The company says that the demand is likely to grow around 8%.
UltraTech Cement has reported good quarter results as the industry witnessed an upturn particularly in the west and northern regions. The company’s net sales stood at Rs4,572 crore as compared to Rs3,715 crore in the corresponding period of the previous year. Its profit before interest, depreciation and tax is Rs1,120 crore and profit after tax is Rs617 crore vis-a-vis Rs768 crore and Rs319 crore respectively, in the corresponding period of the earlier year.
The combined domestic cement and clinker sales of grey cement was 9.72 MnT (9.16 MnT) while it was 2.49 LmT (2.25 LmT) for white cement and wall care putty.
The quarter witnessed improved demand growth of around 10% on account of a lower base effect in the corresponding period of the previous year. The sector capacity utilisation during the quarter improved to 73% as compared to 68% in the preceding quarter. Although post monsoon, the pricing scenario indicated some improvement, the uncertain price scenario is expected to continue.
The company’s wariable cost rose by 16%, mainly on account of increase in energy cost. This is attributable to the 30% rise in the price of domestic coal by Coal India during Q4FY11; continuous spike in prices of imported coal as also the rupee devaluation by approximately 14%. Energy cost is expected to escalate with the change in pricing mechanism from Useful Heat Value (UHV) to Gross Calorific Value (GCV) implemented by Coal India with effect from January 1, 2012. All of these will put pressure on the company’s margins.
Capex The company has a capital outlay of over Rs11,000 crore to be spent on various projects. These include, among others–clinkerisation plants through brownfield expansion at Chhattisgarh and Karnataka together with additional grinding units; installing waste-heat recovery systems; instituting bulk packaging terminals; and setting up of readymix concrete plants. The progress on expansion of capacity at Chhattisgarh and Karnataka are almost in line with the schedule. These are expected to be operational by Q1FY14, and will augment the company’s cement capacity by 9.2 mtpa bringing it to a total of 59 mtpa.
These projects are being funded through a judicious mix of internal accruals and borrowings.
Outlook The company says that the demand is likely to grow around 8%. However, the surplus scenario is likely to continue over the next three years. At the same time, growing input costs will result in a squeeze in margins.
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