ACC share surges 6% despite drop in Q1 profit; here’s why

Shares of ACC, one of the largest cement producers in India, rallied nearly 6% in early trade on Wednesday despite reporting a drop in its net profit for the first quarter ended March 2022. Investors cheered the rise in sales revenue and positive outlook, with the company expecting the demand situation to improve further in the coming months. The positive outlook has been supported by an improving domestic economic environment and various initiatives from the government in terms of increased spending on infrastructure development, the company said.

On Wednesday, ACC shares opened a tad higher at ₹2,063 against the previous closing price of ₹2,057.90 on the BSE. Snapping two sessions losing streak, the stock rose as much as 5.7% to hit a high of ₹2,174.85 during the first hour of trade so far. In comparison, the BSE Sensex was trading 501 points higher at 56,964 levels.

With a market capitalisation of ₹40,019.34 crore, the largecap stock traded lower than 5-day, 20-day, 50-day, 100-day, and 200-day moving averages. The stock price has dropped more than 4% in the last one week, while it has given negative returns of 5.5% since the beginning of the calendar year 2022. The stock has risen 3.5% in a month and 17% over the past one year.

The company, which follows the January-December financial year, has posted a 29.5% fall in consolidated net profit to ₹396.33 crore in Q1 FY22, weighed down by rise in raw material costs, especially crude oil. A subsidiary of Swiss building material major Holcim group, the company had posted a consolidated net profit of ₹563 crore in the corresponding period last year.

However, consolidated net sales rose by 2.6% to ₹4,322 crore in the January-March period of FY21 against ₹4,213 crore in the same period last year.

On the operating front, EBITDA stood at ₹635 crore, declining 26% on Y-o-Y basis due to a significant increase in fuel cost.

“The January to March 2022 quarter was impacted due to the global rise in fuel costs driven by the overall geopolitical situation. Our efficiency and cost reduction actions under project ‘Parvat’ remained very strong and helped us partially offset the impact. The new investments in waste heat recovery systems will help us mitigate the energy cost inflation while also strengthening our sustainability actions,” ACC said in the exchange filing.

The company said the management continues to focus on capacity growth, cost reduction, and sharp actions on sustainability. “Our execution capabilities to drive efficiencies and commission new projects have enabled us to make ACC significantly stronger,” it added.

“The India story remains intact. Our ongoing initiatives on growth, sustainability and productivity improvements will continue as we progress on the consequent execution of our strategy,”said Sridhar Balakrishnan, Managing Director and CEO.

Established in 1936, ACC is one of India’s leading producers of cement and ready-mix concrete. It has 17 cement manufacturing sites, 78 concrete plants, and a nationwide network of over 50,000 channel partners to serve its customers.