InvestorQ : Why did ACC and Shree Cements report such disappointing results in the September 2022 quarter?
Ria Jain made post

Why did ACC and Shree Cements report such disappointing results in the September 2022 quarter?

Dia Deshpande answered.
1 month ago

This is a problem across cement companies. Till date, it is not just ACC and Shree but even Ultratech and Heidelberg Cement have reported pressure on numbers. The reason is a spike in costs, which we will see in detail later. Let us look at the numbers first and foremost. For instance, Shree Cements profits fell by 67% in Q2FY23 quarter while ACC reported a sharp fall to a net loss of Rs87 crore in Q2FY23. In the case of both the cement companies and perhaps the other cement companies also, there was a sharp spike in power and fuel costs which almost doubled on a yoy basis. There was additional pressure on freight costs too.

In the case of ACC, the net loss of Rs87 crore for Q2FY23 is in sharp contrast to a net profit of Rs450 crore earned by the company in the corresponding quarter last year. It may be recollected that the Adani group has controlling stake in ACC and Ambuja Cements by virtue of buying out their stakes from Holcim of France. ACC also reported 6.42% spike in revenues to Rs4,057 crore, but the cost pressures added up due to steep power and fuel costs. Both Shree Cements and ACC saw a sharp 30% spike in the total expenses for the quarter. Both the companies expect cost pressures to continue, although likely to taper in few months.

For the cement industry, while the limestone costs are under check, the real concern is on the power and fuel costs and, to a lesser extent on the transport and freight costs. The two are often related since power and fuel costs tend to rub off on the transport and freight costs too. For now the cement majors are hoping that the input costs will eventually taper. Efforts from select quarters has ensured that recession does not go undetected this time around. The risk is that once the growth impulses return, commodities may once again become expensive. The cement industry is up against an uncertain period.