InvestorQ : How did ACC show such smart growth in profits in the Dec-20 quarter?
Chandralekha Desai made post

How did ACC show such smart growth in profits in the Dec-20 quarter?

NISHA Nayak answered.
10 months ago

ACC, formerly known as the Associated Cement Companies, reported 73% growth in PAT at Rs.472 crore. The company, which is currently owned majorly by Ambuja Cements, reported substantial deferred tax credits which were much bigger than the exceptional write-offs. That was the reason for the growth in profits.

Revenues for the Dec-20 quarter were up just 2.08% at Rs.4,145 crore on a consolidated basis. In short the revenues were almost flat. While the growth in the quarter was driven by the government sponsored infrastructure demand, the demand from residential housing and office space construction was quite limited.

If you look at the two major verticals that form the base of the company’s revenues, cement business showed 4.6% growth while the smaller RMC business sales fell 20%. The RMC business is more dependent on the property demand and that has been sorely lacking in the last few months in the aftermath of the pandemic.

The operating profit margins or the OPM improved from 9.36% in Dec-19 quarter to 10.00% in Dec-20 quarter, which is actually a marginal change. The real benefit for profits came from outside of operations. In the Dec-20 quarter, ACC took a one-time write-down of Rs.176 crore on impairment of assets at the Madukkarai plant. However, this write-off was more than offset by the deferred tax credit benefit of Rs.264 crore leading to profit growth.