The Hindu Business Line : Strong show by UltraTech Cement

UltraTech Cement has posted strong growth numbers for 2007-08, with net profit expanding by 28 per cent, backed by a 12.2 per cent increase in sales. The sequential growth has beaten consensus market estimates by a small margin. The western region has seen strong demand trends, with a 14.2 per cent increase in demand on a year-on-year basis, compared with 8.6 per cent recorded by north and 12.1 per cent recorded by the south.

Costs have seen an upward trend, with power and fuel costs rising by 10 per cent for the year. This, however, has to be seen in the light of imported coal prices nearly doubling in the last one year. Employee costs have seen a sharp increase, with a 46.3 per cent increase in employee expenses from Rs 117 crore to Rs 172 crore for 2007-08. But operating profit margins for the full year have expanded 300 basis points to 33 per cent despite the inflation in costs, probably due to strong trends in cement prices in the region this year.

Export ban

Going forward, the cement export ban by the Government could impact volumes and realisations of UltraTech, the company being a major player in the export market. The move is also expected to increase supplies in the western region, which could moderate prices here. About 10 per cent of the company’ revenues are generated through export sales. However, UltraTech has commissioned a 3.3 million tonnes per annum unit in Andhra Pradesh in end-March. This may diversify the company’s presence from the western market and aid volume growth. Any surpluses from the western region could also be marketed in the South, where consumption has been exhibiting strong trends.

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