ACC

This Holcim company posted a good YoY consolidated performance for third quarter ended 30th Sept 2012 but sequentially, the numbers do not stack up well. Consolidated net sales at Rs.2556 crore, was up 12% (YoY)  but down 12% on a QoQ. The company has stated that cement despatches were down 5% on a YoY due to prolonged monsoon and weak demand. Hike in freight and fuel charges showed but this was more pronounced YoY, while sequentially, it was actually down. Power and fuel charges at Rs.499 crore was up 2.5% on a YoY but down 6.25% on a QoQ. And Freight and forwarding charges at Rs.242 crore was up 3% (YoY) and down 15% on a QoQ. Thus EBIDTA margins disappointed at 17.8%. 

The company changed its method of depreciation retrospectively and thus depreciation arising in earlier years upto 31st dec 2011 of Rs.335.38 crore has been recognized as an exceptional expense while computing the 9M period ended 30th Sept 2012.  The depreciation for the third quarter was at Rs.7.60 crore and had the company not changed the method, then the net profit would have been higher by Rs.5.27 crore.  The company, like all the other cement companies charged by CCI against caterlisation, has not provided for the fine of Rs.1,147 crore.  The company expects demand to pick up in the coming months and if the company is able to pass on the rising costs, then it would be able to post much better numbers for Q4. As such cement companies are poised for a good run over the next 6-9 months. Every dip should be an opportunity to accumulate.