UltraTech boosts capacity and reports 3Q results

UltraTech completed the acquisition of Century's cement business, with the Scheme of Demerger  effective from 1 October 2019. With this acquisition, UltraTech's cement manufacturing capacity stands augmented to 117.4Mta, including its overseas capacity. This makes UltraTech the third-largest cement company in the world, outside of China. It is also the only company in the world to have a capacity of over 100Mta in a single country, outside of China.

The quarter ended 30 September 2019 witnessed depressed cement demand, on account of the extended monsoons and heavy floods in almost all parts of the country. The situation was more aggravated in eastern and central India, where Century's cement plants are located. These plants had also undertaken major planned annual shutdowns during the period. All of these factors impacted the performance of the acquired cement plants of Century.

UltraTech's pan-India presence enabled it to take advantage of the favourable demand situation in the markets of north India, says the company. Given its vast experience in integrating acquired units with its existing operations and bringing them up to its operating standards, UltraTech is focussed on replicating the same for the acquired cement plants.

Financial results
Consolidated net sales were INR94,91bn (US$1.33bn) compared to INR90.88bn over the corresponding period in FY18-19. Profit before interest, depreciation and tax was INR20.72bn when compared with the INR15.64bn reported for the previous financial year and profit after tax was INR5.790bn compared to INR3.56bn. 

Annual maintenance undertaken during the quarter resulted in variable costs increasing three per cent compared to the previous quarter. On the other hand, energy cost was down nine per cent, attributable to increase in share of green power consumption from 8.4 per cent in the 2QFY19 to 10.5 per cent during the quarter, along with reduced power consumption and sustained energy gains.

Corporate developments
UltraTech Nathdwara has been overhauled and fully-integrated into UltraTech Cement's systems and processes having completed their upgrades. The 21.2Mta cement capacity acquired from Jaiprakash Associates in June 2017 are operating in line with the existing plants of the company. The Bara grinding unit is scheduled for commissioning during the 3QFY20.

The Board at its recent meeting approved capex of INR9400m to produce premium products with an increase in its grinding capacities in Bihar and West Bengal by 0.6Mta each and a new 2.2Mta grinding unit in Odisha. This will further strengthen the company’s position in the eastern markets. All the plants will be commissioned by January-March 2021.

Outlook
On the basis of positive demand seen in north India in 2Q as many parts of north India were not impacted by heavy rains and floods, there is a good possibility of a normalised demand for cement going forward, claims UltraTech Cement. In addition, the company says the government's firm commitment to revive the economy and the thrust on infrastructure spending augur well for the growth of cement demand.