ACC's PAT down by 41%, sales by 2.7%

Operational income though was better than estimates due to higher realisations

ACC, a part of the Switzerland-based cement giant Holcim, posted a decline of 41 per cent in its consolidated net profit at Rs 236.5 crore for the quarter ended March 2015, against Rs 399.8 crore in the corresponding quarter previous year. This was higher than consensus Bloomberg estimates of Rs 214 crore.  This was helped by a better operating performance.

The operating Ebitda (earnings before interest, taxes, depreciation, and amortisation) at Rs 609.5 crore was much higher than a year ago’s Rs 425 crore (growth of 43.4 per cent). This was boosted by Rs 139.7 crore due to a favourable court order. Even after adjusting for the sum, the operating Ebitda would have grown 10.5 per cent, say analysts. They add that Ebitda per tonne at Rs 692 was better than estimates of Rs 500 to Rs 515.

This is remarkable and comes on the back of weak demand that led to lower sales volumes during the quarter.

The operating costs for the cement business registered an increase of 3.6 per cent, even as ACC maintained a stringent check on input costs, said the company.

ACC's cement dispatches were down by 10.2 per cent to 5.8 million tonnes against 6.5 million tonnes in the year-ago period. This decline had an impact on the company’s sales. However, better cement realisations compared to a year ago, primarily helped by better cement prices in the south, cushioned the decline in sales. South India saw 50-kg bag prices improve from Rs 280 a year ago to Rs 322 in the March 2015 quarter. This helped national cement average prices come at Rs 296 a bag during the quarter, better than Rs 279 a bag a year ago. During the December quarter, prices stood at Rs 288 a bag.

The consolidated net sales saw a decline of 2.7 per cent year-on-year to Rs 2,885.4 crore during the quarter.

Apart from the exceptional gain of Rs 139.74 crore mentioned above, ACC also saw exceptional charge. As Schedule II of the Companies Act 2013 was applicable for the company from 1 January 2015, it cost ACC an additional Rs 164.45 crore. As per Schedule II, companies have to revise estimates of useful lives of fixed assets. Had this adjustment not made, the company's profit before tax would have stood at Rs 474.57 crore compared to Rs 310.12 crore post adjustment.

Overall, while the company benefited from Rs 139.74 crore credited due to favourable court order and Rs 1.18 crore on account of tax credit, it had to bear additional costs of Rs 164.45 crore due to change in Schedule of the company’s Act 2013 being applicable. Thus, on adjusted basis the company's net profits should have come higher by Rs 25.89 crore.

On the BSE, shares of ACC had closed weak on Monday at Rs 1,594.60, down 2.4 per cent. Looking at the beat in operating performance the stock should see some action on the bourses in the coming days.

Management feels that cement demand is likely to improve in the next two quarters, while focus on performance will continue.

Sanjeev Singh at Emkay Global says, "We believe that cement demand will gradually improve over FY16 leading to improvement in effective utilisation rate of the industry". Higher utilisation levels should reflect positively on margins and profits.