UltraTech Cement Limited, India's largest cement manufacturer, on January 17 exceeded expectations and reported a consolidated profit after tax (PAT) of Rs 1,708 crore for the quarter ended December 2021, up 7.8 percent from Rs 1,584 crore in the year-ago period. PAT during the previous quarter was Rs 1,314 crore.
The company’s consolidated net sales in the December quarter were at Rs 12,710 crore, up 5 percent from Rs 12,144 crore in the year-ago period
“During the quarter, trade sales were impacted more than non-trade sales, as overall cement demand remained subdued. With the onset of the peak season and rising construction activities, cement demand is expected to revive in Q4FY22, driven by a pick-up in the government-led infrastructure and housing projects, the company said in a release.
Rural and urban demand was also expected to pick up, which would be good for the company, it said
Revenue
Consolidated revenue (including operating income) met expectations and was 6 percent higher at Rs 12,985 crore from Rs 12,254 crore in the December 2020 quarter and Rs 12,017 crore in the previous three-month period.
Operating income for the quarter was Rs 275 crore, up by 133 percent.
Grey cement business generated revenues of Rs 10,629 crore during the December quarter, up 3 percent YoY. White Cement revenue improved by a percent on-year to Rs 543 crore, revenues from export and others improved 5 percent YoY to Rs 316 crore. Grey cement revenues from overseas business were higher by 13 percent YoY to Rs 593 crore.
The Aditya Birla Group company added 42 new ready mix concrete (RMC) plants during the quarter, taking the total plants that produce RMC to 151. This helped in improving the revenues from this business by 17 percent on year to Rs 668 crore.
Volume & realisation
The company registered a consolidated volume of 23.3 million tonnes (MT) which was down 3 percent on-year. Grey cement volumes at 21.43 MT were down 3 percent YoY, white cement were up 5 percent at 0.41 MT. Export volumes were hit the hardest and were down 45 percent at 0.16 MT, while overseas business volumes were down 9 percent at 1.24 MT.
While there was a year-on-year decline in volumes, they improved marginally on a sequential basis. Unseasonal rainfall, a sand crisis in a few markets of Uttar Pradesh and in East India and a ban on construction activities in the Delhi–National Capital Region hit volumes.
Rural and infrastructure demand in north India registered growth. Demand from the infrastructure segment in Central India was down due to the near- completion of major projects but rural housing saw growth.
Demand for both rural and infrastructure segments was affected in the Eastern region due to unseasonal rains and festivities.
Mumbai continued to witness strong traction in the housing segment, while the growth in rural housing was strong in all regions of Maharashtra. Gujarat however, lagged behind due to the unavailability of labor and panchayat elections.
Cyclonic rains in South India impacted demand from both the housing as well as infrastructure sector except for Andhra Pradesh.
The company was able to improve its blended realisations by 7 percent on year to Rs 5,527 a ton, which was marginally higher than street’s expectations. This was aided by an increase in premium product mix, which contributed 15.5 percent to trade volumes and was up 1.1 percent from last year.
Costs
The three main cost components—raw material, energy and logistics —jumped due to higher prices of coal as well as petcoke and the freight cost due to rising oil prices.
The raw material cost, account for 13 percent of the cost bill, increased 7 percent on-year to Rs 538 a ton due to an increase in flyash, gypsum and HSD prices. This rise was partly offset by improved operational efficiencies as the company was able to improve clinker to cement conversion ratio by around 1 percent.
Energy costs, constituting 32 percent of total costs, were most impacted and increased steeply by 39 percent YoY to Rs 1,327/ton. On sequential basis, the increase in energy costs was 21 percent.
The average fuel consumption cost for the company during this quarter was at USD 151/ton compared to USD 67/ton in the same period last year.
The impact was cushioned by a reduction in power consumption by ~2 percent and by increasing the contribution of green power which stood at 15.6 percent.
The logistics costs constitute 30 percent of total costs and were up 4 percent YoY to Rs 1,229/ton, severely impacted by ~24 percent rise in diesel prices. This was partially mitigated by improved efficiency and favourable rail-road mix. On quarter basis, the logistics costs were up by 1 percent.
Margins
The higher costs of goods sold impacted the margins significantly as EBITDA (earnings before interest, tax, depreciation amortization) margin came in at 20 percent compared to 28 percent in the corresponding quarter of last year.
EBITDA in absolute terms was down 26 percent on-year from Rs 3,362 crore to Rs 2,490 crore.
Net debt
The company was able to reduce its net debt by around 8 percent during the first nine months of the financial year. Its net debt at the end of December 2o21 was at Rs 6,147 crore basis, with the net debt to EBITDA ratio improving from 0.55 at the end of March 2021 to 0.49 currently.
“During the quarter the company repaid loans amounting to Rs 3,459 crores. The repayments were funded through internal accruals and have reduced the Company’s exposure to floating interest rate”, said the management of the company.
Return on Capital Employed (ROCE) moved up to 16.1 percent in the current quarter from 15.3 percent on trailing 12 months basis.
Return on Equity (ROE) was down marginally from 15.6 percent to 15.1 percent on a trailing 12 months basis.
Investors cheered the numbers, as the stock closed at Rs 7,870 on the National Stock Exchange, up Rs 209.6 from the previous day. It has generated returns of 44.4 percent during past one year and 7.3 percent during the last one month.
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