UltraTech Cement Ltd’s net profit rose 68.8 percent year-on-year (YoY) in the second quarter of 2023-24 to Rs 1,280 crore, driven by increased demand and an uptick in government spending on infrastructure ahead of elections.
The company experienced robust volume growth and its bottom line received a boost from reduced fuel and power costs, despite price increases during the quarter.
The subsidiary of Aditya Birla Group’s Grasim Industries reported revenue of Rs 16,179.26 crore in the quarter ended September 2023, up 15.3 percent YoY beating estimates. However, both revenue and net profit saw sequential declines reflecting the dip in construction work typically seen in the monsoon months.
The company's revenue was expected to increase up to 15 percent to Rs 15,769.40 crore, with a 60 percent surge in net profit to Rs 1,334 crore, according to estimates from 10 brokerages collated by Moneycontrol.
“UltraTech achieved capacity utilisation of 75 percent during the quarter on expanded capacity. Energy cost was lower by 10 percent YoY, while raw material cost rose 4 percent on account of increase in cost of flyash and slag,” the company said in a statement.
Going ahead, the company expects to benefit from robust demand.
“Demand revival is imminent, especially during the festive season and the January-March peak construction period. Demand will also be led by pre-election spending, continued government push on infrastructure development, and sustained real estate development. All of this augur well for the company,” the company said in a statement.
Stronger than Usual Q2
Despite the monsoon, most cement makers are expected to have clocked strong sales volumes as construction momentum remained strong.
In July-September, UltraTech Cement sales volume stood at 26.69 million tonnes, with a 15 percent YoY increase. Weaker monsoon and added capacity supported the growth.
Cement makers increased prices in the quarter, which helped improve the company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin. EBIDTA margin improved to 16 percent in the September quarter from 14 percent a year ago.
Decline in Energy Cost
Declines in domestic and international petroleum coke prices aided growth in profits. While the price of imported coal and pet coke have risen in the quarter, they remain softer than their peaks in February until August.
Power and fuel costs together account for almost 30 percent of the total costs. Analysts expect the recent rise in prices to dent margins in the third quarter of the fiscal.
Capex On Track
UltraTech said its ongoing expansion program is progressing as per schedule. The company has commissioned 5.5 mtpa capacity so far in FY24 as against a total of 12.4 mtpa capacity added in FY23.
The company's total grey cement manufacturing capacity in India is now at 132.45 mtpa.
“Work on the second phase of growth of 22.6 mtpa is in full swing. As part of this project, we are adding another 1.8 mtpa of slag grinding capacity, taking phase 2 to 24.4 mtpa. Commercial production from all these new capacities is expected to go on stream in a phased manner by FY25/FY26,” the company said.
Ultratech also commissioned 30 megawatts (MW) of waste heat recovery systems (WHRS) based capacity, taking the total WHRS capacity to 262 MW. This, along with the company's renewable energy capacity of 429 MW together accounts for 22 percent of the total power requirement of the company.
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