UltraTech Cement, an Aditya Birla Group company, reported that its net profit dropped three per cent to Rs 601 crore (Rs 617 crore) due to sharp increase in operational cost. Net sales improved six per cent to Rs 4,857 crore (Rs 4,565 cr).
The company’s cement sales were almost stagnant at 9.62 lakh tonnes against 9.61 lakh tonnes registered in the same period last year. White cement and wall-care putty sales were up six per cent at 2.62 lakh tonnes (2.46 lakh tonnes).
Expenses were up six per cent to Rs 4,072 crore (Rs 3,833 crore), largely due to a 12-per cent increase in freight and forwarding cost at Rs 1,059 crore (Rs 943 crore). Finance costs rose 86 per cent to touch Rs 52 crore (Rs 28 crore). The company has booked other income of Rs 96 crore on account of subsidy received through state investment promotion scheme.
Raw material and logistics cost were mainly affected due to increase in railway freight and hike in diesel prices, said the company in a press release. Though imported coal prices hovered at $100 a tonne, the benefit of softening in coal prices was partly offset by rupee depreciation against the dollar.
A. Srinivasan, Research Analyst, Angel Broking said the company has managed to perform much better despite weak demand through the quarter.
“The margins were not impacted as much as we had expected. However, going ahead, much will depend on the operational cost even as demand may improve in the March quarter,” he added.
UltraTech Cement had obtained a stay order on the Government’s decision to de-allocate its Chhattisgarh coal block. The Bhaskarapara block was allotted jointly to Grasim Industries (which was merged with UltaTech) and Ahmedabad-based Electrotherm India in 2008. It has coal deposits of about 45 million tonnes.
The company expects to add 9.2 million tonne of capacity by putting up additional clinkerisation plants at Chhattisgarh and Karnataka by early next fiscal. UltraTech Cement’s production capacity is slated to go up to 62 million tonnes a year when these projects are completed.
The company foresees profit margins remaining range bound with the increase in input cost in line with general inflation. The surplus capacity build up by the industry will put pressure on demand over next three years, the company said.
However, in the long term, demand may grow at eight per cent driven by enhanced housing, infrastructure and allied spending, the company said.