ACC - ACC Ltd Share Price

In the earnings call dated April 29, 2025, management provided an optimistic outlook for Ambuja Cement. The company has crossed a significant milestone of 100 million tons of cement capacity within 30 months, now ranking as the ninth-largest cement manufacturer globally. Management indicated plans to increase capacity to 118 million tons by FY '26 and aims for 140 million tons by FY '28, primarily through organic expansions.

Key forward-looking points include:

1. Capacity Expansion: The aim is to commission new clinker units and various grinding facilities, with significant milestones set for FY '26. The Bhatapara clinker unit and associated grinding units are expected to be operational by Q1 of FY '26.

2. Financial Performance: For the quarter ending March 2025, revenue reached INR 9,889 crores, an 11% year-over-year increase, while consolidated annual revenue hit an all-time high of INR 35,045 crores. The EBITDA margin was approximately 19%, with a target of reaching INR 1,500 EBITDA per ton by FY '28.

3. Cost Reduction Strategies: Management reported progress towards achieving operational costs of INR 3,650 per ton by FY '28, citing a reduction in kiln fuel costs to INR 1.58 per 1,000 kcal and transportation costs down to INR 1,238 per ton.

4. Market Demand: The management anticipates a sustained demand growth of about 7% to 8% in cement consumption for FY '26, buoyed by increased government spending and construction activities.

5. Sustainability Initiatives: The subsidiary ACC became India's first large-scale cement company with validated net-zero targets, and the commitment to renewable energy was reiterated, with 1,000 megawatts of renewable energy capacity expected by FY '26.

With these initiatives, management is confident about Ambuja Cement's capability to become a market leader and enhance shareholder value sustainably.

Question 1: Can you please help us understand the quantum of cost savings achieved during the year? Any change in the guided benefits for FY '26 and FY '27?

Answer: Since September '22, we started with a cost of around INR4,250 per ton and are currently at INR4,170. We've achieved cost savings of approximately INR150 to INR175 per ton so far. The target of INR3,650 is achievable in the next few years, driven by WHRS, fly ash investments, and improved logistics. As for guidance, we're still on track for cost savings of over INR100 per ton in FY '26 and INR150 in FY '27.

Question 2: Can you provide an update on the share of premium products?

Answer: Our share of premium products has improved significantly to about 29%, up from 25% to 26%. We aim to reach around 35% by FY '26, focusing on quality and increased marketing efforts. Premium cement traditionally offers an additional INR200 to INR300 per ton, and our efforts to enhance ground network engagement will support this growth.

Question 3: Could you clarify the investment made by ACC in land purchases?

Answer: ACC has invested approximately INR680 crore in land, primarily in western India, to set up grinding units and acquire coal mines. This expenditure includes investments for establishing better logistical support and ensuring raw material availability, which is crucial for our growth strategy.

Question 4: What can we expect regarding Sanghi's capacity utilization going forward?

Answer: Sanghi's current utilization is around 40-45%, which is below our target. However, we are addressing operational issues and expect significant improvements. The plant has substantial limestone reserves and should ramp up its production effectively in the upcoming months.

Question 5: What are the expected capacities for FY '26 and FY '27?

Answer: We are targeting 118 million tons by FY '26, and we aim for approximately 140 million tons by FY '28. Our expansion plan includes several grinding units that will help us reach these targets. The clarity on our roadmap positions us well for achieving these capacities.

Question 6: Given the recent acquisitions, will there be a focus on consolidation in FY '26?

Answer: Yes, our focus for FY '26 will primarily be on organic growth and consolidation of the recently acquired assets. Integration of companies like Sanghi and Penna is progressing well, and we aim to enhance efficiency and streamline operations across our new portfolio.

Question 7: Can you provide insights on the renewable energy initiatives?

Answer: We had set a commitment to establish 1,000 megawatts of renewable energy. We are on track, with about 300 megawatts already operational and a forecast to complete the remaining capacity by Q2 FY '26. This shift is projected to reduce both energy costs and our carbon footprint, reinforcing our commitment to sustainability.

Question 8: What's the anticipated EBITDA per ton for upcoming quarters?

Answer: Our target is to reach an EBITDA per ton of INR1,500 by FY '28. Current EBITDA per ton stands at around INR1,001, reflecting our improvement strategies. We believe targeted cost reductions, coupled with enhanced operational efficiencies, will contribute to achieving this goal.