UltraTech Cement reported that its Q2 FY25 net profit fell by a sharper-than-expected 36 percent on-year as a demand slowdown due to monsoon and project delays hit price realisations. The company's July-September consolidated net profit fell to Rs 820 crore from Rs 1,280 crore a year ago. A Moneycontrol poll of eight brokerage estimates pegged UltraTech’s Q2 net profit at Rs 1,062 crore.
The cement maker’s revenue from operations in the July-September quarter fell 2.3 percent year-on-year to Rs 15,635 crore, down from Rs 16,012 in the corresponding quarter previous year. That was slightly better with the Moneycontrol poll estimate of Rs 15,579 crore.
The Aditya Birla Group firm's domestic grey cement sales volumes during the reporting quarter were 25.75 million tonnes, up by a marginal 3 percent over the same quarter last year, while it also represents a sharp 15 percent decline over the April-June quarter, which was affected due to the General Elections, extreme heat, and unavailability of labour.
UltraTech Cement's Q2 earnings were expected to be weighed down by a combination of weak demand due to infrastructure delays, flooding, and labour shortages during the second quarter, brokerage analysts had said ahead of the results. Further, muted prices, unsuccessful hikes and low realisations due to an extended monsoon were also expected to drag performance.
For the July-September quarter, domestic grey cement realisations were Rs 4,901 per tonne, being on a downward trajectory on both an annual and sequential basis. In the same quarter last year, realisations per tonne were Rs 5,349, while that in the April-June quarter were Rs 5,045, reflecting continued weakness in cement pricing. Analysts say that any meaningful increase in cement prices is expected in the second half of the next financial year.
The cement maker's EBITDA fell by 18 percent on-year to Rs 2,239 crore during the quarter. Operating margin shrunk to 13 percent against 16 percent year-on-year. The company's operating EBITDA, a key metric in the industry to measure cost competitiveness vis-a-vis realisations, declined to Rs 732 per tonne of domestic grey cement. The same for the corresponding quarter last year was Rs 955.
The input cost picture for UltraTech Cement was largely favourable, save a marginal increase in power costs, as well as increases in some input costs such as gypsum and fly ash. Logistics costs were flat sequentially, but down by 2 percent year-on-year, as the company continued to reduce lead distances, now at 388 kilometres (km). The same in the corresponding quarter in FY24 was 403 km, and in the April-June quarter, it was 385 km.
Fuel costs were also lower for the the company on both an annual and sequential basis, with a per-tonne cost of Rs 938, against Rs 1,123 in Q2 FY24 and Rs 1,003 in Q1 FY25. Consumption for petroleum coke, or petcoke, improved to 54 percent in the overall fuel consumption mix for Q2 FY25, against 37 percent in the April-June quarter, and 39 percent in the corresponding quarter in FY24.
In its investor presentation, UltraTech Cement said that plant maintenance activities caused per-tonne power costs to increase by 5 percent on a sequential basis to Rs 400, while it remained lower by 7 percent on an annual basis. Raw material costs increased in July-September both year-on-year and sequentially to Rs 640 per tonne, as fly ash and gypsum costs increased.
As the company ramps up its organic and inorganic expansion, the consolidated net debt has climbed upward, which stood at Rs 8,792 crore as on September 30, against Rs 5,482 crore at the end of June 30, 2024.
India's largest cement manufacturer has plans to reach 200 million tonnes per annum (MTPA) in cement capacity by FY27, powered by a number of greenfield and brownfield expansions, and strategic measures. It has agreed on two major acquisitions recently, including the purchase of Kesoram Industries' cement operations, and buying a majority stake in India Cements. Both the deals are awaiting statutory approvals.
On October 21, UltraTech Cement's shares closed 2.1 percent lower on the National Stock Exchange at Rs 10,839.
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