Sales increase 27%, profits 47%.
Cement stocks outperformed the BSE Sensex in the current month with the Business Standard Cement index up 11.6 per cent compared with a 5 per cent rise in the benchmark index since July 1. Investors are buying cement stocks since the beginning of the month in anticipation of robust quarter results. Cement despatches rose by over 11 per cent during the quarter ended June 2009, while price realisation per bag of cement went up by more than six per cent.
Analysts expected a robust performance from the sector. 16 cement companies declaring their results for the quarter have performed in line with expectations. The year-on-year net sales in the period rose 26.6 per cent, the best in the last four quarter, driven by frontline companies such as UltraTech, Shree Cement and other mid-size cement makers such as Binani Cement, Chettinad Cement, Dalmia Cement and OCL.
Operating margins moved up by 434 basis points (bps) to 28.25 per cent, the best in the last eight quarters. Apart from the higher price realisation per bag, the sharp decline in cost of imported coal helped these companies to achieve better margins. No wonder, net profit rose by 46.9 per cent as against 10.8 per cent in the March quarter and a decline of 15-21 per cent during the earlier two quarters.
Cement stocks moved up ahead of results with ACC, Ambuja Cement, UltraTech Cement, India Cement and Binani Cement hitting their 52-week highs much before the announcements of quarterly results. Shree Cement and JK Lakshmi Cement hit 52-week highs on Friday as these companies reported more than 100 per cent rise in quarterly profits. Birla Corporation and Mangalam Cement too hit 52-week highs on Friday on investment buying.
Ambuja Cement underperformed the cement stocks last with marginal decline in share price as the company reported a decline in net profit due to high-cost clinker purchases. ACC did well with a net profit growth of 78.9 per cent, mainly on account of higher-than-expected cement realisation and lower power and fuel costs. The company’s exposure to northern, central and eastern regions helped in a significant improvement in realisations.
UltraTech Cement reported its best-ever quarter with 30.5 per cent rise in sales and 57.6 per cent growth in net profit. Its operating margin increased by 700 bps to 37 per cent on a 9 per cent rise in domestic realisations. The company also benefited from a decline in prices of imported coal.
