Adani-Owned ACC Limited’s Q4 Net Profit Falls 40%, Revenue Up 8.2%

ACC Ltd, which is owned by the Adani group, reported a fourth-quarter net profit that fell short of analysts’ expectations due to increased costs. The cement manufacturer recorded a 40% decline in consolidated net profit to Rs. 235.63 crore for the quarter ended March 31, 2023. This is in stark contrast to the Rs. 396 crore net profit it had reported for the same period the previous year.

However, the company’s consolidated operating revenue for Q4FY23 increased by 8%, rising from Rs. 4,427 crore to Rs. 4,791 crore year on year. ACC Ltd’s financial year, which was previously based on the January-December period, has now been modified to follow the April-March cycle since its acquisition by the Adani group in May of last year. Despite the challenging circumstances, the company continues to be a vital component of the Adani Group’s portfolio, and its performance will continue to be closely monitored in the coming years.

ACC Ltd’s stock closed at Rs 1,744 on the BSE, representing a modest increase of 0.3%. The firm’s board has proposed a dividend payout of Rs 9.25 per share. Meanwhile, the Adani Group, a diversified conglomerate with interests in ports and energy, has recently announced its entry into the cement industry. The group has struck a deal to acquire a controlling stake in Holcim Ltd’s Indian assets for a whopping $10.5 billion.

According to the latest filing, the company’s sales volume has surged by 9% QoQ to reach 8.5 MT. The increase is attributed to a rise in blended cement, better route planning, and greater operational synergies with Ambuja Cements Ltd, its parent company. However, there was a slight dip in the cost of labour, which decreased from Rs. 262 PMT to Rs. 250 PMT on a QoQ basis. Additionally, kiln fuel usage dropped by 10%.

During the quarter, the Adani Group firm experienced a decline in EBITDA margins of 340 basis points, with the figure standing at 12.3%, and a 15% year-on-year drop in profits before interest, tax, depreciation, and amortisation, reaching 588 crores. This was primarily due to weaker realisations.

Despite this, ACC managed to increase operational profit on every tonne of cement supplied from 542 to 694, thanks to a cost reduction of 5% per tonne, or 264 to 5,106 per tonne. The business also reported a 6% sequential increase in net sales to Rs. 4,791 crore and a 40% increase in EBITDA to Rs. 588 crore. The rise in EBITDA margin from 9.3% to 12.3% was achieved through cost-cutting measures and the effective use of synergies from other Adani Group businesses. 

Our pursuit of transformation has resulted in remarkable enhancements in our financial performance and important business metrics. This favourable consequence can be credited to our concentration on attaining operational efficiencies, capitalizing on synergies, and striving for excellence in every facet of our operations.

Our revered full-time Director and CEO, Ajay Kapur, underscored the existence of a comprehensive strategy aimed at addressing all cost drivers and implementing measures to curtail expenditures while concurrently augmenting value. By integrating our capital expenditure program with our strategic plan, we are poised to steer the company back to a growth trajectory that is consistent with our past, Kapur affirms.

Although fuel prices have been decreasing, the company has attributed its lower EBITDA to higher fuel costs compared to the previous year. However, the company is optimistic that it can continue to reduce fuel costs in the coming months by leveraging group synergies and implementing various business strategies aimed at reducing operational expenses, decreasing the clinker factor, improving logistics efficiency, enhancing sales of blended cement, and ultimately boosting EBITDA margins.

In relation to the ongoing controversy over the report made public by short-sellers, a new development has emerged – a petition has been lodged with the Supreme Court. In addition, the Securities and Exchange Board of India is currently undertaking an inquiry into the companies listed by the group, with the aim of ascertaining whether they have adhered to all relevant legislation and regulations. Despite this, the organization has not altered its financial data as yet, as the matter is still awaiting resolution.

Following the release of the Hindenburg report, Adani Group’s various firms experienced a severe bearish attack. Consequently, the company had to adopt a more cautious approach towards new projects and put a hold on further development. In order to repay its debt, the group resorted to selling off shares in its numerous businesses. However, the situation appears to have improved since then, with market capitalization for Adani Group’s firms has risen by 47% from its lowest point in February.

The stock value of ACC has experienced a substantial decline of roughly 26% since January 24, as a result of a highly critical report published by US-based short-selling company Hindenburg Research regarding Adani Group’s business practices. Hindenburg’s report brought attention to a series of unresolved legal disputes between Adani and themselves, which led to ACC’s auditor issuing a qualified opinion. Nevertheless, in response to these allegations, ACC has initiated an impartial legal review that has determined the Adani Group is in full compliance with all applicable laws and regulations. Despite Adani refuting all accusations, the fallout from the report has had a major detrimental effect on the stock value of ACC.

Edited By, Naveenika Chauhan