UltraTech Q3 net profit surges 80% on better realisation, lower costs

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Updated: January 25, 2020 7:34 AM

Despite the sales slowdown, UltraTech's consolidated Ebitda for the December quarter rose 25.4% to Rs 2,141 crore, on 35.5% increase in price realisation.

UltraTech Q3 net profit, UltraTech Cement, Ebitda, Sabka Vishwas Scheme, Century Textiles and Industries, International Maritime OrganizationOn the consolidated balance sheet, UltraTech’s net debt to Ebitda ratio stood at 1.87 times for the December quarter.

UltraTech Cement’s consolidated net profit for the December quarter rose 79.8% to Rs 712 crore year-on-year, boosted by higher price realisation and a 15% decline in energy costs to Rs 941 per tonne. Net sales of the company declined 1.15% y-o-y to Rs 10,176 crore. Volumes for third quarter declined 4% to 20.9 million tonne, impacted by a 3% decline in domestic sales to 19.4 million tonne.

Despite the sales slowdown, UltraTech’s consolidated Ebitda for the December quarter rose 25.4% to Rs 2,141 crore, on 35.5% increase in price realisation. The management said it saw a demand turnaround in several geographies, driven rural housing and infrastructure projects. Operating earnings before interest, tax, depreciation and amortisation (Ebitda) per tonne of the cement major stood at Rs 1,004 per tonne in December compared with Rs 741 per tonne last year, boosted by falling pet coke prices.

Expenses for the quarter declined 4.25% on a consolidated basis to Rs 9,524.62 crore. Power and fuel costs for the quarter declined 17.8% y-o-y to Rs 2,039.43 crore, while logistics (freight and forwarding expenses) declined 8.2% to Rs 2,343.77 crore. The declining price of pet coke – a major fuel for the cement industry – stood at $80 per tonne during the third quarter, compared with $91 per tonne last year. The company reported a one-time expense of Rs 133 crore towards payment under the Sabka Vishwas Scheme, 2019, for legacy dispute resolution. “The contingent liabilities extinguished amount to Rs 832 crore (on account of the dispute resolution scheme),” said Atul Daga, chief financial officer, UltraTech.

Meanwhile, rural sales volumes grew around 9% y-o-y, the company said in its investor presentation. “The operational performance for the quarter is slightly below expectations, primarily due to slow volume growth, thanks to the construction slowdown,” said one analyst. However, management sees improvement in new housing launches in metro towns, going forward. The chief financial officer told investors that the group has performed better than the industry, and seen an overall increase in market share on an all-India basis. “In a depressing market, infrastructure activity has slowed down… but things are picking up,” Daga said, adding that company has seen price improvements in Maharashtra and Rajasthan, and double-digit growth in the eastern region. Volumes have declined in Gujarat and Andhra Pradesh, among others.

Net debt of the company reduced to Rs 18,625 crore in December 2019, compared with Rs 20,619 crore in the September quarter. On the consolidated balance sheet, UltraTech’s net debt to Ebitda ratio stood at 1.87 times for the December quarter. The management also revised its cash flow guidance downwards to Rs 1,600 crore for the full financial year, Daga said. The company also released Rs 834 crore of working capital in the third quarter.

UltraTech had last year acquired Century Textiles and Industries. Daga said the operating Ebitda for Century operations currently stood at around Rs 267 per tonne, while capacity utilisation for these plants stood at 79% in December.

The management is hopeful of improving the operating Ebitda for these plants to Rs 1,000 per tonne by the first quarter of FY20. In terms of capacity addition, the management said it has placed orders for capacity expansion of in three plants in Dankuni, Patliputra and Cuttack. “This would add up to about 3.4 million tonne per annum. We should be commissioning this by March 2021. The total capex commitment is about Rs 940 crore,” Daga said.

Going forward, the company expects shipping freight costs to rise on account of the International Maritime Organization’s restrictions on usage of bunker oil as shipping fuel, Daga said. On fuel expenses, the lower pet coke prices will continue to benefit the company for the coming two quarters. It will reflect in the costs to the tune of Rs 50 per tonne in the next quarter and continue to reflect, Daga told analysts.

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