UltraTech Reports 70% Surge In Q2 Net Profit

UltraTech Cement has witnessed a 68.8% year-on-year (YoY) surge in net profit during the second quarter of the 2023-24 fiscal year, reaching a staggering Rs 1,280 crore. This boost in earnings was fueled by an upsurge in demand and a notable increase in government infrastructure spending, strategically timed ahead of upcoming elections.

The company's bottom line received a significant boost despite price hikes during the quarter. This was followed by robust volume growth and commendable cost management, particularly in reducing fuel and power expenses.

The subsidiary of Aditya Birla Group's Grasim Industries reported revenues of Rs 16,179.26 crore in the quarter ending September 2023, surpassing expectations with a substantial 15.3% YoY growth. However, it's important to note that both revenue and net profit saw a sequential dip, mirroring the usual lull in construction activities experienced during the monsoon season.

UltraTech Cement utilized its expanded capacity efficiently, achieving a capacity utilization rate of 75% during the quarter. The company also benefited from a 10% YoY reduction in energy costs. However, raw material costs saw a marginal increase of 4% due to the rise in fly ash and slag costs.

UltraTech Cement is optimistic about the future, anticipating a robust resurgence in demand. This optimism is based on the expected increase in construction activities during the festive season and the peak construction period from January to March. The company foresees continued government infrastructure development initiatives and sustained real estate projects driving demand.

Despite the monsoon season, most cement manufacturers have reported strong sales volumes, with construction momentum remaining high. In the July-September period, UltraTech Cement's sales volume reached 26.69 million tonnes, reflecting a substantial 15% YoY increase. The combination of a weaker monsoon and increased capacity played a key role in this growth.

Cement producers across the industry raised their prices during the quarter, contributing to an improvement in UltraTech's Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin. The EBITDA margin expanded by 200 basis points to 16% in the September quarter, up from 14% a year ago.

Declines in domestic and international petroleum coke prices significantly contributed to profit growth. While the price of imported coal and petroleum coke experienced some increases during the quarter, they remained lower than their peak levels observed between February and August. Power and fuel costs constitute nearly 30% of total expenses, and analysts anticipate that the recent price increases may impact margins in the third quarter of the fiscal year.

UltraTech Cement affirmed that its ongoing expansion program is right on track. So far in the fiscal year 2023-24, the company has commissioned 5.5 million tonnes per annum (mtpa) of capacity, out of a total of 12.4 mtpa added in the previous fiscal year (2022-23). The company's total grey cement manufacturing capacity in India has now reached 132.45 mtpa. The second phase of expansion, which includes adding 1.8 mtpa of slag grinding capacity, is well underway and is expected to commence commercial production in phases by FY25/FY26.

In addition to expanding its cement production, UltraTech Cement has commissioned 30 megawatts (MW) of waste heat recovery systems (WHRS) based capacity, increasing the total WHRS capacity to 262 MW. When combined with the company's renewable energy capacity of 429 MW, this accounts for a remarkable 22% of the company's total power requirements.

The UltraTech Cement stock has ended the session with gains of nearly 3% and has risen 5% in the last eight trading sessions.