ACC reports a 45% decline in operating profit

ACC, one of the largest cement producing company,  announced its Q3 result   ACC reported a sharp increase of 81% in net profit to Rs 156 cr. The increase was mainly due to a significant jump in the company’s other income which grew by 95% to Rs 58 cr.

Net sales rose by 30% YoY to Rs 2283 cr, on the back of the newly operational 3.2 mn tonne plant.

However if we look at the QoQ performance, ACC reported a 45% decline in operating profit to Rs 317 cr. The total cost as a percentage of sales rose also increased by 1200 bps on account of higher fuel prices and freight charges.

The July-September quarter is the monsoon season, and typically, there is a moderation in construction activity which has impacted the sales volume of the company down by 7% on QOQ basis to 5.7 mn tonne. Also the realization was however higher on a yearly basis by 8% but was sequentially down by 4% due to slow down in demand. And the overall impact was seen on the net sale which declined by 10% during the quarter.

Company in a statement released after the result said that “the supply of domestic coal, our principal source of energy, has been grim, affecting cement as well as the power sector. The overall outlook for coal in terms of both availability and pricing is not favorable”. 

Nevertheless as we mentioned earlier in our preview on the cement companies reporting lackluster performance in the September 11 quarter largely due to rising input costs and lower volume off take, holds true for most of the companies who recently announced their results and ACC ltd is one amongst them.

Going forward we believe the pickup in demand to remain slow because of higher Interest rate scenario which may slow down the construction activity and also delay some of the new projects because of higher cost of funding. Also, we usually see a shortage of labor due to the festive season which hampers construction work in November month. Therefore, the pickup in demand is expected to be slow in the coming quarter, and expect to gain pace in Q4 FY12.

Even company had said that the cement demand is likely to pick up post monsoon but does not expects it to be robust due to concerns about a slowdown in economic growth.

The stock closed at Rs 1183.95 on Tuesday, and was marginally down by 0.95% on the NSE. So far, it has touched a high of Rs 1195 and a low of Rs1170 in trade after the results announcement.