ACC - ACC Ltd Share Price

In the earnings call dated May 4, 2026, management at ACC Limited provided an outlook characterized by cautious optimism amid industry challenges. For FY '27, the company anticipates sales volumes to rise by approximately 8%, reaching around 80 million tonnes, despite a softer industry growth expectation of 5-5.5%. This volume growth outlook is underpinned by the effective integration of recently acquired companies and increased utilization of existing capacities. Management noted that premium cement sales, which constitute about 36% of trade volumes, will continue to be a focal point.

Key forward-looking points include:

1. Capacity Expansion: The company expects to increase its total capacity to 119 million tonnes by the end of FY '27, with plans to add 10 million tonnes through various new plants. New clinker capacity of 4 million tonnes is also anticipated.

2. Cost Improvement: Management committed to achieving a reduction in costs by INR 250 per tonne for FY '27, targeting a cost of around INR 4,250 per tonne, despite external inflation pressures.

3. Sales and Profitability Strategy: The management is focused on increasing trade sales and premium product offerings. They indicated that trade sales, which increased to 74%, coupled with greater utilization of acquired assets like Sanghi and Penna, are crucial for margin resilience.

4. Challenges and Risk Management: External factors, including geopolitical tensions and inflation, were acknowledged as potential impediments to profitability. Despite this, the company's operational efficiencies remain prioritized to ensure margins are safeguarded in a potentially volatile environment.

5. Financial Health: ACC continues to operate with a robust balance sheet, debt-free status, and a high credit rating, maintaining financial discipline amid the ongoing challenges.

In sum, while challenges persist, ACC Limited's management is strategically positioning the company for growth through operational efficiency, premiumization, and capacity expansion, while also preparing to navigate external economic headwinds.

Earnings Call Q&A Summary

Question 1: "If we are seeing pressure on volumes due to the softer industry growth, what is the strategy for achieving 80 million tonnes for FY '27?"
Answer: Yes, while the current quarter saw muted growth, we're confident in hitting 80 million tonnes in FY '27 due to stabilizing acquired assets like Sanghi and Penna and ongoing capacity expansions expected to be commissioned by September. We're optimistic about incremental volumes from these sources despite softer demand.

Question 2: "Can you provide insights into the adjusted capex plans and expectations for inorganic growth?"
Answer: Our focus remains predominantly on organic growth through existing assets and optimizing capacity utilization. While we aim for efficient capital allocation, any larger growth ambitions may shift to FY '28 or '30 based on market dynamics. We're currently prioritizing ramping up existing capacities.

Question 3: "What is the current clinker capacity, and when will you add another 4 million this year?"
Answer: Currently, our clinker capacity stands at 69 million tonnes. We plan to add 4 million tonnes at Maratha this year, enhancing our overall production capability.

Question 4: "What was the cost per tonne for Q4 FY '26?"
Answer: For Q4 FY '26, our cost was approximately INR 4,250 per tonne, with some escalations bringing it closer to INR 4,500. This reflects the heightened costs due to various operational challenges.

Question 5: "What impact do you foresee on cement prices amidst rising costs?"
Answer: Industry pricing has seen modest increases, yet with the current softer demand, passing on cost increases remains challenging. Thus, we are focusing on optimizing production costs to mitigate margin pressures.

Question 6: "Regarding the trends for premium products, what's the target for the premium mix beyond the current levels?"
Answer: Currently, premium products constitute about 36% of our trade sales. We aim to sustain this level as we continue to enhance our market positioning and brand penetration.

Question 7: "Is there a shift in your capacity and growth ambitions following the recent performance?"
Answer: Yes, while we still hold onto our growth targets, we've adjusted timelines recognizing the need for improvement in execution and cost management. We prefer to ensure steady operations before any aggressive capex.

Question 8: "What is the expected cost outlook for FY '27?"
Answer: We anticipate a cost reduction of around INR 250 per tonne for FY '27, but current inflationary pressures may keep costs flattish in Q1 before we see gradual declines in subsequent quarters.

Question 9: "What are your key focus areas going forward in terms of operational improvements?"
Answer: Our strategy will hone in on five key performance indicators: improving plant operational discipline, enhancing trade versus non-trade sales, optimizing raw material consumption, and expanding our distribution channel network while aggressively targeting cost reductions.

Question 10: "What role will SLAs play in addressing past operational inefficiencies?"
Answer: SLAs will help streamline operations by involving competent partners to manage plant efficiencies and resolve past operational challenges, allowing us to focus on our core competencies and improve cost structures effectively.