• JULY 20, 2021

ACC Posts Two-Fold Rise in Net Profit Despite Covid-19 Disruptions

Shares of ACC hit a new high of Rs 2,343 as they rallied 9% on the BSE in intra-day trade today after the company reported strong operational performance for the second quarter ended June 2021.

Cement manufacturer ACC's June-quarter earnings results came out much better than expected in the wake of the second wave of Covid-19.

The resilience in cement volumes was due to the continued strength in the housing and the infrastructure segments.

Company's financial performance during the quarter

ACC reported 49.3% growth year on year (YoY) in total sales revenues for the June 2021 quarter on consolidated basis at Rs 38.8 bn.

On a sequential basis, the revenues were down 9.5% compared to Rs 42.9 bn in the March 2021 quarter on account of Covid 2.0 impact on output.


For the June quarter, cement volumes 43.7% to 6.8 m tonnes as compared to 4.8 m tonnes in the same period last year. It got big boost from government infrastructure spending.

Among the two key verticals of ACC, the cement division saw 43.9% growth at Rs 36.7 bn while the ready-mix concrete or RMC division saw 4-fold revenue growth at Rs 2.6 bn.

In terms of earnings before interest, taxes, depreciation, and amortisation (EBITDA) contribution, the RMC business turned around from EBITDA losses to EBITDA gains. The cement division saw EBITDA improve YoY by 79% to Rs 7.2 bn.

The cement maker reported an over two-fold jump in consolidated net profit to Rs 5.7 bn for the second quarter ended June 2021, helped by a lower base, increase in sales, and cost-efficiency.

The company, which follows the January-December financial year, had posted a profit of Rs 2.7 bn in the April-June quarter a year ago.

Key Financial Parameters

Rs in bn Jun-21 Jun-20 YOY
Total Income 38.8 26.0 49.3%
Operating Profit 7.2 3.6 99.3%
Net Profit 5.7 2.7 110.2%
Diluted EPS 30.2 14.4  
Operating Profit Margin (OPM) 18.6% 13.9%  
Net Margins 14.7% 10.4%  
Data Source: Investor Presentation

Management comments on ACC's quarter earnings

While commenting on the results, the management said that with a strong focus on supply chain efficiencies and cost optimisation, the company has emerged stronger and more resilient.

Waste heat recovery system projects at various sites are progressing well.

The large cement capacity expansion project at Ametha in Madhya Pradesh has commenced.

Also, the management expects strong demand recovery. This would be led by the government's focus on large-scale infra projects and affordable housing, coupled with a revival in industrial capex, driven by the implementation of the production-linked incentive scheme.


Equitymaster's technical view on the cement sector

We reached out to Brijesh Bhatia, Research Analyst at Equitymaster, and editor of the premium monthly recommendation service Fast Profits Report, for his technical view on the cement sector.

Here's what he has to say...

  • The financial market was hit in March 2020 by lockdown and by March 2021, they are up by 100% from the lows.

    Cement sector outperformed and most of the cement stocks are up by 100% from the lows.

    The demand in cement is largely lead by government spending on infrastructure and real estate.

    The commercial office been vacant with work-from-home culture and new housing projects been stalled, can still the cement sector rally from current levels?

    We created an Equal Weighted Cement Index (EWCI) chart using cements stocks with market cap over 10,000 crores and compared it with Nifty Realty Index.
  • Since the lows in March 2020, EWCI and realty index rallied in a same manner.

    But since March 2021, we are witnessing divergence between the two sectors (marked red) where cement stocks are trading near high and realty stocks are underperforming against cement stocks.

    To check the future outperformance of cement stocks, we compared EWCI with Nifty.
  • The ratio chart of EWCI Index vs Nifty above is indicating profit bookings can be on cards for cement stocks and it has reversed from the similar highs made in June 2020.

    The negative crossover of averages on Moving Average Convergence Divergence (MACD) supports an underperformance of EWCI over Nifty.

How the stock markets reacted to ACC

Shares of ACC opened the day at Rs 2,225 on the BSE and Rs 2,226 on the NSE.

At the time of writing, the company's shares were trading up by 7% on the BSE.

At its current price, it is trading at a P/E of 25.8.

The share touched its 52-week high of Rs 2,304 and 52-week low of Rs 895.5 on 20 July 2021 and 7 September 2020, respectively.

Over the last 30 days, the ACC share price is up 13%. Over the last one year, the company's share price is up 157.3%.

About ACC

ACC is India's oldest cement company.

It's a member of the LafargeHolcim Group and is one of India's leading producers of cement and ready-mix concrete.

The company has 6,300 employees, 17 cement manufacturing sites, 79 concrete plants and a nationwide network of over 50,000 retail outlets to serve its customers.

ACC boasts a large marketing infrastructure, pan-India presence, and strong operational linkages with Ambuja Cements. The two companies together have around 14% capacity share in the Indian cement market.

Their nationwide presence shields operations from regional price volatility and demand-supply imbalances.

ACC and Ambuja Cements are part of the LafargeHolcim group. As on December 31, 2020 LafargeHolcim held 63.27% stake in Ambuja Cements, which held 50.05% stake in ACC; it also holds 4.48% stake in ACC through Holderind Investments.

For more details about the company, you can have a look at ACC's fact sheet and ACC's quarterly results on our website.

You can also compare ACC with its peers on our website.

ACC vs UltraTech Cement

ACC vs Ambuja Cement

ACC vs JK Lakshmi Cement

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