ACC Ltd and Ambuja Cements Ltd, both majority-owned by Holcim Group, have reported decent earnings for the December quarter.
ACC posted a robust 27.8% year-on-year (y-o-y) jump in net sales to Rs 2,502.73 crore for the December quarter. Growth, as expected, was driven by an increase in price realization. Cement prices have been rising since April in most regions, leading to a 21% increase in average price realizations in the December quarter. Volumes grew 6% y-o-y.
In Ambuja’s case, net sales grew 30% over the year-ago period to Rs 2,329.1 crore on the back of 11% higher sales volume. Realization per tonne of cement sold rose 17% from the year-ago period.
But unlike UltraTech Cement Ltd, whose results beat revenue and profit expectations, the improvement in profitability of ACC and Ambuja was subdued. In ACC’s case, while power, fuel and freight costs rose, it was offset by a reduction in other expenditure. Thus, the company’s operating margin was flat at year-ago levels of 17.7%. Operating profit, however, rose 29% to Rs 441.8 crore, almost in line with the rise in revenue.
In Ambuja’s case, too, costs spiralled compared with a year ago. As a result, operating margin rose by only 110 basis points y-o-y to 19.3% for the quarter, despite a sharp rise in price realizations. One basis point is one-hundredth of a percentage point.
In UltraTech’s case, operating margin rose to as much as 23% last quarter from 16.7% in the year-ago period. This was in spite of a 16% rise in variable cost, mainly on account of energy.
For the full year ended December, Ambuja’s operating profit rose by a mere 2.2% to Rs 1,994 crore. This was in spite of 15.2% growth in net sales to Rs 8,515 crore. According to a company statement, the lower operating profit growth in comparison with sales growth was due to a substantial increase in clinker cost, fuel and freight charges compared with the previous fiscal.
Given the relative underperformance compared with UltraTech, investors are unlikely to be enthused by the results of ACC and Ambuja.