Adani Group-owned Ambuja Cement saw its shares decline a day after reporting its third-quarter results. The cement maker saw its standalone net profit grow by a whopping 242% to Rs 1,758.03 crore for the quarter ending December 31, 2024.
Brokerages noted that profitability came below expectations due to low realisation and higher costs amid Ambuja's integration with Sanghi Industries and Penna Cement. However, management expects both of these assets to show improvement in performance in FY26.
Ambuja Cement was trading at Rs 500.40 per share, down 4.17%.
Expansion Cost Drags EBITDA
Ambuja Cement's adjusted revenue for Q3 FY25 rose 4.6% year-on-year (YoY) and 13.1% quarter-on-quarter (QoQ) to Rs 8,502.2 crore, driven by a 17% YoY growth in sales volume to 16.5 million tonnes.
However, net realisation (price per tonne after costs and adjustments) fell 10.6% YoY, affecting profitability. EBITDA per tonne—a key measure of a company's operating profitability—dropped 56.3% YoY to Rs 537 per tonne, primarily due to lower prices.
As a result, adjusted EBITDA declined 48.9% YoY to Rs 885.5 crore.
"The company’s EBITDA/t was significantly lower than estimates due to weak realisations, as its exposure in the South region increased through inorganic growth, where pricing remains more depressed. Further, opex/t was higher due to increased plant maintenance and other overheads related to the integration of newly acquired assets (Sanghi and Penna Cement)," said Motilal Oswal.
Meanwhile, other income increased to Rs 1,352.2 crore, including Rs 517.1 crore from interest reversal. The company reported a consolidated net profit of Rs 2,620.09 crore, but after adjusting for excise duty refund, interest reversal, and tax provision reversal, the actual net profit stood at Rs 471.61 crore (compared to Rs 823.05 crore in Q3FY24 and Rs 472.89 crore in Q2FY25).
"Minor Blip, Bright Outlook"
Despite weak realisations, brokerages remain optimistic about the firm's expansion-led growth in the coming quarters. Nuvama noted that Ambuja's sales volume during the last quarter rose 17% YoY to 16.5 million tonnes, far outpacing the industry’s ~5% growth. Adjusted for acquisitions, volume growth was 7% YoY. Penna Cement contributed 0.9 million tonnes, while Sanghi Industries added 0.5 million tonnes.
"Volume growth remained strong, led by the consolidation of Sanghi Industries and recently acquired Penna Cement," ICICIDirect Research noted.
The Adani Group-owned cement maker also announced that its board has approved making an open offer to acquire up to a 26% stake in Orient Cement from public shareholders at Rs 395.4 per equity share. Its total cement capacity would stand at 97 million tonnes per annum (mtpa) after acquiring Orient Cement (8.5 mtpa). The company aims to expand to 104 mtpa in FY25, 118 mtpa in FY26, and 140 mtpa by FY28.
Ambuja Cement's board has also approved 14 new grinding units (2.4 mtpa each) across different locations, with land acquisition and regulatory approvals in progress. Ongoing projects totaling about 21 mtpa are expected to help reach the 140 mtpa target by FY28.
Green power usage is set to increase from 18% currently to 60% by FY28. By Q4FY25, Ambuja expects to commission 4 mtpa of clinker capacity and 4.8 mtpa of grinding units.
