Monsoon Plays Dampener For UltraTech Cement in Second Quarter

Good monsoons dampened cement offtake for the country’s largest cement major, UltraTech Ltd. but other income ensured its second quarter earnings beat Bloomberg consensus estimates. The company registered a 31.5 percent growth year-on-year in standalone profit at Rs 601.05 crore for the quarter ended September 2016, according to its filing on the stock exchanges.

The company reported other income of Rs 172.48, an increase of 14.71 percent sequentially and 28.85 percent year-on-year. The higher other income sequentially was the impact of IND-AS, a new accounting norm that all large companies have had to follow since April 1, 2016.

Revenue declined due to muted volume growth in the quarter. Sales volume (domestic and export) stood at 11.18 million tonnes (mt) in September-October quarter against 11.09 mt last year and 13.20 mt in the previous quarter.

Operating profit jumped 17.60 percent to Rs 1,154.9 crore and margin expanded by 314 basis points to 18.6 percent in July-September quarter led by 17 percent fall in power and fuel cost and 8.5 percent drop in raw material cost. Earnings before interest, tax, depreciation and amortisation was at 21.15 percent, 328 basis points higher than last year and 402.3 basis points higher on a sequential basis.

Key Highlights From Conference Call

• Volume growth for the industry is expected to be around 5 percent for financial year 2016-17 against 4 percent year-to-date.
• UltraTech’s volume growth stood at 1 percent against the industry volume growth of 2-3 percent in July-August on account of heavy rainfall in key markets.
• The management sees demand picking up in northern and western market; followed by eastern and southern markets.
• The company has a planned capital expenditure of Rs 800-900 crore per year, for the next two financial years.
• Newer units are currently operating at 50 percent capacity utilisation.
• The company expects to maintain Rs 150-170 crore run rate in other income.
• The company is expected to take Rs 16,189 crore of debt on its books after the acquisition of JP Associates which was an all-debt deal.
• Short-term debt reduced by Rs 1,600 crore to Rs 819 crore in July-September quarter as against Rs 2,476 crore at the end of financial year 2015-16.