ACC Flatters the Street With Improved Volumes in Q2
For the Jun-21 (second quarter), ACC reported more than doubling of net profits at Rs.569.4 crore. While price realizations remained flat to moderately better, there was a visible spurt in volumes. We will come back to this point later. For the Jun-21 quarter, ACC reported 49.3% growth in sales at Rs.3,885 crore. Net profits were up 110.2% yoy at Rs.569.4 crore.
Check: Ultratech Cements Results
Even as the low base effect helped yoy growth at ACC, the company reported robust 43.7% growth in cement volumes at 6.84 million tonnes compared to 4.76 million tonnes in Jun-20 quarter. Sales were slightly lower sequentially owing to the impact of COVID 2.0 on domestic demand. However, export demand remained robust. The surge in volumes yoy were driven by sharply higher infrastructure spending by the Indian government as a conscious strategy to give a fiscal boost to the economy.
The sales of ACC were driven by cement and RMC (ready mix concrete) sales. In terms of EBITDA contribution, RMC business turned around from EBITDA losses to EBITDA gains in FY21. The cement division, which accounts for over 95% of ACC revenues saw EBITDA improve yoy by 79% to Rs722cr. Cement, being a capital intensive business, gained from the sales growth as fixed costs got absorbed more effectively in the Jun-21 quarter.
ACC also flattered on the margins front. Operating margins at 18.61% showed a sharp improvement over 13.94% in the Jun-20 quarter as well as 16.71% in the sequential Mar-21 quarter. Net margins at 14.66% in the Jun-21 quarter were also higher than the yoy quarter and the sequential quarter. In a nutshell, the big driver of ACC growth has been the demand generated by enhanced government spending on infrastructure. That is here to stay!
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