UltraTech Cement Limited’s profitability enhanced in the September quarter but slower-than-expected cement volume growth astounded investors. Its shares were under pressure on Monday before announcement of the earnings, perked up after they were released however ended lower by 0.74 per cent.
The Net Profit increased by 25 per cent from a year ago to Rs.601 cr, partly aided by higher other income. EBITDA - earnings before interest, taxes, depreciation and amortization rose by 19 per cent and EBITDA margin enhanced by 389 basis points (bps) to 24.14 per cent. The significant improvement in EBITDA was majorly due to petroleum coke inventory acquired at a lower cost.
While its profit is good, what didn’t go down well with the investors was subdued volume growth. Though the quarter was a seasonally weak one for the cement industry, a growth of a mere 1 per cent year-on-year to 11.18 million tons in sales volume was unexpected. After all, as analysts pointed out in a post-earnings conference call, the industry volume growth was nearly 2-3 per cent in the quarter. The management clarified that the volume was hit by normal monsoon across the Indian subcontinent.
Analysts are worried that though there are expectations of a revival in the demand of cement in the second half of the year, the volume growth in the December quarter may be tepid due to a prolonged monsoon.
Meanwhile, UltraTech Cement share price was trading at Rs.4008.25, down 0.11 per cent on the NSE today.
UltraTech Cement’s consolidated net sales fell 2.53 per cent on a year-on-year basis and realizations slipped 3 per cent at Rs.4,829 per tonne year-on-year. On the positive side, the outlook for rural growth looks brighter. Rural markets contributed nearly 38 per cent to overall sales, according to the firm’s earnings presentation. When urban demand picks up, overall volumes can get a boost.
For more information, visit UltraTech Cement share price history.
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