Intense competition eats into UltraTech’s second-quarter net profit

Rave News

MUMBAI: Fierce competition in India’s cement industry has eroded profits at the country’s largest construction materials maker, with UltraTech Cement’s profits falling by more than a third in July-September.

The company reported consolidated profit of $8.2 billion, an annual decrease of 36%. Comprehensive revenue fell 2% $15,635 Crores.

This is despite its consolidated sales volume increasing 4% year-on-year to just under 28 million tons.

Financial decline

The decline in the company’s financial position was due to lower realizations. Domestic gray cement realization volume fell by 8% compared with the same period last year $USD 4,901 per ton this season. Domestic gray cement accounts for 92% of UltraTech’s sales.

Subsequently, advance earnings on interest, taxes, depreciation and amortization (Ebitda) decreased by 21% annually to $2019 Crores. Ebitda margin fell three percentage points to 12.9%.

The country’s two largest cement manufacturers – UltraTech and Adani Group – are aggressively increasing production capacity. They are also actively consolidating the industry by acquiring smaller peers.

“The scale of the capacity expansion is unprecedented in the global cement industry,” UltraTech said in a press statement.

With the completion of the company’s ongoing expansion projects across India and statutory approvals for the acquisition of Kesoram Cement (10.75 MTPA) and The India Cements (14.45 MTPA), UltraTech’s total cement production capacity will be over 200MTPA.

“The expanded manufacturing footprint will help reduce operating costs and improve customer service by leveraging the company’s strong nationwide presence and its distribution network. More importantly, this scale will further enable UltraTech to cater to growing growth across India of cement demand and enhance UltraTech’s contribution to national development.

During the quarter, the company raised $500 million through sustainability-related loans with participation from six banks. This is the company’s second sustainability-related financing after the issuance of sustainability-related bonds in 2021.

Ritesh Shah, head of mid-market coverage and ESG at Investec Capital Services India, said: “Sluggish industry demand coupled with surging supply has taken a toll on UltraTech’s profitability. We expect consensus earnings to continue facing downgrades.”

Looking ahead, the company said its capacity expansion leverages the long-term growth potential of the Indian cement industry.

“By expanding its scale, the company will meet the growing demand for cement across the country,” the company said.

The company expects increased government spending on infrastructure and increasing demand for urban housing to drive sales growth of 7-8% in the next few years.

“UltraTech aims to lay the foundation for the infrastructure that will shape modern India and make a meaningful contribution to the progress of the country,” the report states.

During the quarter, the company also launched an 8-MW waste heat recovery system. This brings UltraTech’s total waste heat recovery capacity to 308 MW.

During the quarter, green power, including waste heat recovery and renewable energy, accounted for 32% of the company’s power mix.

Catch all business news, corporate news, breaking news events and latest news updates on Live Mint. Download The Mint News app for daily market updates.

moreless

Source link

Leave a comment
×

Hello!

Who do you want to talk to?

×