ACC reported a 44% year-on-year drop in adjusted EBITDA to Rs 4.34 billion for the June quarter, missing market expectations. The decline was largely driven by a 12% shortfall in cement prices compared to forecasts. Investors are closely watching how the company manages costs amid these pricing pressures.
Detailed Coverage
Cement manufacturer ACC posted a challenging start to the 2027 fiscal year, with its June quarter results showing a significant impact from declining cement prices. The company reported an adjusted profit after tax of Rs 1.72 billion, representing a 55% decrease compared to the same period last year. This performance reflects the broader difficulty cement companies are facing in maintaining profitability when selling prices remain under pressure.
Impact of Lower Realisations
The core issue weighing on ACC’s financial performance this quarter was the drop in blended realisations—the average price the company receives for its cement. These realisations fell by 10% sequentially, ending 12% lower than brokerage estimates at Rs 5,766 per tonne. While the company successfully managed to move 10 million tonnes of cement, meeting volume expectations, the lower price per tonne directly eroded the bottom line. This resulted in an adjusted EBITDA of Rs 4.34 billion, which was significantly lower than industry projections.
Cost Control Efforts
Despite the pressure on profit margins, the company did see success in managing its operating expenses. Combined raw material, power, and fuel costs per tonne were 10% lower than what analysts had anticipated. These costs only saw a modest 4% increase compared to the previous year. While these efforts in cost control were noted, they were not substantial enough to protect the profit margins from the sharper decline in selling prices. Operating costs per tonne rose only 2% year-on-year, showing that the company’s internal efficiency measures are functioning, even if they are currently overshadowed by the pricing environment in the sector.
Valuation and Market Context
The recent earnings miss has led to cautious commentary from analysts. Nomura has maintained a 'Reduce' rating on the stock with a target price of Rs 1,250. The brokerage noted that the stock currently trades at an 8.0x one-year-forward EV/EBITDA multiple, which is higher than their assessment of the company's current earnings trajectory.
Investors should monitor the company's upcoming management commentary during the earnings call scheduled for today, July 28, at 4:30 PM IST. The key monitorable for the coming quarters will be whether cement prices show signs of recovery or if the industry continues to face pricing pressure that could further squeeze margins. Additionally, tracking whether cost efficiencies can continue to buffer against volatile fuel prices will be essential for assessing the company's financial health in the current fiscal year.