Cement shares rally as ACC logs strong operational performance in June qtr

Individually, ACC rallied 6%, Ambuja Cements & JK Cement surged 5% each, while Ramco Cements, Shree Cement, India Cements, Heidelberg Cement India & UltraTech Cement were up in the range of 2% to 4%

Brisk buying was seen across cement counters as positive sentiment rubbed-off on investors post ACC's April-June quarter numbers. Shares of cement makers rallied up to 6 per cent on the BSE on Tuesday after ACC reported healthy operating margin expansion of over 156 basis points (bps) year on year (YoY) to 20.8 per cent during the June quarter (Q2CY20) despite weak sales volume. The margin expansion was supported by strong cost management and efficiency actions.

ACC, post market hours on Monday, reported a 40.6 per cent YoY decline in its consolidated net profit to Rs 271 crore for the quarter ending June, impacted mainly by a decline in sales during the lockdown. The company, which follows a January-December financial year, had posted a profit of Rs 456 crore in the same quarter a year ago.

ACC's net sales, meanwhile, were down 37.9 per cent to Rs 2,520 crore during the quarter under review as against Rs 4,059 crore in the year-ago period.

The month of April 2020 was almost a total closure impacting revenue & EBITDA (earnings before interest, taxes, depreciation, and amortization) for the quarter with strong recovery in May & June. With strong focus on supply chain efficiencies and cost optimization, the management is confident that the company will emerge stronger from this situation.

“While volume got affected due to lockdown impact, a demand recovery in the later half along with the benign cost environment had a positive impact on margins and profitability for the quarter. The company has debt free status and strong liquidity position, which is a key positive,” ICICI Securities said.

The stock of ACC rallied 6 per cent to Rs 1,423 in the intra-day trade today on the BSE. Ambuja Cements and JK Cement surged 5 per cent each, while Ramco Cements, Shree Cement, India Cements, Birla Corporation, Star Cement, HeidelbergCement India and UltraTech Cement from the S&P BSE 500 index were up in the range of 2 per cent to 4 per cent on the BSE. In comparison, the S&P BSE Sensex was up 1 per cent at 37,772 points at 10:08 am.