 "UltraTech Q1 profit falls short of Street estimate")
The company, part of Aditya Birla Group, posted a year-on-year decline of seven per cent in profit — net profit stood at Rs 626 crore, against Rs 673 crore in the corresponding quarter last year. Analysts polled by Bloomberg had anticipated a fall of little more than a percentage point; their consensus earnings estimate was Rs 664 crore.
On the net sales front, however, the company beat the Street estimate, reporting a rise of 14 per cent. Net sales for the June quarter stood at Rs 5,649 crore, compared with Rs 4,949 crore in the year-ago period. The consensus estimate for net sales was Rs 5,601 crore.
On Friday, the UltraTech stock fell 1.71 per cent, or Rs 44.45, closing at Rs 2,548.10 on BSE. Recently, the stock had hit a 52-week high of Rs 2,868.
K C Birla, chief financial officer, told Business Standard, “We had good volume growth of 14 per cent (year-on-year). But the pricing environment continues to remain poor.”
On an average, all-India cement prices for the June quarter marginally rose to Rs 295 a 50-kg bag.
Despite better than expected growth in cement demand, UltraTech couldn’t record higher profitability, as prices were supportive and variable costs increased three per cent, primarily on account of higher pet coke prices. During the quarter, power and fuel costs jumped 22 per cent to Rs 1,207.6 crore from Rs 989.6 crore in the year-ago period. Freight costs increased 21 per cent to Rs 1,330 crore. These factors led to lower than expected earnings before interest, tax, depreciation and amortisation (Ebitda). While the Street expected Ebitda of Rs 1,140 crore, on a standalone basis, the figure stood at Rs 1,050 crore.
The company’s net realisation per tonne fell two per cent. “Our net realisation for the quarter was Rs 4,150 a tonne, against Rs 4,230 in the June quarter of FY14,” Birla said.
During the quarter, UltraTech’s capacity utilisation rose to 84 per cent from 76 per cent a year ago.
The quarter also saw the completion of the acquisition of Jaypee Cement. However, this wasn’t reflected on UltraTech’s balance sheet, as the financial results of Jaypee Cement’s Gujarat units had been combined with UltraTech’s financial results only for the period after June 12.
The company said cement demand was slated to grow seven-eight per cent, with expectations of double-digit growth in the second half of this financial year. “The key value drivers will be renewed government focus on housing and infrastructure spending,” it said.
While foreign institutional investors reduced their stake in UltraTech by half a percentage point during the June quarter — from 20.95 per cent in the March quarter to 20.44 per cent — most analysts remain positive on the company’s prospects. Of the 21 analysts polled by Bloomberg in July, 14 have ‘buy’ ratings, five ‘hold’ and two ‘sell’. Their target prices range between Rs 2,200 and Rs 3,003; the consensus estimate is Rs 2,683.
Giriraj Daga of Nirmal Bang says, “From now, costs will not increase much, while cement prices have improved, which will lead to an improvement in Ebitda in coming quarters.”
CEMENT NOT STICKING
- Volume growth at 14% y-o-y during the quarter
- Despite better demand, UltraTech could not reap the benefit as prices remained subdued
- Net realisation per tonne at Rs 4,150 against Rs 4,230 last year
- Capacity utilisation improves to 84% from 76% y-o-y
- Company expects double-digit volume growth in the second half of FY15
- Completion of acquisition of Jaypee’s Gujarat units