ACC net down 60% in Q1 on higher cost, lower volumes
AI Summary
ACC's net profit for the June quarter fell 60% to ₹147 crore, primarily due to increased costs and a decline in sales volume, which dropped 7% year-on-year. The company's revenue also decreased by 8% to ₹5,790 crore, affected by a higher master supply agreement with Ambuja Cements and planned maintenance at its larger plants. Despite these challenges, ACC is focused on strategic expansions and the proposed merger with Ambuja Cements, which may enhance future performance.
ACC, an Adani Group company, reported that its net profit in the June quarter plunged 60 per cent to ₹147 crore against ₹375 crore logged in the same period last year, largely due to higher costs. Revenue was down 8 per cent at ₹5,790 crore (₹6,277 crore).
The company said the profitability reflected the impact of planned maintenance at larger integrated units and a higher master supply agreement (MSA) with the parent firm Ambuja Cements, apart from lower sales, revenue and margins.
ACC’s sales volume, too, declined 7 per cent y-o-y at 10 million tonnes due to a higher MSA with Ambuja. The company’s EBITDA for the quarter was down 41 per cent at ₹457 crore. The company attributed the decline in sales volume and operating EBITDA to the higher MSA.
The MSA allows ACC and Ambuja to supply cement to each other to meet customer demand. Under the arrangement, if one company faces a supply shortfall or secures an order beyond its available capacity, it is fulfilled by the other company.
During the quarter, a higher share of sales was routed through the MSA, while planned maintenance at ACC’s larger integrated plants also weighed on the company’s sales volumes and profitability, it said.
Vinod Bahety, whole-time director and CEO, ACC, said the profitability reflects the impact of planned maintenance at larger integrated units and higher MSA with parent Ambuja Cements, even as the company continued to prioritise value-led growth and quality earnings.
Combined with strategic capacity expansions at Salai Banwa and Kalamboli, the company expects to improve performance in the coming quarters. The company informed that it continued to make progress towards the creation of the One Cement platform through the proposed amalgamation of ACC with Ambuja Cements. It has received no-objection certificate from SEBI, and an application for merger is pending with NCLT. The amalgamation is expected to be completed during FY27.
On the West Asia conflict, ACC said the cement sector witnessed cost pressures in the June quarter from higher prices of imported fuels such as petcoke and thermal coal, along with elevated freight and logistics costs due to geopolitical developments in West Asia.
Given the 60-90-day fuel inventory cycle, the impact of peak fuel cost inflation is expected to coincide with the seasonally weaker Q2, potentially impacting industry profitability in the near term, it said.
Original Article
Published on Hindu BusinessLine