15 Mar , 2021 By : kanchan Joshi
MUMBAI: Cement major ACC Ltd, in its recently published annual report for fiscal 2020, outlined its capital expenditure plans, cost optimisation measures and other financial details for the year. The company follows a January-December amounting year.
A key highlight was the management's claim of having been able to save Rs250 crore under its project Parvat. According to analysts, while this is a positive, it is unlikely to sustain going ahead. They say, the benefit of low-cost inventory won't last long and input cost will start to impact margins in quarters to come.
"Even though there have been cement price hikes across India, ACC's capacity constraints would weigh on its volumes and consequently margins. The company is expected to lag peers in terms of volumes growth until new capacity comes," said an analyst with a domestic brokerage house who did not want to be named.
ACC plans to add 2.7 million tonne of clinker capacity at Madhya Pradesh, and its grinding units in Ametha, Shonebhadra, and Tikaria located in Uttar Pradesh. It also plans to add waste heat recovery system at Jamul in Chhattisgarh and Kymore in Madhya Pradesh, with cumulative capacity of 22.5 megawatts. The new capacities will be operational in the year 2022.
Analysts at Nirmal Bang Securities Ltd point out that efficiency parameters of ACC like specific heat consumption and electricity consumption per unit are still low. "ACC’s thermal energy requirement per kg of clinker has declined from 748 kilo calories (Kcal) to 742 Kcal while electricity consumption per mt of cement has increased marginally from 79.6 kilowatt hour (kwh) to 80.7kwh. Both parameters are higher than industry average and much lower compared to industry leaders," the brokerage house said inna report on 15 March.
Investors would reckon that ACC had signed a master supply agreement (MSA) with Ambuja Cement Ltd in 2018 for sale and purchase of cement, clinker, raw material and spare parts. Analysts say, while volumes have improved aided by the MSA, other areas like logistics cost are yet to benefit from it.
"Under the MSA with Ambuja, volume has picked up. Cement production for the company was 23.8 million tonnes while cement sales volume was 25.5 million tonnes. The additional 1.76 million tonnes volume would have largely come from the MSA," added the Nirmal Bang report.
On Monday, the ACC stock opened in the red, down more than a percent on the National Stock Exchange at Rs1767.50.
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