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BL Research Bureau

After reporting strong profit growth in the previous quarter, UltraTech Cement has faced a setback in performance in the June quarter. For the first quarter of financial year 2008-09, Ultra Tech Cement’s operating profit margin fell by 2 per cent to 31.6 per cent, relative to the previous year.

This resulted in flat net profit, despite the company achieving sales growth of 10 per cent for the quarter.

The fall in margins can be attributed to escalating prices of inputs as well as staff costs. While prices of imported coal escalated; power and oil expenses rose 27 per cent and freight handling charges were up over 6 per cent.

Employee expenses, which shot up in the March quarter continued to show sharp increases of 48 per cent year-on-year.

Though costs increased, the company had limited flexibility to pass on increases to consumers, with cement prices remaining more or less flat at about Rs 225 per bag in the Gujarat region over the quarter.

The bright spot in the result was the strong sales growth.

Despite the Government’s export ban on cement for a six- week period during the quarter, UltraTech managed to post a 10 per cent increase in sales for the quarter.

Volumes registered a 4 per cent growth year-on-year in the domestic markets.

Project-related demand helped demand register reasonable growth in the western region, with demand growth at 8 per cent year-on-year in May.

During the quarter, the company ramped up its ready mix concrete capacity to a total of 9 lakh cubic metres. A clinker unit in Andhra Pradesh and a 46 MW thermal power plant at Gujarat were also commissioned.

The company’s plans to increase its total captive thermal power capacity to 270 MW by 2008, meeting nearly 80 per cent of its power requirements, appear to be on track.

With an estimated Rs 2,050 crore capex over the next three years, the company’s plans include additional RMC plants, building new port terminals and introducing waste heat recovery systems across units.

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