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ACC: Cement Volumes Slump 10% - Views on News from Equitymaster
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ACC: Cement Volumes Slump 10%
Oct 25, 2016

ACC has announced its financial results for the third quarter of the calendar year 2016. During the quarter ended September 2016, the company's standalone sales and net profit decreased by 9.8% YoY and 28.1% YoY respectively. Here is our analysis of the results:

Performance summary
  • On a standalone basis, net sales reported a drop of 9.8% YoY during the quarter.
  • Capacity utilisation during the quarter declined to 66%. Cement sales volume stood at 5.07 million tonnes, lower by 9.6% YoY.
  • There was de-growth in cement volume sales mainly due to heavy rains & floods in Bihar, Jharkhand, Uttar Pradesh & Madhya Pradesh which contributed to volume decline. Sand shortage in Uttar Pradesh was another reason for the lower demand.
  • Overall cement realisations were also lower on a YoY basis.
  • While raw material and power & fuel costs declined (as a percentage of sales), there was a significant rise in employee and freight costs (as a percentage of sales).
  • EBITDA margin contracted from 9.6% in 3QCY15 to 9.1% in 3QCY16.
  • Along with poor operating performance, higher finance costs resulted in 28.1% YoY drop in net profit during the quarter.
  • Net profit margin contracted from 4.3% in 3QCY15 to 3.4% in 3QCY16.
  • During the nine-month period ended September 2016, while net sales dropped by 3.7% YoY, net profit improved by 13.3% YoY.

    Standalone financial performance snapshot
    (Rs m) 3QCY15 3QCY16 Change 9MCY15 9MCY16 Change
    Net sales 27,400 24,706 -9.8% 85,867 82,678 -3.7%
    Expenditure 24,762 22,458 -9.3% 76,297 72,642 -4.8%
    Operating profit (EBITDA) 2,638 2,247 -14.8% 9,569 10,035 4.9%
    EBITDA margin 9.6% 9.1% 11.1% 12.1%
    Other income 678 744 9.8% 3,990 2,552 -36.1%
    Depreciation 1,607 1,529 -4.8% 4,962 4,373 -11.9%
    Finance cost 150 197 31.4% 519 544 4.8%
    Profit before tax & exceptional items 1,559 1,265 -18.8% 8,079 7,670 -5.1%
    Exceptional gain/ (loss) 0 0 -1,532 0
    Profit before tax 1,559 1,265 -18.8% 6,547 7,670 17.1%
    Tax 389 424 9.1% 1,657 2,129 28.4%
    Effective tax rate 24.9% 33.5% 25.3% 27.8%
    Profit after tax 1,170 841 -28.1% 4,890 5,541 13.3%
    Net profit margin 4.3% 3.4% 5.7% 6.7%
    No of shares (m) 187.8
    Diluted EPS (Rs)* 35.0
    P/E (times) 44.4

    *trailing twelve month earnings

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Equitymaster Agora Research Private Limited (hereinafter referred to as "Equitymaster"/"Company") was incorporated on October 25, 2007. Equitymaster is a joint venture between Quantum Information Services Private Limited (QIS) and Agora group. Equitymaster is a SEBI registered Research Analyst under the SEBI (Research Analysts) Regulations, 2014 with registration number INH000000537.

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