ACC is the fifth largest cement company in India in terms of market capitalization. While it is among the oldest companies in this space, it lags behind its peers on many metrics. 

However, initiatives taken to ramp up capacity and optimise costs reflect in this quarter’s results. This is the first cement company to declare results for the quarter, and the numbers indicate that it is on the road to recovery. ACC had one of the lowest quarterly revenues in Q2 CY20 (April-June 2020), which was adversely impacted due to the Covid19-related national lockdown. The company has subsequently posted higher revenues sequentially for the past three quarters. In  Q1 CY21, the company posted its highest revenue in the last 10 quarters. 

Quick Takes

• Net profit rose 74.2% YoY in Q1 CY21 to Rs 562.6 crore vs Rs 324.0 crore a year ago.

• Cement sales volumes are up by 21.6% on a YoY basis but the readymix concrete volumes are down by 10.9% in Q1 CY21.

• The earnings before interest, tax, depreciation and amortisation (EBITDA) margin grew by 290 basis points (bps) which stood at 20% this quarter as against 17.1% in the same quarter last year.

• ACC commissioned a large new grinding unit at Sindri in record time, adding a capacity of 1.4 MTPA.

ACC’s Q1 CY21 results point to a recovery

The YoY revenues has grown at 21.9% to Rs 4,336 crores this quarter as against Rs 3,557 crores quarter a year ago. Last year, Q2 CY21 was in the middle of a national lockdown due to the pandemic, and obviously this impacted revenues. However, the revenue numbers for the subsequent quarters show a sustained improvement, with each subsequent quarter reporting higher revenues compared to the previous one. This quarter has been the quarter with the highest ever revenues in the last 10 quarters.

Cost optimisation helped deliver better margins and profits

Under the project “Parvat”, ACC undertook numerous initiatives to improve efficiency and reduce costs where possible. The project also focuses on sustainability and reducing its carbon footprint. The company was able to save on freight and forwarding costs by direct dispatches, warehouse footprint optimization and procurement. The other contributor towards revenues is the Master Service Agreement (MSA) with Ambuja Cements.

Supply chain transformation to help operations

ACC and Ambuja Cements, the two Indian units of LafargeHolcim, have chosen Blue Yonder, a global end-to-end, digital supply chain platform provider, for their supply chain transformation. 

With improved supply chain optimization, ACC can potentially align its service locations with lowest costs, reduce delivery costs and create a better service network.

Two new plants will add to ACC’s capacity

ACC has also commissioned a new 1.4 MTPA (million tonne per annum) unit at its Sindri cement grinding plant in Jharkhand. The commissioning was completed in Q1 CY21 and is one of the fastest commissioned plants in the company's history. This unit now has a total grinding capacity of 4.4 MTPA. The company began work on capacity expansion in December 2019 in order to strengthen its presence in the Eastern region. The expansion was done with the aim to contribute to servicing the growing market, strengthen its presence in the eastern region and to add value to the business. The facility will manufacture low-CO2 and environment-friendly cement products.

In February 2021, ACC announced the groundbreaking ceremony of its greenfield project of 2.7 MTPA integrated cement plant, with 1 MTPA cement grinding unit at Ametha in Kymore, Madhya Pradesh. This plant will be  commissioned in Q2 CY22.

Can ACC catch up with its peers?

The past year has been good for cement companies with the stock prices of some companies giving more than 2X returns (Dalmia Bharat delivered more than 150% in FY21). ACC has however, been an underperformer. The results for Q1 CY21 quarter seem to indicate that ACC is on its way to catch up with its peers. The planned capacity expansion, cost optimization initiatives and digital strategy to manage logistics will help the company to keep pace with its peers. 

The only grey area is the pending cartelisation case brought by the Competition Commission of India, which is pending before the National Company Law Appellate Tribunal. As to whether it does outperform its peers, the next few quarters will show investors whether ACC can achieve that goal.