UltraTech Cement Q1 net falls 33% to Rs 598 crore

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Mumbai | Published: July 19, 2018 4:12:09 AM

Continuing its momentum of strong volume growth, UltraTech Cement on Wednesday reported a good 33% jump in domestic sales volumes for the three months of April-June 2018.

UltraTech registered a volumes growth of 37% in the October-December 2017 period. (Reuters)

Continuing its momentum of strong volume growth, UltraTech Cement on Wednesday reported a good 33% jump in domestic sales volumes for the three months of April-June 2018.

However, recurring cost pressures impacted the standalone net profit for the cement major, which fell 33% to Rs 598 crore during the period.
The volumes of the company increased due to full integration of capacities acquired from Jaiprakash Associates and also due to a low base in the corresponding quarter last year, when the growth was flat. However, even at 33%, the volume growth was below analyst expectations of 38%.

UltraTech registered a volumes growth of 37% in the October-December 2017 period, which was the highest in last six quarters with the acquired assets of JP Associates coming on stream. In the January-March 2018 period the volume growth tapered a bit to 32%, while the acquired assets operated at 75% utilisation in the quarter. However, adjusted for acquired capacities in Q4FY18, estimated like-to-like volume growth was lower at 10% y-o-y, analysts at Kotak Institutional Equities (KIE) observed in a report.

Helped by higher volumes again, UltraTech reported a 30% y-o-y rise in the standalone net sales to Rs 8,476 crore for the three months of April-June 2018. Analysts, however, are bearish on the cement sector. In fact, it is only the volumes that analysts believe will lend some support to earnings for cement companies during Q1FY19, because absence of a meaningful price increase amid rising cost pressures puts earnings estimates for the sector at risk, as industry utilisation remains low.

Indeed, rising cost pressures have impacted UltraTech’s profitability in the past few quarters, as is the case with first quarter of 2018-2019 as well. During the three months of April-June 2018, pet coke was at $110 per tonne and coal at $105 per tonne, while rising diesel prices impacted the logistics cost for the company. This coupled with high depreciation and interest costs led to a sharp fall in the standalone net profit during the quarter. Though remaining in the double digit trajectory, the lower than expected volume growth led UltraTech to miss analyst guidance on EBITDA (earnings before interest, tax, depreciation and amortisation) during the quarter. The company reported EBITDA of Rs 1,620 crore which was below estimates of Rs 1,660 crore, analysts at Emkay Global observed.

However, the operating margins came in at 18.8%, which is higher than the expected 18.5%. The blended EBITDA/tonne was at Rs 928, in-line with estimates, the domestic brokerage noted. Blended realisation was down 1.5% y-o-y to Rs 4,946/tonne.

Meanwhile, in a statement, UltraTech said the company’s acquisition of 21.2 million tonnes per annum cement capacity in June 2017 has already achieved an average capacity utilisation of 70% across all the regions and a cash break even.

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