Home >Companies >News >Ambuja Cements clocks strong Q1 operational performance

The highlight of Ambuja Cements Ltd's March quarter earnings was its operating performance. Thanks to its continued cost saving efforts, the company clocked its best Ebitda ever and managed to beat consensus estimate by 33%. Ebitda is short for earning before interest, tax, depreciation and amortization. Its Ebitda in the March quarter stood at 977 crore, much higher than consensus estimates of 740 crore. On a per unit basis, Ebitda rose 25% year-on-year (y-o-y), ahead of estimates.

Its cost-saving initiatives such as ‘I-CAN’ are bringing in cost efficiencies. These include measures such as renegotiation of warehouse rents, increased direct dispatches of sales, and renegotiated fuel/freight mix. According to analysts at Kotak Institutional Equities, master supply agreements with ACC Ltd have resulted in savings of around Rs250 crore in CY2020 or 5-6% of profit before tax for Ambuja. Ambuja follows calendar year as financial year.

Despite this beat, shares of the company were flat at Rs313 on Friday on the NSE. According to analysts at Nirmal Bang Securities Ltd, while the earnings momentum for Ambuja Cement looks strong, its volume growth will lag growth that of industry leaders in spite of capacity expansion while commodity price inflation will drive it's cost structure higher.

The company's management maintained its guidance for commissioning of the 3 mtpa clinker and 1.8 mtpa grinding capacities by 3QCY21. Mtpa is short for million tonnes per annum. This clinker plant is expected to effectively add 5 mtpa cement

grinding capacity. While the company has shared its medium-term plan to reach 50 mtpa capacity, details on timelines and approvals are awaited.

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