UltraTech Cement’s profit tumbles 42% YoY to ₹756 crore due to higher power, raw material costs

• India’s largest cement manufacturer UltraTech Cement today reported a 16% rise in second quarter revenue to ₹13,893 crore.
• Rising power and raw material costs were the primary factors behind the company’s net margin halving to 5.4% from 10.9% a year ago.
• Despite this, UltraTech says demand revival is imminent, with signs visible in September.

India’s largest cement manufacturer UltraTech Cement’s second-quarter net profit fell 42% from a year ago to ₹756 crore, hurt by high power and input costs.

Its revenue, however, rose 16% to ₹13,893 crore, from ₹12,017 crore in the year-ago quarter. While the rise in revenue is in line with analysts’ estimates, the profit decline came in much lower than expected.

The company said that rising power and raw material costs also halved its net margins to 5.4% from 10.9% in Q2 FY22.

According to the company, its power costs spiked 58% year-on-year, while raw material costs were up over 18% during this period. Transportation, which is another major cost for the company, saw an increase of 14%.

Despite the pressure on margins, the cement manufacturer remains positive about the future prospects.

“Given the government's focus on infrastructure spending and affordable housing, the cement sector's long-term growth potential continues to remain healthy. Demand revival is imminent, especially during the festive season and the January-March peak construction period,” the company said in its exchange filing.

The September quarter is usually considered a slow one for the cement sector. UltraTech Cement noted that while the demand was weak in July and August, there were signs of revival in September.

“Pick-up in retail demand was on the back of pent-up demand accumulation during the monsoons, pre-Diwali construction and repair work gaining momentum, and pre-election tailwinds. Institutional demand was led by increased construction activity after the receding monsoons,” the company added.

Shares of the company were up nearly 1% after the results were announced.

Here’s UltraTech Cement’s Q2 in numbers:


Source: Company reports

UltraTech said that it has improved its capacity utilisation to 76% from 71% a year ago. It also witnessed a 9.6% increase in sales volume despite heavy monsoons during the September quarter.

Capacity expansion under way – debt rises over 50% sequentially

UltraTech Cement set out on a growth plan in 2020, and the company says it is on track to achieve its goals at the end of FY23.

In the September quarter, UltraTech added 1.3 million tonnes per annum (mtpa) capacity, taking its total to 115.85 mtpa. It aims to add another 15.4 mtpa in the second half of FY23, taking its total capacity to 131.25 mtpa.

Apart from this, the company also shed light on the status of its second phase of growth, wherein it plans to add 22.6 mtpa capacity – taking the total to 159.25 mtpa by FY25.

As a result of capacity expansion, UltraTech’s debt increased by over 50% sequentially to ₹8,357 crore from ₹5,561 crore in the previous quarter.

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