A sharp increase in operating costs, primarily due to rise in prices of pet coke and coal impacted the standalone net profit of UltraTech Cement, which came in lower by 25% year-on-year at Rs 423 crore for the three months ended December 31, 2017, in line with Street estimates.
A sharp increase in operating costs, primarily due to rise in prices of pet coke and coal impacted the standalone net profit of UltraTech Cement, which came in lower by 25% year-on-year at Rs 423 crore for the three months ended December 31, 2017, in line with Street estimates. However, increase in domestic demand from the infrastructure and housing sectors, along with a pick-up in rural demand, boosted sales. Net sales were up 35% Y-o-Y at Rs 7,471 crore, much above Bloomberg estimates. Domestic sales volume increased 37% to 15.1 million tonne. The company’s capacity stood at 96 million tonne per annum (MTPA), including the 11 MTPA capacity under implementation. According to Bloomberg estimates, UltraTech was expected to report a net profit of Rs 428 crore, while revenues were estimated to be Rs 7,054 crore. The energy costs at the Aditya Birla Group company were up a steep 21% Y-o-Y as prices of pet coke and coal remained at high levels. Pet coke prices were up 33% at $104 per tonne. Additionally, the company had to use more high-cost fuel due to the ban on pet coke usage in some states, which impacted performance. Logistics cost was up 6% Y-o-Y due to increased diesel prices.
There was some relief in raw material costs, which declined 2%, with the focus on replacing high-cost additives with low-cost alternates. The EBITDA (earnings before interest, tax, depreciation and amortisation) increased 14% y-o-y to Rs 1,269 crore, while high costs weighed on the operating margins, which were lower by 300 basis points at 17%. Meanwhile, in a statement, UltraTech said after launching the ‘UltraTech Brand’ in all the markets being served from acquired plants, operations are in line with the company’s ramp-up strategy. Improved capacity utilisation is currently touching 60% from a low of 18% at the time of acquisition.
“Substantial improvements have been carried out at these plants in terms of their operating parameters. Appointment of new dealers and retailers is an on-going programme to increase the reach of UltraTech in new markets. The acquisition is generating incremental earnings as planned and which are improving month on month,” the statement said. On a consolidated basis, UltraTech’s net sales were up 33% Y-o-Y to Rs 7,897 crore, while the net profit declined 23% to Rs 456 crore. Going forward, the expected higher Budget allocation for infrastructure and rural development will be the key demand drivers, the company said.