UltraTech Cement quarterly net profit falls 16.3%, India

UltraTech Cement on Monday announced a 16.3 per cent YoY fall in quarterly profit, which it attributed to an increase in railway freight costs and diesel prices.

The company reported standalone profit of INR7.26bn (US$134.26m) for the January-March quarter. Net sales rose one per cent to INR53.89bn and combined cement and clinker sales of grey cement were almost flat at 11.13Mt for the quarter. Fortunately, there was some respite as coal prices softened during the quarter.

Brokerage firm JP Morgan warns that the company is currently facing headwinds as demand is likely to remain weak in the near term, essentially on a weak industry environment affecting cement prices and volumes. Analysing the four quarter, JP Morgan says in a report, "The company continued to see lower power cost/t which was driven by higher petcoke usage. Freight cost/t increased more than one per cent QoQ and should see further increase in Q1FY14 with higher railway freight and diesel costs. Costs are likely to continue to inch up given steady diesel price increases."

New capacity

UltraTech has initiated projects across many of its locations, of which the following have been commissioned:
•  3.3Mta clinker plant at Rawan, Chattisgargh
• 1.55Mt grinding unit at Hotgi, Maharashtra
• grinding capacity at the Gujarat plant increased by 0.6Mt
• bulk terminal at Cohin, Kerala.

With the commissioning of these projects, the company’s cement capacity has increased from 48.75Mt to 50.9Mt. the 3.3Mta Karnataka clinker plant is expected to go on-stream in 1Q14. At its recently-held meeting, the Boad has also approved the capacity expansion of the Aditya Cement Works in Rajasthan by 2.9Mt which will also include the establishment of two grinding units. This expansion involves a capital outlay of around  INR2000 crore, to be funded through a mix of internal accrual and loans. The additional facility is expected to be commissioned by March 2015.  This, together with other projects, will help lift the company’s capacity to 61.45Mta.

Long-term outlook

On its outlook, the company sees cement demand growing over eight per cent in the long term in line with GDP growth. Growth drivers will continue to be housing demand and infrastructure development.