ACC disappoints in Q4CY14

Its adjusted net profit at Rs 130 cr was way short of Bloomberg consensus estimates of Rs 183.8 cr

ACC, India's second-largest cement maker, posted a rise of 18 per cent in its consolidated net profit at Rs 326.22 crore for the quarter ended December against Rs 276 crore a year ago. The consolidated net sales were up 0.75 per cent to Rs 2,762 crore.

The results are not comparable with the previous year’s, given an exceptional gain of Rs 196 crore as tax write-back during the October-December quarter of CY2014. A write-back is to restore or increase the value of an asset on a balance sheet after a previous write-off or write-down. On adjustment of this, the profit would stand lower at Rs 130 crore, far below the Bloomberg consensus estimates of Rs 183.8 crore.

On Tuesday, after hitting an intra-day high of Rs 1,570 (up three per cent against the previous close), shares closed at Rs 1,510.6, down one per cent on the BSE. The total expenses for ACC during the quarter moved up six per cent. Increase in costs of materials, employee costs and freight costs dampened performance, even as freight and forwarding and other expenses were flat or declined compared to a year ago.

For instance, costs of materials consumed and freight were up 13 per cent and 8 per cent, respectively.

Piyush Jain, analyst with Morningstar India, said, "ACC's fourth quarter results disappointed us both on volume growth and profitability. The company clearly could not keep up pace (in terms of prices) compared with the rise in costs in its operations. Margins took a hit. Sales was driven by about 3 per cent growth in the blended price realisation and flat growth in the cement sales volume versus our estimate of four per cent volume growth. ACC’s profitability was dented by sharp rise in the manufacturing and freight costs. This led to drop in the EBITDA margins to 9.3 per cent versus 13.5 per cent last year."

The company's profit before interest, depreciation and tax (PBIDT) came in at Rs 257 crore versus Rs 361.75 crore in the year ago period, down about 29 per cent.

During the quarter, ACC's two limestone mining operations remained temporarily suspended. In a statement, the company, said,"Consequent to an order of the Hon'ble Supreme Court restraining mining under deemed extension of second and subsequent renewals of mining leases, limestone mining operations at Chaibasa and Bargarh plants remained temporarily suspended during Q4, resulting in an exceptional increase in cost."

ACC is a Holcim group company, with a capacity of 30.1 million tonne per annum (mtpa). It follows the calendar year as its accounting year.

For the year ended 31 December, 2014, ACC's consolidated net profit stood at Rs 1,161.82 crore, up 6 per cent compared with Rs 1,094.67 crore. The consolidated net sales for the year were up 5.4 per cent at Rs 11,480 crore. The company sold 24.2 million tonnes of cement - a flat growth over 1.1 per cent over the previous year.

"Overall, for the full year, after adjusting for higher tax reversal of Rs 310 crore versus last year, net profit came two per cent below versus last year and pales in comparison to higher profitability enjoyed by companies having significant market share in western and northern India", said Jain of Morningstar. He believes that large price increases seen in the first half of January should help in margins returning back to 13 per cent levels in the first quarter of 2015.

The company has recommended a final dividend of Rs 19 per share. This will result in a total outgo of Rs 428 crore.

In its outlook, the company said that based on present indications, it sees a modest but steady revival for the Indian economy in 2015. "The infrastructure, housing and construction sectors are expected to register faster growth in the near term with a positive impact on demand for cement," it added.