Analyst Concall
Ambuja Cements, ACC aim "organic" growth from FY26
This story was originally published at 16:55 IST on 29 January 2025
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--Ambuja Cements: Cash, cash equivalents at INR 87.55 bln as of Dec 31
--Ambuja Cements: To primarily see organic growth from Apr-Jun
--Ambuja Cements: Achieved growth via acquisitions till now
--Ambuja Cements: Current capacity utilisation of Sanghi, Penna units sub-40%
--Ambuja Cements: Sanghi, PEnna units may hit 70% capacity utilisation by FY26
--Ambuja Cements: Spent INR 62 bln in Apr-Dec of INR 90-bln FY25 capex
--Ambuja Cements: Mfg costs of Sanghi, Penna 10-15% higher than Ambuja, ACC
--Ambuja Cements: Aim to cut output cost to INR 3,700-INR 3,800/ tn in 2 yrs
--Ambuja Cements: Current production costs at INR 4,600/tn
--Ambuja Cements: Cement prices up in Dec, see similar trajectory in Jan
By Sunil Raghu & Akshita Kumar
AHMEDABAD/MUMBAI– The visible slowdown in the cement business and the rising competition from other players may have nudged Ambuja Cement Ltd. and ACC Ltd., part of the Adani group, to mellow down their growth expectations. The companies that were on a buying spree to bridge the cement-making gap with the largest player, are now talking about achieving growth in an "organic" way going forward.
Post March, the growth for Adani Cement – Ambuja Cement and ACC – will be organic rather than through acquisitions that the group achieved till now, the management of Ambuja Cements and ACC said in a post-earnings analysts call on Wednesday.
After the acquisitions of Ambuja Cements and ACC from Swiss owner Holcim, the Adani group has been growing its cement business through a series of acquisitions. It bought brands such as Sanghi Cement, Penna Cement, and Orient Cement in the last two-and-a-half years, adding nearly 24-25 million tonnes of cement-making capacity. Ambuja Cement and ACC aim to achieve a cement manufacturing capacity of 140 million tonnes per annum by 2027-28 (Apr-Mar), the management said. The two companies will have a total capacity of over 100 million tonnes by the end of the current financial year and 118 million tonnes by FY26.
Adani Cement has spent nearly INR 62 billion in capital expenditure during the nine months ended Dec. 31. It aims to spend a total of INR 90 billion in capex for 2024-25 (Apr-Mar). Adani Cement holds INR 87.55 billion in cash and cash equivalents, which at the end of Sept. 30 was INR 101.35 billion. The management had in October said that looking at the growth plans, the cash may get utilised fully by FY26.
As part of the growth plans, Adani Cement plans to ramp up the production capacity of the assets bought from Sanghi and Penna Cements, which are currently operating below 40% capacity, to above 70% by the end of FY26.
The cement maker is also targeting to bring down the cost of manufacturing to improve margins. Currently, manufacturing costs for Sanghi and Penna are at least 10-15% higher than those for Ambuja Cement and ACC, the management said. They want to bring down cement-making costs to INR 3,700-INR 3,800 per tonne over the next couple of years. At present, the average cement production cost is around INR 4,600 per tonne. The management said they are enforcing measures to optimise costs, including increasing the use of renewable energy, cutting logistics costs, and improving waste heat recovery systems and alternative fuels.
On Wednesday, shares of Ambuja Cements ended at INR 522.10 on the National Stock Exchange, down 3.9%. Shares of ACC closed marginally up at INR 2,001.90. End
Edited by Saji George Titus
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