ACC Limited — Q3 FY25 earnings call

Call held 29 Jan 2025

Management summary

ACC reported a robust Q3 FY25 with consolidated revenue of INR 9,329 crores and EBITDA of INR 1,712 crores, driven by cost optimization and market expansion. The company made significant progress on capacity expansion, targeting 104 MT by Q4 FY25, and commissioned 200 MW solar power. However, profitability was sequentially impacted by lower utilization and higher costs from newly acquired assets and plant shutdowns, alongside depressed prices in the South market.

Highlights

  • Consolidated revenue of INR 9,329 crores, driven by strong micro market management strategy and dealer network expansion.

  • EBITDA at INR 1,712 crores with a healthy margin of 18.4% and EBITDA per ton of INR 1,038.

  • Operational costs reduced to INR 4,618 per ton, a 7% decline in energy cost and 6% in transportation costs.

  • Total capacity projected to hit 104 million tons by Q4 FY25, with 118 million tons by end of FY26.

  • 200-megawatt solar power project in Khavda, Gujarat, commissioned in Q3 FY25, contributing to green energy goals.

Concerns

  • Sequential drop in EBITDA per ton and lower realization, partly due to acquired entities (Penna, Sanghi) operating at sub-40% utilization.

  • Higher costs due to shutdowns of four plants (Wadi, Kymore, Maratha, Rabriyawas) for retrofitting, upgradation, and routine maintenance.

  • Depressed prices in the South market impacting overall realization, despite Ambuja/ACC brands maintaining premium positioning.

Key financials

  1. Consolidated Revenue ₹9,329 Cr
  2. Consolidated Operational Cost/Ton ₹4,618
  3. Consolidated EBITDA ₹1,712 Cr
  4. Consolidated EBITDA Margin 18.4%
  5. Consolidated EBITDA/Ton ₹1,038
  6. Consolidated 9M Revenue ₹25,156 Cr
  7. Consolidated 9M EBITDA ₹4,103 Cr
  8. Consolidated 9M EBITDA Margin 16.3%
  9. Consolidated 9M EBITDA/Ton ₹881

What they filed

Q1 FY27: revenue down 4.6%, net profit down 60.8% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,634 5,972 6,115 6,087 6,005 +30%6,483 +9%7,146 +17%5,808 −5%
EBITDA436 1,116 830 778 846 +94%700 −37%626 −25%457 −41%
Net profit200 1,092 751 375 1,119 +460%404 −63%238 −68%147 −61%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Capex ₹9,000 Cr
    • Capacity expansion to 140 MT by FY28, including new clinker lines and grinding units
    • Green power initiatives (1000 MW RE, WHRS)
    • Logistics optimization (GPWIS and BCFC rakes)
    • Limestone reserve acquisition
    For the full year, it is closer to INR9,000 crores. And so, another INR2,200 crores will go for this quarter. And that's precisely like because a lot of these 4-5 facilities, which are like in the last leg, again, to refresh, Sankrail, Bhatapara, Marwar, then we have Sindri, and then we have one more, Salai Banwa and all. So, like there's now a good level of say momentum coming in terms of the capex program. So almost INR2,000 crores to INR2,500 crores will be for the March quarter.
  • Debt Gross ₹0 Cr · Net cash ₹8,755 Cr
    Our balance sheet is getting stronger by the quarter. I'm glad to share that we have achieved a net worth of almost INR63,000 crores, which was in April INR51,000 crores, so almost up by INR12,000 crores. And we remain nil debt and with the highest rating of AAA. Ambuja's tangible assets, most importantly, out of this net worth, the tangible assets are almost 75% of the net worth and in our press release also, we have highlighted 15% of this net worth is comprised of cash and cash equivalent.
  • M&A Orient Cement Acquisition · Pending regulatory · Consideration ₹[object Object] (cash)

    Expand operating cement capacity to 97 million tons post completion.

    With the acquisition of Orient Cement, our operating cement capacity will go up to 97 million tons post completion of the Orient transaction.
  • M&A Penna Cements, Adani Cementation, Sanghi Industries Merger · Pending regulatory

    Consolidate entities for better operational efficiency and cost synergies.

    Expected to be consummated in the next financial year, leading to limited entities going forward.

    Already, we have announced one set of transactions to merge some entities, including Penna Cements, Adani Cementation and Sanghi. So, if you see out of all the entities, we've already announced 3 entities, which is currently under regulatory approval stage. We are very hopeful that in the next financial year, this whole transaction should get consummated, and you will have only limited entities going forward.
  • Liquidity Cash ₹8,755 Cr Consolidated cash and cash equivalents stood at healthy INR 8,755 crores as of December 31.
    As on December 31, the consolidated cash and cash equivalents stood at healthy INR8,755 crores.

Guidance & targets

Capacity

  • Total Cement Capacity Capacity · Q4 FY25 · High confidence 104 million tons
    With Orient acquisition at advanced stage, the total capacity by Q4 FY '25 to hit 104 million tons.

    — Ajay Kapur

  • Total Cement Capacity Capacity · end of FY26 · High confidence 118 million tons
    Further clinker unit of 4 million tons at Maratha in Maharashtra and grinding unit at Warsaliganj in Bihar are also expected to be commissioned by the end of FY '26, enabling us to reach 118 million tons capacity.

    — Ajay Kapur

  • Total Cement Capacity Capacity · FY28 · High confidence 140 million tons
    As we plan to expand our cement capacity to 140 million tons by FY '28, we are pacing well to achieve the stated target.

    — Ajay Kapur

Cost

  • Cost Reduction Target Cost · FY28 · High confidence INR 530 per ton
    For example, we had announced 1,000 megawatts of RE power last year, and I'm glad to share, which we are going to discuss more in our Q&A, 200-megawatt has been up and running in December '24, and this will keep added more out of the 1,000 megawatts, with each passing quarter. And by June '26, we should be completing the entire plan of 1,000 megawatts.

    — Vinod Bahety

  • Operational Cost per Ton Cost · FY28 · High confidence INR 3,650 per ton
    In December 2023, if you remember, we have indicated a cost reduction target of INR530 per ton, wherein we aspire to achieve and reach to INR3,650 per ton by FY '28. And we are going well on this route with investments being committed.

    — Vinod Bahety

  • Power Cost Reduction Cost · FY28 · High confidence INR 100 per ton
    This would help in reducing the power cost by around INR100 per ton by FY '28.

    — Ajay Kapur

  • Cost Reduction (Year 1) Cost · next year · Medium confidence INR 100
    I think if I'm looking at, you can say about INR100 next year, another INR150 following year.

    — Ajay Kapur

  • Cost Reduction (Year 2) Cost · following year · Medium confidence INR 150

    — Ajay Kapur

Green Power

  • WHRS Capacity Green Power · March '25 · High confidence 218 megawatts
    Our waste heat recovery capacity at the time of takeover was 40 megawatts which we are now targeting to increase to 218 megawatts by March '25.

    — Ajay Kapur

  • Renewable Energy Capacity Green Power · FY '26 · High confidence 1,000 megawatts
    We had earlier announced our investment in 1,000 megawatts RE, which is expected to get commissioned by FY '26.

    — Ajay Kapur

  • Share of Green Power (140 MT capacity) Green Power · FY28 · High confidence 60
    Both WHRS and solar power would ensure that 60% of our power requirements are of the planned 140 million tons would be through green power.

    — Ajay Kapur

  • Share of Green Power (Clinkerisation) Green Power · FY28 · High confidence 83
    However, on clinkerisation, the share of green power will further rise to 83%.

    — Ajay Kapur

  • Renewable Energy Capacity Green Power · Medium confidence 800 megawatts
    See there are other initiatives of waste heat, solar power, as I mentioned, Vinod mentioned, so 800 megawatts green will happen.

    — Ajay Kapur

Logistics

  • Lead Distance Reduction Logistics · Medium confidence 100 kilometers
    We are targeting to reduce the lead distance by about 100 kilometers.

    — Ajay Kapur

Utilization

  • Sanghi and Penna Utilization Utilization · next financial year · Medium confidence 70% plus
    My estimate is in the next financial year, both the assets should go up, I think Sanghi earlier and Penna because it's also in the market where it takes time to ramp up. But both of them should hit 70% plus utilization levels in the next financial year.

    — Ajay Kapur

Incentives

  • Prospective Incentives Incentives · prospectively · Medium confidence INR 600-650 crores
    It would be on increasing trend now. Historically, say, it was around, say, INR100-odd crores of incentive per quarter, almost INR400 crores for a year. But this will actually now start moving up to INR600 crores, INR650-odd crores prospectively with new capacities coming in and giving the benefit of incentives.

    — Vinod Bahety

Cost Efficiency

  • Waste Heat Recovery Program Completion Cost Efficiency · next 12 months · High confidence completed
    The entire waste heat program will get over in the next 12 months.

    — Ajay Kapur

  • Alternate Fuel Journey Completion Cost Efficiency · next 24 months · High confidence completed
    The entire alternate fuel journey will also get over in the next 24 months.

    — Ajay Kapur

What to watch in Q4 FY25

Sanghi and Penna Utilization Levels

next financial year
Current Sub-40%
Target 70% plus

Why it matters

Improved utilization of acquired assets is key to reducing costs and improving overall profitability, as they currently drag performance.

My estimate is in the next financial year, both the assets should go up, I think Sanghi earlier and Penna because it's also in the market where it takes time to ramp up. But both of them should hit 70% plus utilization levels in the next financial year.

Risks & concerns

  • Integration challenges and sub-optimal utilization of acquired assets

    medium

    Acquired entities (Penna, Sanghi) are currently operating at sub-40% utilization, leading to higher costs and impacting overall profitability during the stabilization phase.

    Management acknowledged

  • Impact of plant shutdowns for maintenance and upgradation

    medium

    Four plants (Wadi, Kymore, Maratha, Rabriyawas) were under shutdown for retrofitting, upgradation, and routine maintenance, contributing to higher costs and inventory drawdowns.

    Management acknowledged

  • Depressed prices in the South market

    medium

    Prices in the South market are more depressed, impacting overall realization, especially with 1 million tons of sales from Penna in the region.

    Management acknowledged

  • Industry oversupply and pricing pressure

    medium

    New capacity creation alongside tepid demand growth in H1 FY25 has created short-term sentiment pressure on pricing, though management expects it to adjust over time.

    Analyst acknowledged

Q&A highlights

6 direct
Sequential performance drop and impact of incentives Partial
So, if you see, we have done well on the volume growth. Overall, I think our volume has grown by 17%. However, as you know, we also have now volume of Penna and Sanghi in the overall consol volumes. So about 1.4 million tons is coming out of Sanghi and Penna. And also, the cost structures of both the companies are currently under the phase where we are launching various initiatives to reduce cost. The capacity utilization also of these two entities is still sub-40%.

Analyst questioned the reported EBITDA/ton after removing incentives, highlighting a sequential drop. Management attributed it to integration of lower-utilization acquired assets and plant shutdowns, indicating these are temporary impacts.

Asked by Amit Murarka

Increase in other expenses and its nature (one-off vs recurring) Direct
When you compare again Y-on-Y, there is a sharp jump on other expenses on account of, a: because of consolidation of say, Penna, Sanghi and other assets here. And therefore, the fixed overheads of those companies will get consol here, number one. Number two, there have been a higher consumption of stores and spares and on account of shutdown of some of the kilns, which also we had informed about the plant shutdowns and all.

Analyst sought clarity on a significant sequential increase in other expenses. Management explained it's due to consolidation of acquired entities' overheads, higher consumption of stores/spares, and plant shutdowns, suggesting a mix of recurring and one-off factors related to integration and maintenance.

Asked by Navin Sahadeo

Sanghi's underutilization and challenges Direct
No. So, Navin, very good question. As I mentioned in the previous section, Sanghi has two kilns. We have already completely done cost optimization and shutdown optimization of one kiln. Second kiln, as I speak to you, is currently shut down, and we are taking all major repairs and maintenance. One of our power plants is also under shutdown and also being taken into full repairs and maintenance. The 37% is the Sanghi cement utilization for this quarter, which was 22% same quarter last year. And in the sequential previous quarter, it was 23%.

Analyst questioned Sanghi's continued low utilization (37%) despite being acquired. Management clarified that one kiln is undergoing major repairs and maintenance, indicating a temporary issue rather than fundamental challenges.

Asked by Navin Sahadeo

Actual volume growth excluding acquired entities Direct
The way to look at it is the utilization of Ambuja and ACC, if I remove the others, is near 80%. Last year same quarter, it was 76%. So, we have the industry in the quarter 3, we believe should have grown around 5%. So, the traditional volume that we have, where there is no new capacity, it has grown at about 7%, which is slightly higher than the industry growth. And wherever we are having new capacity, we have grown much more at 11%. So, I think that's a mix. It's a very logical mix.

Analyst sought to understand organic volume growth, excluding acquired entities. Management confirmed that traditional volumes grew 7%, outpacing industry growth of ~5%, while new capacity areas grew 11%, providing a clearer picture of underlying demand.

Asked by Ashish Jain

Sequential pricing and incentive decline Direct
No. So, Raashi, I'm sure you're looking at consol numbers, and on a consol number, if you see, last quarter, for example, we had incentives coming for one of the plants for the previous period, which is for the Sankrail. Now if you remove that also, say, closer to INR135 crores, if I remember, and then you will see that the numbers which you will find is almost INR100 crores between both say September and say for that matter for December also. However, as I said, now, for example, the way we are focusing on all these incentives, you will find some of these items of the previous years, which will keep building on and which is also actually going to help me to release the working capital.

Analyst questioned the sequential decline in incentives. Management clarified that previous quarter's incentives included a one-off for Sankrail, and current incentives are for Himachal, indicating a shift in source rather than an overall decline in the incentive program.

Asked by Raashi Chopra

Time and capex to bring Sanghi/Penna to Ambuja's cost structure and realization of cost savings Direct
So basically, two things have happened. Some cost has been already realized in the Ambuja ACC balance sheets. However, with the acquisition of new companies, which, as I mentioned already, for the sake of repetition, are still under stabilization phase, an asset to give you its full efficiency and all KPIs needs to operate at 80--85%. Currently, one asset is sub-40%, one asset is sub-50%. As we ramp both of them to 80%, you'll start seeing the cost numbers that we are talking, number one. Number two, all the initiatives, which is like waste heat in Sanghi Line 2, which we have now ordered, it takes about 12 months to come in. So, I think in the next financial year, you will see that impact coming in.

Analyst inquired about the integration timeline and cost savings from acquired assets. Management detailed that full efficiency requires 80-85% utilization, which will take time, and specific initiatives like WHRS for Sanghi Line 2 will take about 12 months, with impact visible next fiscal.

Asked by Jashandeep Chadha

Industry supply curve, incremental capacity additions, and pricing outlook Direct
There will be times when demand supply does not match. Unfortunately, current year H1, the demand after growing a very healthy 7%, 8% for the first time went almost flattish. And that, alongside the new capacity creation, created a short-term sentiment pressure, which I believe will get adjusted because nobody will be able to manage the investments without requisite returns. And I think that's why the price situations will remain better in time to come.

Analyst questioned the impact of industry capacity additions on pricing. Management acknowledged H1 FY25 demand-supply mismatch causing short-term pressure but expressed confidence that pricing will improve as investments require requisite returns.

Asked by Ritesh Shah

2 min read 6 chapters

Detailed narrative

Q3 FY25 Performance Overview

ACC reported a consolidated revenue of INR 9,329 crores for Q3 FY25, driven by a strong focus on micro market management and dealer network expansion. The company achieved an EBITDA of INR 1,712 crores, translating to an 18.4% margin and INR 1,038 per ton. Operational costs were managed effectively at INR 4,618 per ton, benefiting from a 7% decline in energy costs and a 6% reduction in transportation costs, with lead distance decreasing by 4 kilometers to 285 kilometers.

Strategic Growth & Capacity Expansion

ACC is on track to expand its cement capacity to 140 million tons by FY28. With the advanced stage of the Orient Cement acquisition, total capacity is expected to reach 104 million tons by Q4 FY25. The company has commissioned 8 new ready-mix plants, reaching a milestone of 100 plants. Key projects include a 4-million-ton clinker unit in Bhatapara (78% complete, expected Q4 FY25) and associated grinding units, with further expansions planned to reach 118 million tons by end of FY26.

Cost Optimization Initiatives

The company is pursuing a cost reduction target of INR 530 per ton, aiming for an operational cost of INR 3,650 per ton by FY28. Initiatives include increasing waste heat recovery (WHRS) capacity to 218 megawatts by March '25 (currently 197 MW) and commissioning 1,000 megawatts of renewable energy by FY26. These efforts, along with better fuel management and footprint optimization, have already reduced power and fuel costs by 7% to INR 1,262 per ton in Q3 FY25.

ESG Commitments & Green Power

ACC is committed to net-zero by 2050, with significant progress in green energy. The 200-megawatt solar power project in Khavda, Gujarat, was commissioned in Q3 FY25. By FY28, WHRS and solar power are expected to meet 60% of power requirements for 140 MT capacity and 83% for clinkerisation, aiming to reduce power costs by INR 100 per ton. The company also increased its use of waste-derived resources to 4.8 million tons in Q3, promoting a circular economy.

Acquisition Integration & Challenges

The integration of acquired assets like Penna and Sanghi Industries is ongoing. While these acquisitions contributed to a 17% volume growth, they are currently operating at sub-40% utilization, leading to higher costs and impacting sequential profitability. Management expects these assets to reach 70% plus utilization in the next financial year, with specific initiatives like WHRS for Sanghi Line 2 taking about 12 months to come online. The depressed pricing in the South market also affected overall realization.

Industry Outlook & Demand Dynamics

Management anticipates an improved consumption demand in housing and infrastructure segments, with government spending poised to reverse the tepid 1.5-2% cement demand growth in H1 FY25. Demand is expected to grow by 4-5% in FY25, with H2 performing better than H1. ACC believes it is well-positioned to benefit from these trends and grow faster than the industry, leveraging its accelerated growth, lower costs, and group synergies.

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