-core businesses (like Bridgestone). ACC, with its strong distribution network and a pan India presence, is well poised to capitalise on the growing demand for cement in the domestic market. We expect cement demand to grow at 8%-9% in the next five years.

    Lafarge

    Lafarge is a world leader in construction materials with operations in over 70 countries and leading positions in all four of its divisions: Cement (No. 1), Aggregates & Concrete (No. 2), Roofing (No. 1) and Gypsum (No. 3). The company has a total cement capacity of 148 MT (7% of estimated global cement market size of US$ 100 bn). Close to 71% its cement division's revenues accrue from the Western Europe and the North American regions.

    Lafarge is among the first transnationals to enter the Indian market and has already emerged as a market leader in the eastern region. Lafarge is increasingly focusing on developing economies like India, as diversified presence helps it to effectively counter the lower growth rates in its mature markets with growing markets like India and other Asian countries. Asian region accounted for 10% of Lafarge's revenues in FY03. Lafarge has just completed a Euro 1 bn rights issue and it is believed that a significant part of it would be spent to expand its operations in the global markets.

    Holcim

    Holcim, the Swiss giant, is one of the world's leading suppliers of cement, as well as aggregates, concrete and construction related services. It has a strong market presence in over 70 countries and across all continents. The total cement capacity of the company equals 142 MT. Similar to Lafarge, Holcim is also trying to consolidate its presence in growing markets like Asia to compensate for the lower growth rates in established markets like the US. The company however, does not have a presence in India. Holcim has a 1 MT plant in Sri Lanka.

    Let us see how the three companies compare on various parameters

    Parameter* Units ACC Lafarge Holcim
    Capacity (MT) 16.1 148.2 142.0
    Net Sales (US$ m) 627.6 16,071.0 9,107.0
    Sales CAGR - 3 years (%) 8.9% 9.3% -1.9%
    Operating ratios        
    Operating margin (%) 12.0% 22.3% 16.9%
    Net margin (%) 3.6% 3.1% 3.9%
    Sales per employee (US$ m) 0.1 0.2 0.2
    Return ratios        
    Return on net worth (%) 9.6% 4.9% 7.1%
    Debt to equity (x) 1.5 1.1 1.8
    Valuations        
    Price (US$) 4.3 16.6 76.2
    Price to earnings (x) 32.3 17.4 4.2
    Enterprise value per tonne (US$) 65.8 127.0 73.2

    *FY03 data

    As is evident from the table above, despite being in a growing economy like India, ACC has under-performed Lafarge in terms of revenue growth in the last three years. But it has to be remembered that Lafarge acquired Blue Circle in FY01 and this, consequently, increased the French major's presence in emerging markets. Organically, ACC's revenue growth is on the higher side.

    ACC is operationally less efficient than its global peers mainly on account of its old plants and it has also been hurt by lower realisations in the Indian market. Lafarge's high operating margin stems from the fact that the company was able to capitalise on the Blue Circle acquisition. Cement prices are relatively higher in the US and Western Europe as compared to India, which is also a reason for higher margins. The net income margin of Lafarge was however, affected by extraordinary provisions in the form of a fine of around US$ 275 m, imposed by the European commission for alleged price fixing in the UK and Germany. Excluding this item, Lafarge's net margin stood at 4.6% in FY03.

    Given the fact that ACC and Holcim are debt burdened, we expect an improvement in net margin in the future on the back of the restructuring exercise. Lafarge is expected to retire debts to the tune of US$ 1 bn from the rights issue proceeds. So, at the net profit level, the restructuring exercise could improve profitability of all three majors.

    As far as the valuations are concerned, Holcim's P/E ratio is the lowest among the three as it had a poor FY02 and moreover, it has seen a decline in its topline in the past three years. ACC, on the other hand, trades at a premium to the global majors. There are various reasons for the same. One is that the company's operating margin at 12% in FY03 fares poorly when compared with domestic majors like Gujarat Ambuja (28%) and Grasim (24%). This is expected to improve considering the fact that cement prices are expected to remain favorable in FY04 and in the medium term. Demand could outpace expectation of 8%-9% depending upon the kind of infrastructure projects (Bangalore airport project is an example). Having said that, on a relative basis to both domestic and international companies, ACC's valuations are on the higher side.

     

     

    Equitymaster requests your view! Post a comment on "ACC Vs Lafarge Vs Holcim". Click here!

    2 Responses to "ACC Vs Lafarge Vs Holcim"

    KUMARESH DAS KARMAKAR

    Aug 12, 2014

    sr
    pls advice what is the preferable roof construction.

    Like (8)

    krishna dutta

    Feb 8, 2013

    what is the best choice for home construction ACC? LAFARZE?

    Like (27)
      
    Equitymaster requests your view! Post a comment on "ACC Vs Lafarge Vs Holcim". Click here!
     

    More Views on News

    ACC: Cementing Growth through Capacity Expansion and Favorable Sectoral Developments (Quarterly Results Update - Detailed)

    Jul 20, 2017

    Expanded capacity helped ACC strengthen its market presence in eastern region during the quarter ended June 2017.

    ACC: Jan-March Quarter Sales up 9% YoY, Margins Dip (Quarterly Results Update - Detailed)

    May 4, 2017

    Expanded capacity results in topline growth during the quarter ended March 2017.

    ACC: Demonetisation Takes Toll on Volumes (Quarterly Results Update - Detailed)

    Feb 20, 2017

    Demonetisation hits cement demand during the quarter ended December 2016.

    UltraTech: Post-Acquisition Cement Capacity Augmented to 93 MTPA (Quarterly Results Update - Detailed)

    Aug 11, 2017

    UltraTech Cement completed the acquisition of cement plants of Jaiprakash Associates Limited (JAL) and Jaypee Cement Corporation Limited (JCCL) during the quarter ended June 2017.

    Ambuja Cement: Fall in Other Income Drag Bottomline Lower (Quarterly Results Update - Detailed)

    Aug 11, 2017

    While topline witnessed growth on the back of higher cement sale volumes, a 50.5% YoY fall in other income weighed on Ambuja's bottomline during the quarter ending June 2017.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    ACC LTD SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK ACC LTD

    • Track your investment in ACC LTD with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    ACC LTD - DALMIA BHARAT COMPARISON

    Compare Company With Charts

    COMPARE ACC LTD WITH

    MARKET STATS