ACC Share price today: ACC's Q4 CY20 volume decline is negative although commissioning of new capacity in the east implies this is only a short-term issue. A slight sequential decline in realisation along with continuing cost focus allowed the company to report a 30% YoY growth in EBITDA. There are too many exceptional items during the quarter but the operating performance is in line. The current market price of ACC is Rs 1762 down Rs 13 or 0.75%.

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ACC’s Negative operating leverage:

Reported unit cost rose 1% QoQ which is higher than forecast but adjusting for RMC ramp-up, was in-line. ACC’s unit costs were impacted by higher than-expected staff costs and other expenses, distributed over a declining volume base. Normalisation of expenses, pent-up maintenance spends, along with ramp up in RMC volumes would have resulted in higher overheads, in our view. Variable costs however saw a declining trend. Unit freight cost declined 3% QoQ, while manufacturing cost (material + power & fuel) was up just by 1% sequentially despite steep fuel price inflation, a positive.

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ACC’s Volume decline:

Market share losses continued for ACC as volumes declined 1% YoY to 7.7mt, which is 3% below Jefferies estimate. A volume decline, in the context of the strong growth reported by peers, is disappointing. RMC witnessed sequential stabilisation, up 60% QoQ although YoY pressures remained, -20% YoY decline.

ACC’s In-line EBITDA:

ACC Unit EBITDA rose 30% YoY (-12% QoQ) to around Rs900/t, in line with Jefferies estimates. A ramp-up in RMC business also contributed to the margin recovery YoY. Overall EBITDA (adjusting for one-off) is up 30% YoY to Rs 7 bn which is in line with forecasts. Pre-ex PBT is up 42% YoY to Rs 5.8 bn.

Exceptional items in ACC’s results:

The quarter has a few exceptional items viz:

a) Rs 1.8 bn impairment with respect to Madukkarai unit assets
b) reversal of incentive income in other expenses worth Rs 1.3 bn
c) tax writebacks due to migration to the new regime at Rs 2.5 bn.

ACC’s Management commentary:

Outlook is fairly positive as economic recovery is underway led by government focus on infra, particularly roads, railways, affordable housing etc. as announced in the union budget.