Why ACC Reported Surprise Loss In September Quarter

The cement maker which was recently acquired by Adani Group reported net loss of Rs 87.32 crore against profit of Rs 450.21 crore during the same period last year
ACC Cement
ACC Cement

Cement maker ACC on Monday disappointed street after it reported a surprise loss for quarter ended September 2022. The cement maker which was recently acquired by Adani Group reported net loss of Rs 87.32 crore against profit of Rs 450.21 crore during the same period last year, the company's regulatory filing showed. The surprise loss in September quarter came on the back of sharp surge in energy costs which negatively impacted company's operating performance, analysts said.

Its revenue from operation advanced 7 per cent annually to Rs 3,910 crore from Rs 3,653 crore in the same period last fiscal. According to ACC, its operating profit also known as earnings before interest, tax, depreciation and amortization (EBITDA) in the quarter "stood at Rs 16 crore largely due to steep rise in fuel cost" as against Rs 712 crore earlier.

Total expense of ACC was at Rs 4,162 crore, up 30 per cent from Rs 3,204 crore in July-September quarter of 2021.

ACC's cement sales volume in the quarter under review rose 6.85 million tonne as against 6.57 million tonnes in the year-ago period.

Revenue from ready-mix concrete (RMC) advanced 16 per cent to Rs 353.26 crore from Rs 305.07 crore a year ago.

"We have had significant cost pressures in the recent past due to steep fuel price rise. However, the recent cooling off in energy costs will impact us positively in the coming quarters," ACC CEO and Whole time director Sridhar Balakrishnan said.

The company has "aggressive growth plans" and its capacity expansion initiative through new green field projects at Ametha, Madhya Pradesh is progressing well and is expected to be commissioned by March 2023, he added.

ACC reported a dismal set of September quarter earnings as higher energy costs impacted operating metrics adversely. EBITDA stood at a mere Rs 15.4 crore against estimate of Rs 200 crore, analysts at brokerage firm Motilal Oswal said. 

"Though revenue was 2 per cent above our estimate, EBITDA/tonne of Rs 23 and operating profit margin of 0.4 per cent was at historically low levels. Adjusted loss stood at Rs 74.8 crore versus our estimate of a profit of Rs 57.7 crore," Motilal Oswal said..

The brokerage however added that with decline in coal/petcoke prices and discontinuation of royalty payments to Holcim at 1 per cent of sales amounting to Rs 53/tone should aid the margin recovery in second half of the current fiscal.

Last month, Endeavour Trade and Investment an entity of Adani Group, acquired shareholding of Holcim Group and consequently, its board was reconstituted.

"The group with effect from September 16, 2022, has terminated its agreement with Holcim Technology Ltd for payment of technology and know-how fees of 1 per cent of eligible net sales," it said.

ACC shares were trading 1.8 per cent lower at Rs 2,229, underperforming the Nifty which was up 1 per cent.

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