UltraTech profit falls 7% due to increased fuel and power costs hit

Beats first quarter estimate despite decline on both YoY and sequentially

UltraTech, the country's largest cement maker, on Friday reported nearly 7 per cent year-on-year decline in net profit to Rs 1,584 crore for the quarter ended June 31, 2022 (Q1). Sequentially, too, it plummeted 39.5 per cent.

This was because the bottom-line was hit by a sharp rise in power and fuel costs. Power and fuel costs, along with freight and handling, account for 55-60 per cent of the total cost for cement companies on a per-tonne basis, according to sector analysts. 

The prices of both pet coke and thermal coal have risen sharply over the past few months, putting pressure on production costs of cement firms, they said.

Despite the decline on the bottom-line front, UltraTech’s net profit beat Street estimates, which came in at Rs 1,369 crore, according to a poll of analysts by Bloomberg. Last year, the company reported a net profit of Rs 1,703 crore in Q1.

UltraTech's revenue was up 28.2 per cent in Q1FY23 to Rs 15,164 crore on account of a favourable base, as well as price hikes taken in the quarter under review. Domestic sales volume grew 19 per cent on a YoY basis, thanks to an uptick in the infrastructure sector, the company said. 

Revenue in Q1, too, managed to beat Street estimates, which came in at Rs 14,236 crore, according to Bloomberg. The company had reported a revenue of Rs 11,830 crore in the year-ago period.

Sequentially, cement sales were hit due to a moderation in demand from the real estate sector, the company noted. This resulted in a 3.8 per cent decline in revenue over the March quarter when the top-line was Rs 15,767 crore.

The sharper decline in UltraTech’s net profit sequentially, as the company's results showed, pointed to the input-cost challenges it has been facing over the past few months. In the March quarter, UltraTech's net profit stood at Rs 2,620 crore.

"After a strong end to FY22, cement demand was impacted by overall inflationary trends and lower labour availability in May 2022. However, cement demand picked up in June 2022 over pre-monsoon construction activity," the company said.

Its profit before interest, depreciation and tax (PBIDT) came in at Rs 3,204 crore in Q1 against Rs 3,513 crore a year ago, making a decline of 8.8 per cent. Sequentially, PBIDT was up 1.2 per cent.

UltraTech Cement also re-appointed Kailash Chandra Jhanwar as its managing director.

The company said that its existing expansion programme was on track and would be over by the end of FY23.

"Work on further capex announced during the quarter has already commenced and commercial production from these new capacities is expected to go on stream in a phased manner by FY25. Upon completion of the latest round of expansion, the company's capacity will grow to 159.25 million tonne per annum (mtpa)," it said.

Shares of Ultratech jumped over 5 per cent on the BSE following the announcement of its results in the afternoon session on Friday. 

The stock closed trade at Rs 6,437 per share, up 5.03 per cent over the previous day's close.