Adani Group Stock Slides Despite Robust Q3 FY24 Results, Company Eyes Expansion Amidst Acquisitions

Ambuja Cements, a prominent cement manufacturer under the Adani Group, reported a standalone net profit of Rs 513.69 crore for the third quarter of the fiscal year 2024, marking a substantial growth of 39.2% from Rs 368.99 crore in the same quarter the previous year. The company's stellar performance was underscored by a 7.5% increase in standalone revenue, reaching Rs 4,439.5 crore from Rs 4,128.5 crore year-on-year (YoY). Additionally, sales volume rose impressively to 8.2 million tonnes, up from 7.7 million tonnes in the corresponding period, showcasing a robust 6.5% growth.

On a consolidated basis, Ambuja Cements witnessed a 3% increase in sales volume, reaching 14.1 million tonnes, coupled with an impressive 25% reduction in Kiln fuel cost. At the operational level, the earnings before interest, tax, depreciation, and amortization (EBITDA) experienced a notable surge of 33%, standing at Rs 851.1 crore in the December quarter, up from Rs 638.2 crore in the same period the previous year. The EBITDA margin also demonstrated a significant improvement, rising by 370 basis points to 19.2% from 15.5% YoY.

Ambuja Cements attributed part of its success to the ongoing cement capacity expansion, with 20 MTPA at various stages. The board has further greenlit an additional cement capacity expansion of 12 MTPA, outlining an ambitious roadmap aiming for 110 MTPA by FY 2028, which accounts for 80% of the targeted 140 MTPA capacity.

In December 2023, Ambuja Cements completed the strategic acquisition of Sanghi Industries, boasting a capacity of 6.1 MTPA. Subsequently, in the current month, Ambuja's subsidiary ACC successfully acquired the remaining 55% stake in Asian Concretes and Cements Private Ltd (ACCPL), which possesses a substantial capacity of 2.8 MTPA. These acquisitions, as the company emphasized, strengthen the Adani Group's market leadership, propelling its total cement capacity to an impressive 77.4 MTPA, marking a 15% increase from the previous year.

Ajay Kapur, Whole Time Director & CEO of Ambuja Cements, expressed satisfaction with the company's performance, stating, "Our performance is a reflection of our resilience and focused efforts. Our pursuit of excellence continues to propel us towards setting new benchmarks in our steady growth. We remain steadfast in our mission to deliver value for all stakeholders by redefining the industry landscape."

A notable point highlighted by the company's management was the planned maintenance affecting about 12% of the Clinker capacity of Ambuja (Standalone) during the quarter. This resulted in lower cost absorption, but the management assured that the benefit would accrue in the upcoming quarter.

Financially, Ambuja Cements demonstrated fiscal prudence by generating an incremental cash and cash equivalent of Rs 562 crore in Q3 FY24, bringing the total cash levels to an impressive Rs 8,591 crore at the end of the December quarter.

The company is not only focusing on capacity expansion but is also prioritizing sustainability. Ongoing green power projects with a capital expenditure of Rs 10,000 crore aim to increase the green power share to 60% of the expanded capacity while simultaneously reducing operating costs. The commitment to cost optimization was evident, with a consolidated basis reduction of Rs 491 in Total Cost PMT.

Commenting on the favourable trends, the Adani Group company stated, "Higher consumption of domestic coal helped in improving coal cost and the trend is expected to continue. The opportunity to buy of low-cost petcoke in the past few weeks will help to further optimize fuel costs in the coming quarters and this augurs well in our cost optimization journey."

Despite these positive developments, the shares of Ambuja Cements were observed trading with cuts of more than 2% at Rs 558 per share as of 2:10 pm on the National Stock Exchange (NSE). Nonetheless, the stock has delivered impressive returns of over 48% to its investors in the last year.

Ambuja Cements' financial performance, coupled with strategic acquisitions and aggressive expansion plans, positions the company as a formidable player in the cement industry. The focus on sustainability and cost optimization further underscores its commitment to long-term growth and value creation for stakeholders.