UltraTech Cement Q1 Results: Operating Profit Beats Estimates On Lower Costs
UltraTech Cement Ltd.'s profit fell in the first full quarter affected by the coronavirus pandemic that froze economic activity. But its operational performance managed to beat estimates, aided by cost cuts.
Net profit declined 38% year-on-year to Rs 797.4 crore in the three months ended June, the cement maker said in an exchange filing. That compares with the Rs 413.6-crore consensus estimate of analysts tracked by Bloomberg.
UltraTech also reported a one-time expense of Rs 157.37 crore as per a Supreme Court order against the company's claim of capital investment subsidy, under the Rajasthan Investment Promotion Scheme, 2003, the filing said.
- Revenue declined 33% over the year-ago period to Rs 7,633 crore. Analysts had pegged the top line at Rs 7,279 crore.
- Power and fuel expenses fell 41% to Rs 1,370.8 crore.
- Freight and forwarding costs fell to Rs 1,605 crore, down 38% over the year earlier.
- Volumes declined 22% to 13.94 million tonnes. This is marginally lower than the 14.2-million estimated.
India's construction sector, already grappling with lower capex amid rising fiscal stress, has been dealt a body blow by the Covid-19 crisis, according to Edelweiss Securities. The world's biggest lockdown completely stalled operations in April and most of May before the government started easing restrictions.
UltraTech's earnings before interest, tax, depreciation and amortisation fell 29.6% year-on-year to Rs 2,074.6 crore, compared with the estimated Rs 1,495 crore. Its margins expanded 140 basis points to 27.2%. Analysts had pegged the metric at 20.5%.
Key Highlights (Year-On-Year)
- Logistics cost per tonne declined 5% to Rs 1,116.
- Energy cost per tonne fell 11% to Rs 913.
- Raw material cost per tonne down 2% to Rs 477.
- Domestic sales volume down 21% to 13.56 million tonnes.
- Export sales volume flat at 0.38 million tonnes.
- Managed to reduce net debt by Rs 2,209 crore to Rs 14,651 crore.
UltraTech Cement, according to its annual report, has reduced its overall capital expenditure plans for 2020-2021 to Rs 1,000 crore with a view to conserve cash.
Shares of the cement maker rose as much as 4.9% to Rs 4,049 apiece, the day's high, after the results were announced. The stock has gained for the second straight day. In comparison, the benchmark Nifty 50 Index is up 1.17%.
Highlights From Conference Call
- Divested 92.5% equity in overseas cement subsidiary at enterprise value of $120 million.
- Divestment transaction to be completed by August-end.
- Further deleveraging to take place by sale by Dubai unit and downselling outstanding loan to Binani 3B—The Fibreglass Company. To take a call on Dubai unit after a quarter.
- A total of Rs 6,000 crore has been released in last nine months from free cash flows.
- Don’t expect working capital to further shrink.
- Will have to infuse some more working capital to push sales.
- Don’t expect further benefits from power & fuel price correction.
- Cement industry usually witnesses 60% utilisation during monsoon quarter.
- Average utilisation for June quarter stood at 46%.
- Expect utilisation to be lower than 60% in Q1 due to Covid and monsoon.
- 4-5% correction in prices in Q1 is normal for cement industry.
- Non-trade demand, or institutional demand, to come back post November
- Expect workers to come back after Diwali.
- Expect cost optimisation to the tune of Rs 500 crore for FY21.
- Expansion plans across industry moving cautiously.
- Price discounts offered only in the southern market.