Detailed Narrative
Strong FY26 Performance Despite Headwinds
ACC delivered a resilient performance in FY26, achieving its highest ever annual sales volume of 73.7 million tonnes, a 16% Y-on-Y increase, growing well ahead of the industry. EBITDA grew 31% to INR6,539 crores, with EBITDA per metric ton at INR887, up 12%. PAT also increased by 17% to INR2,647 crores, and the company maintained its debt-free status with the highest credit rating.
Capacity Expansion and Integration Progress
The company's cement capacity expanded to 109 million tonnes, with 10.7 million tonnes of new grinding capacity and 7 million tonnes of clinker capacity commissioned during the year. The amalgamation of Sanghi Industries and Penna Cement with Ambuja Cements is complete, while the integration of ACC and Orient Cement is in process, leading to balance sheet adjustments for finalized purchase price allocation.
Cost Pressures and Optimization Efforts
Despite cost optimization efforts, the full year FY26 cost per tonne was INR4,400, 10% higher than the initial target of INR4,000. This was attributed to higher freight, packing costs, fuel consumption, and increased branding/sales promotion for trade sales. Management expects INR150-200 in savings from raw materials and green energy, targeting an FY27 cost of INR4,250/tonne.
Strategic Recalibration and Disciplined Capital Allocation
Management acknowledged past underperformance and announced a 'reset' in strategy, shifting from aggressive capacity targets (previously 140-155 MT) to a more disciplined approach. The focus is now on optimizing current capacities, improving utilization of acquired assets (Sanghi 57%, Penna 46%), and streamlining operations. FY26 capex was INR7,500 crores, with FY27 estimated at INR6,000-6,500 crores, prioritizing projects with an 18% IRR.
Operational Challenges and Project Delays
Capex projects have faced delays due to issues such as selecting unsuitable contractors, lack of an initial dedicated team post-acquisition, and commencing projects without complete engineering. These delays have impacted the timely commissioning of new capacities and the realization of associated efficiency benefits, particularly in acquired assets where breakdowns led to higher repair and maintenance costs.
Market Dynamics and Pricing Environment
The company observed muted volumes in Q4 March and a subdued demand environment in April/May, with industry growth projected at 5-5.5% for FY27 due to inflation and weak monsoon. This softer demand has limited the company's ability to fully pass on increased costs, leading to modest price improvements of only INR10-20 in select geographies.