ACC’s 1Q09 results were significantly above our estimates, as our numbers proved to be conservative in terms of cost savings and benefits from lower coal costs. ACC reported a record-high EBITDA/mt.
Is the worst behind us in the cement cycle?
The cement earnings upcycle started in FY05, driven by rising capacity utilisation (84% in FY04 rising to 94% in FY08) and strong demand (9.3% CAGR over FY05-08). While our demand outlook remains stable (7-8% growth through FY12F), we estimate the bunching of capacity addition between June 2009 and mid-2010 will reduce utilisation to 77-80%, which will probably put margins and prices under pressure.
In the past 3 years, ACC has achieved an EBITDA/mt of Rs900, vs Rs1,066 by Ambuja Cements and Rs1,087 by Ultratech Cement (Grasim’s 100% subsidiary). However, in 1Q09, ACC recorded an EBITDA/mt of Rs1,100, vs Rs1,017 by Ambuja Cements and Rs997 by Ultratech Cement.