UltraTech Q2 profit falls 36% to ₹820 cr

Net profit of UltraTech Cement Ltd tumbled 36% year-on-year to ₹820 crore for the quarter ended September compared with ₹1,281 crore in the year-ago period.

Revenue from operations of India’s largest cement producer declined 2.36% year-on-year to ₹15,634 crore for the second quarter as against ₹ ₹16,012 crore in Q2 FY24.

Shares of UltraTech fell as much as 2.6% to ₹10,770 on the BSE.

UltraTech achieved capacity utilisation of 68% during the quarter. Domestic sales volume grew 3% year-on-year on a consolidated basis despite incessant rains throughout the country this season, the company says in a stock exchange filing.

Energy costs were lower by 14% year-on-year, while raw material costs rose 1% on account of an increase in the cost of flyash and slag, the statement says.

The company’s operating profit or earnings before interest, taxes, depreciation, and amortisation (EBITDA) dropped 18% year-on-year to ₹2,018 crore for the September quarter. Margins for the quarter shrunk to 12.9% in Q2 FY25 against 16% in the corresponding quarter last fiscal.

UltraTech raised $500 million through a sustainability-linked loan with participation from six banks. The transaction marks the second sustainability-linked financing, after the inaugural sustainability-linked bond issuance in 2021, it says.

The capacity expansion drive is on a scale that is globally unprecedented in the cement sector, the Aditya Birla Group company says. “With the completion of the ongoing expansion projects across India by FY27, and receipt of statutory approvals for the acquisitions of Kesoram Cement (10.75 MTPA) and The India Cements (14.45 MTPA), UltraTech’s total cement capacity will surpass 200 MTPA,” it says.

This expanded manufacturing footprint will help reduce operational costs, and improve customer service, leveraging the company’s strong nation-wide presence and its distribution network, UltraTech says. This scale will further enable UltraTech to service India’s growing demand for cement across the country, it adds.

UltraTech says its ambitious capacity expansion capitalises on the substantial long term growth potential of India’s cement sector. “Its growth trajectory aligns closely with India’s broader growth story. By increasing its scale, the Company will meet the rising demand for cement nationwide. Increase in Government spending on Infrastructure sector and rising demand from the urban housing sector is expected to generate a sustainable volume growth of 7-8% in future years. UltraTech aims to make a meaningful contribution to the nation’s progress by laying the groundwork for infrastructure that shapes modern India,” says the company.

Pan-India cement prices took a beating in the second half of FY24 amid increasing competition and higher supply in the market. Prices have plunged by ₹40-45 per bag in the five months (November 2023 – March 2024) since the last price hike in October 2023. Cement prices have been subdued, declining 1.5% to ₹383-385 per bag on average in fiscal 2024 from an all-time high of ₹391 per bag in fiscal 2023. “Heightened competitive intensity due to entry of new players, 40-42 MT of capacity additions and benign cost pressures catalysed the cement price correction in fiscal 2024 after four consecutive years of price rise at a CAGR of around 4% from fiscal 2020 to fiscal 2023. In fiscal 2025, continued capacity expansion, declining cost pressures and moderating demand are expected to limit any uptick and keep prices rangebound at (1)-1%,” says Sehul Bhatt, Director-Research, CRISIL Market Intelligence and Analytics.