UltraTech Cement Q2 profit halves on subdued demand

MUMBAI (Reuters) - UltraTech Cement Ltd, the country's largest cement maker, reported a 52 percent fall in net profit for the July-September quarter, the biggest drop since 2010, after it was hit by a slowdown in homebuilding and infrastructure projects.

Rising input and energy costs have been putting pressure on margins at Indian cement companies, including UltraTech and Ambuja Cements Ltd , while demand remains a concern in an economy that is growing at its slowest pace in a decade.

"The outlook continues to remain challenging. Demand growth in FY14 is likely to be around 5 percent, though in the long term growth is likely to be over 8 percent," UltraTech said in a statement to the stock exchange on Saturday.

 

UltraTech is part of the diversified Aditya Birla Group.

The company reported net profit of 2.6 billion rupees for the quarter ended September 30, falling short of market estimates of 4.1 billion rupees, according to Thomson Reuters I/B/E/S. Net sales fell 4 percent to 45 billion rupees.

In September, UltraTech agreed to buy a cement plant in the western state of Gujarat from debt-laden competitor Jaiprakash Associates for about 38 billion rupees, including debt.

Production capacity at UltraTech will rise to 59 million tonnes after the acquisition of the 4.8 million tonnes Jaiprakash unit and the company plans to expand this to 70 million tonnes by 2015.

Jaiprakash Associates, which also has interests in power and infrastructure, had been trying to sell the plant for more than a year to cut its debt.

Government initiatives to expedite large infrastructure projects have yielded little so far and this is putting pressure on cement makers, especially those with debt that has become expensive to service due to high interest rates. (Reporting by Aradhana Aravindan and Aditi Shah; Editing by Paul Tait)