ACC's 1QCY13 First cut: Poor realization (down 4% QoQ) drags down profitability - Karvy

ACC's consolidated sales/ EBITDA/ adjusted PAT during 1QCY13 declined 3%/ 24% / 21% YoY respectively to Rs29.6bn, Rs4.92bn and Rs2.98bn. The profitability came in below our and street estimates driven by weak realization. Its sales, EBITDA and adjusted PAT were 3%, 9% and 3% lower than our estimates.

- Net sales realization (NSR) of the cement business declined 4% QoQ (flat YoY) vs our estimates of 2% higher QoQ realization. Flat NSR along with 2% lower YoY volumes resulted in 2% lower segmental revenue. With the RMC sales also declining 5% YoY, total revenues declined 3% YoY. Weak cement demand along-with ACC's declining brand positioning across many markets impacted its lower sales and realization.

- Variable costs shows moderation QoQ: Raw materials including power & fuel and clinker transfers declined 8% QoQ on a per MT basis. Freight (external) cost per MT remained flat QoQ.

- Fixed costs per MT declined by 9% QoQ benefitting from the operating leverage of 11% cement QoQ sales growth. Subsequently, operating costs per MT declined 6% QoQ (2% lower than our est). With opex per MT up 5% YoY and flat YoY NSR, EBITDA per MT declined 22% YoY to Rs746 (+13% QoQ). (Our est was Rs820 per MT.)

- High other income moderates the PAT decline: Strong cash balance on books (Rs31bn of cash & equivalent as on end of CY12: ~25% of total assets) boosted treasury income to Rs1.02bn This is ~50% higher than the average of the preceding four quarters. Additionally, the company's reported flat capital charges YoY. Subsequently. adjusted PAT declined 21% YoY to Rs2.98bn.

- Reported tax is lower by Rs1.41bn related to earlier year taxes. Hence, our adjusted PAT is lower than the reported PAT.

Source : Equity Bulls

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