1. An overview of the Indian economy
and cement industry in 2019.

Indian Economy

India’s GDP has expanded at a healthy rate over the last decade, with a CAGR of over 7%. This has resulted in improvements across key development indicators of the economy. Our country has witnessed a reduction in poverty rate by 10%, increase in pace of highway construction from 12 km/day to 27 km/day and a 6% CAGR increment in per capita income. India is currently the 5th largest economy in the world with an internal target of becoming a USD 5 trillion economy by 2024.

The agricultural, industrial, manufacturing and service sectors are the growth enabling pillars of the economy. The service sector is the largest contributor to the nation’s GDP, followed by the manufacturing sector. With the intent to boost the domestic manufacturing sector output, the Government has spearheaded several campaigns, reforms and initiatives like Make in India, Sagarmala, Start-up India and has commissioned dedicated freight corridors to help the sector increase its pie in the overall contribution to GDP.

India’s improved ranking (currently at 63rd position out of 190 countries) in Ease of Doing Business (improved by 67 positions over the past three years), is an outcome of the Government’s efforts towards making the domestic environment conducive for attracting foreign capital. The reduction of corporate taxes was one such step taken in September 2019, the actual impact of which should reflect in the second half of 2020.

However, the GDP growth rate has witnessed a diminishing trend over the past few quarters. This can be attributed to the overall dip in consumption and muted manufacturing output and exports of goods and services.

Government expenditure on infrastructure and affordable housing waned in the second half of 2019. On the service sector front, the trade, hospitality, transport and communications businesses were amongst the ones which witnessed significant impact of slowdown.

To revive the economy and enhance consumer expenditure, fundamental reforms and consumer-centric policies are required coupled with heightened execution and implementation capabilities. In this regard, the Government has taken steps in the right direction by reducing repo rate to the tune of 135 basis points in 2019, exempting start-ups from payment of angel tax, infusion of 70,000 crores in public sector banks via two-stage bank recapitalization measures and planned expenditure on infrastructure development to the tune of 102 lakh crores.

Cement Industry

In 2019, growth in demand for cement hovered around 2-3% amid tough macro-economic conditions, muted demand in housing sector, pre-budget cutbacks in infrastructure spending and weak private sector contribution.

The year began on a positive note with the industry reporting double-digit growth in the first quarter (Jan-Mar 2019). But owing to the general election, labor shortages, weakness in realty sector and prolonged monsoon, the growth momentum was arrested and thereon the industry witnessed a downturn. In particular, the negative impact could be felt in the eastern and southern regions, while the central and northern regions stabilized the downward pressure on the overall industry growth rate.

The broader outlook for the cement sector remains positive bearing in mind the Center’s renewed focus on infrastructure development and housing sector.

2. Operational and Financial Performance-2019

The Company cemented its position in 2019

  • Sales Volume
  • Cement sales volume decreased by 0.9% from 24.18 million tonnes in 2018 to 23.96 million tonnes
  • Cement production reduced by 1.7% from 24.34 million tonnes to 23.93 million tonnes

  • Sales Value
  • Sales value increased by 3.4% from 10,977 Crores to 11,353 Crores
  • Average sales realization increased by approx. 4.4 %, at 4,738 per tonne against 4,540 per tonne in previous year 2018

  • Expenses, Profit and Margin
  • Total operating expenses for the year 2019 were almost at the same level of year 2018, marginal increase of 0.5%
  • During the year, Company earned EBITDA of 2,149 Crores, an increase of 13.6 % as compared to EBITDA of 1,891 Crores for the year 2018
  • Profit Before Tax and exceptional item was at 1,948 Crores, up by 19.1% as compared to 1,636 Crores for the year 2018
  • Net Profit (Adjusted*) was up by 19%, at 1,426 Crores as compared to 1,200 Crores earned during the year 2018
  • * Adjusted for
    a. Reversal of deferred tax of 103 Crores on account of change in income tax rate, in year 2019, Write-back of tax provision of 372 Crores in previous year 2018
    b. Exceptional item 85 Crores in previous year 2018


Performance of the Material Subsidiary, ACC Limited

The Company’s material subsidiary, ACC Limited, is one of the oldest and leading cement manufacturers of India. The summary of operational and financial performance of ACC is as under:

Cement sales volumes in 2019 were up by 1.8% at 28.89 million tonnes
Operating EBITDA for the year was 2,413 Crores, as compared to 2,048 Crores in the previous year, up by 17.8%
Profit Before Tax for the year was up by 35.9% to 2,053 Crores as compared to 1,510 Crores in the previous year

Amount in Crores

Particulars

Standalone

Consolidated

Current Year
31-12-2019

Previous Year
31-12-2018

Current Year
31-12-2019

Previous Year
31-12-2018

SUMMARISED PROFIT AND LOSS

Sales

11,352.76

10,977.00

26,538.62

25,418.90

Profit Before Finance Cost, Depreciation &

Amortisation Expense and Exceptional Items

2,575.37

2,266.44

5,177.73

4,382.23

Finance Costs

83.52

82.33

169.87

170.50

Gross Profit

2,491.85

2,184.11

5,007.86

4,211.73

Depreciation and Amortisation Expense

543.83

548.09

1,152.52

1,153.94

Share of Profit of Associates and Joint Ventures

_

_

19.97

12.53

Exceptional Items

_

129.95

_

151.78

Profit Before Tax and Non-controlling Interest

1,948.02

1,506.07

3,875.31

2,918.54

Tax Expense

419.48

19.06

1,092.15

(54.15)

Net Profit for the Year

1,528.54

1,487.01

2,783.16

2,972.69

Less: Non-controlling Interest

_

_

688.16

795.29

Profit for the Year Attributable to Owners of the Company

1,528.54

1,487.01

2,095.00

2,177.40

MOVEMENT IN RETAINED EARNINGS

Balance as Per Last Account

2,342.84

1,303.52

3,542.04

1,843.76

Net Profit for the Year

1,528.54

1,487.01

2,095.00

2,177.40

Add: Other Comprehensive Income

(4.39)

2.09

(29.09)

(0.17)

Less: Dividend on Equity Shares (Including Interim)

297.85

397.13

297.85

397.13

Less: Corporate Dividend Tax on Above

34.18

52.65

61.40

81.82

CLOSING BALANCE

3,534. 96

2,342.84

5,248.70

3,542.04

There are no significant changes in the key financial ratios during the year under review.