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ACC rises 4% post September quarter results; other cement stocks rally too

ACC said the efficiency and cost reduction drove Ebitda margin expansion by 328 basis points during the quarter

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Recovery in cement demand in the North, Central and East regions surprised positively after the easing of lockdown norms

Shares of cement companies were in focus at the bourses on Tuesday, gaining up to 4 per cent, after ACC managed to improve its sales volumes to pre-Covid levels along with expansion in margins during the July-September quarter (Q3CY20) despite localised lockdowns and monsoon impact.

ACC hit a 52-week high of Rs 1,622, up 4 per cent on the BSE on the back of heavy volumes. A combined 2.8 million equity shares had changed hands on the counter on the NSE and BSE till 09:43 am. In the past month, the stock has outperformed the market by gaining 12 per cent, against 4.5 per cent rise in the S&P BSE Sensex.

ACC's revenues for Q3CY20 grew 0.3 per cent year on year (YoY) to Rs 3,537 crore. Net profit increased 20.3 per cent to Rs 364 crore over the previous year quarter. Ebitda (earnings before interest, taxes, depreciation, and amortization) margins for the quarter improved 328 bps YoY to 19 per cent. Efficiency and cost reduction drives EBITDA margin during the quarter, the company said.

The management said that “despite Covid-19 headwinds, Indian economy is witnessing early signs of recovery. At ACC, this recovery has been reflected in our Q3 results where our volumes and sales have bounced back to prior year levels”.

“Our efficiency and cost reduction plans have helped drive significant margin expansion during the quarter. We continue to manage working capital effectively resulting in healthy cash flow delivery,” it said.

Besides, other cement stocks were also trading firm. Orient Cement, Dalmia Bharat, Birla Corporation, Star Cement, India Cements, HeidelbergCement India, Shree Cement, JK Cement, JK Lakshmi Cement, UltraTech Cement and Ambuja Cements were up between 1 per cent and 4 per cent in intra-day trade, so far.

Recovery in cement demand in the North, Central and East regions surprised positively after the easing of lockdown norms, though demand remained under pressure in the South and West regions. The demand recovery in the beginning was led by strong rural demand, though infrastructure demand too has started improving recently.

Analysts at Emkay Global Financial Services remain constructive on the sector as they expect clinker utilization to improve gradually. "Though there has been cost inflation in H1FY21, we believe that price hikes and volume improvement will help companies improve profits," the brokerage firm said in sector update.