Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ACC Ltd (BOM:500410, Financial) reported a year-on-year revenue increase to INR7,516 crores, driven by a strong focus on micromarket management and expansion of dealer networks.
- The company remains debt-free and plans to fund its acquisition of a 46.8% stake in Orient Cement Limited through internal accruals.
- Operational costs per tonne decreased by 4%, with a notable 10% decline in energy costs due to better fuel management and increased use of green power.
- ACC Ltd (BOM:500410) has secured 70 million tonnes of new limestone reserves, supporting future production capacity expansion.
- The company is on track to increase its cement capacity to 140 million tonnes by FY28, with several projects underway to achieve this target.
Negative Points
- Despite revenue growth, the company faces a challenging pricing environment, with a year-on-year decline in cement prices impacting profitability.
- There are delays in some expansion projects due to heavy rains and other logistical challenges, potentially affecting future capacity increases.
- The integration of recent acquisitions, such as Penna, is ongoing, and the full financial impact and synergies are yet to be realized.
- The company's ambitious expansion plans require significant capital expenditure, which could strain resources if not managed effectively.
- While the company aims to reduce costs by INR500 per tonne, only 25% to 30% of this target has been achieved so far, indicating more work is needed to reach cost efficiency goals.
Q & A Highlights
Q: Can you explain the significant volume growth of 9% year-on-year, especially when the industry is struggling with 1-2% growth?
A: Our volume growth is driven by both current and acquired capacities. The ramp-up of these capacities has helped us fill market voids. For instance, Sanghi has shown a tremendous increase. Additionally, growth in the B2B segment and premium products has contributed to this increase. Even excluding clinker sales, the volume growth is a healthy 7%.
Q: What is the company's strategy regarding future acquisitions, especially after the recent acquisitions of Penna and Orient?
A: Both acquisitions are strategic, enhancing cost efficiencies and volume. Currently, we are focused on integrating Penna and Orient. We are also expanding our capacity with ongoing projects. Our balance sheet remains strong, and while we don't comment on future acquisitions, we remain open to opportunities that align with our strategic goals.
Q: Can you provide more details on the integration and performance of Penna Cement?
A: Penna has ramped up well, with clinker production operating at 85-90% utilization. We are confident that by year-end, we will reach 95% utilization. Penna's clinker supports our southern plants, and sales are expected to be healthy. The integration has gone smoothly, and we are on track with our sales plan.
Q: How is the company progressing with its cost reduction target of INR500 per tonne?
A: We have achieved about 25-30% of the target so far. Initiatives include coal mining, green power, waste heat recovery, and operational efficiencies. Investments have been made, and results will start materializing in the coming quarters. We are on track to become one of the most cost-efficient producers in the industry.
Q: What is the status of the Mundra project and the expansion plans for Sanghi?
A: The Mundra project is on track for commissioning in 2026-2027. Sanghi faced delays due to severe monsoons, but we have refurbished one kiln and are working on the second. We expect full production in Q3 and Q4. We are also progressing with marine expansion plans and fortifying our position along the west-south coast.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
