The Hindu Business Line : UltraTech Q1 net profit rises 2 pc, sales up 10%

Mumbai, July 18 Hit by the 6-week cement export ban and high input cost, UltraTech Cement has reported a muted 2 per cent rise in net profit at Rs 265 crore in the first quarter ended June 30, against Rs 259 crore registered in the same period last year.

Net sales increased 10 per cent to Rs 1,496 crore (Rs 1,360 crore) in the quarter under review.

On a sequential basis, the company’s net profit, sales and income were down 6 per cent.

Mr Kumar Mangalam Birla, Chairman, UltraTech Cement, said the results are lower than that of the preceding quarter, reflecting the impact of higher input costs which have not been passed on to the consumer.

For instance, coal prices have gone up from $78 a tonne in Q1FY’08 to $179 a tonne in Q1FY’09. Cement prices have also been contained, given the Government’s concern over inflation, he said.

The economy in general, including the cement sector, is gravely affected by the escalation in fuel prices, which have resulted in double digit inflation, rising interest rates and slower economic growth.

Unless this is contained, it can slow down construction growth and consequently the demand for cement, said Mr Birla.

The new capacity addition of 115 million tonnes a year by the industry may coincide with slower economic growth and lead to a surplus scenario from calendar year 2009, with consequent impact on margins.

Capex

The board of directors has approved an additional capex Rs 1,000 crore.

Of this, Rs 250 crore will be spent on setting up waste heat recovery systems of 25 MW across all units for generating power out of waste gases.

The balance funds will be invested in setting up additional RMC plants, extension of Gujarat jetty and new port terminals, Mr Birla said.

The company has already spent Rs 1,800 crore in fiscal 2008.

In next three years, the company would invest about Rs 2,400 crore.

Mine hunt

Mr K.C. Birla, Senior Executive President & CFO, said the company is scouting for mines in Indonesia and South Africa to tide over the rising coal prices.

The impact of rise in coal and fuel prices is about Rs 10 per 50 kg bag.

With an expectation of demand softening, the company will take a call on how much of this can be passed on to the end users, he said.

UltraTech and another Aditya Birla Group company Grasim Industries will set up 250 RMC units.

The company has proposed to increase RMC units from 27 to 39 and capacity from 4.8 million cubic metres a year to 7.2 million cubic meters by FY’09.

The company’s shares on the BSE gained 4 per cent to close at Rs 540 on Friday.