Ultratech’s Q1 net profit up 58%, volumes up 24%

Ultratech Cement’s sales and profits during the June 2009 quarter grew handsomely. The company is a subsidiary of Grasim Industries, a Aditya Birla Group company. Its net sales grew by 31% to Rs 1953 crore, and net profit rose by 58% to Rs 418 crore. Several factors contributed to its good performance: volume growth (partly due to new capacity), firm prices, excise duty reduction, lower coal prices and power costs.

  • Highlights
  • Ultratech completed a capacity expansion of 1.2mn tonnes at its Andhra Pradesh plant, taking up total capacity to 23.1mn tonnes. This extra production contibuted to volumes during the quarter.
  • Exports grew by 91% to 0.6mn tonnes while domestic sales grew by 18% to 4.7mn tonnes. Overall volumes rose by 24% while the excise duty hike would have contributed to better realisations too.
  • Ultratech’s costs increased by only 17.6% compared to the sales growth of 31%. Power and fuel costs were stagnant despite higher production. Nearly 80% of its power requirement is now met inhouse, since its power plants are fully commissioned, a big advantage in a power intensive industry. Coal prices too have softened, muting the effect of a 19% increase in freight costs.
  • The operating margin improved by 690 basis points to 37.2%. Depreciation and interest have both risen during the quarter.
  • Net profit increased by 58% to Rs 418 crore during the quarter, despite a sharp jump in its tax provision.
  • The company had spent Rs 3,200 crore for expanding capacity and setting up captive power facilities. The company plans to spend Rs 600 crore more, taking its total outlay to Rs 2,000 crore, to be spent over two years. Plans include a 25 mega watt captive power plant at Maharashtra, a grinding unit in Gujarat and waste heat recovery systems across its plants.
  • Ultratech expects demand for cement to grow by 9% during 2009-10. But it also expects capacity to turn surplus in the second half of 2009-10 leading to a pressure on prices. The fourth quarter will also see the base effect of excise cuts disappear.
  • Investors were anticipating the company’s performance, it seems, as the stock price moved up by just Rs 5 to close at Rs 776.

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