UltraTech full year results impacted by slower demand

UltraTech full year results impacted by slower demand
Published: 26 April 2011

Indian cement producer UltraTech Cement, part of the Aditya Birla Group, today announced a decline in full year sales to 31 March, 2011, with its performance hampered by slower growth in cement demand and higher input costs. 

Full-year net sales stood at INR13,210 crore compared to INR13,442 crore in the same period of the previous year. Profit before interest and tax as INR2063 crore against to INR3319 crore YoY. The company highlighted that the results for the year and the quarter ended 31 March, 2010 include Samruddhi Cement Ltd’s performance for like-for-like comparison and are strictly not comparable with the corresponding period of previous year.

Domestic cement and clinker sales stood at 32.76Mt (32.26Mt in the previous year) while white cement sales stood at 414,000t (402,000t).

The company reported that Indian cement demand growth for the year was just 5.3 per cent, the lowest in 10 years. This was primarily due to declining/subdued growth in various key cement consuming states as a result of lower infrastructure spending, a slowdown in the real estate sector as well as an extended monsoon period and a lack of railway wagons.

In terms the company’s quarterly performance, net sales stood at INR4490 crore compared to INR4,206 in the corresponding period of the previous year. Profit before interest and tax was INR904 crore as against INR858 crore YoY. Domestic cement and clinker sales for the quarter amounted to 10.37Mt while white cement sales were 143,000t.

During the quarter the company’s variable cost rose by 14 per cent mainly on account of a substantial increase in input and energy costs. Imported coal prices rose by 27 per cent YoY. Further, domestic coal prices shot up by 30 per cent in March, 2011. Variable costs during FY11 also increased by 13 per cent due to increasing flyash, slag and energy prices.

During FY11, the Indian cement industry witnessed capacity additions of around 28Mt on top of the 60Mt added in FY10 resulting in surplus volumes. According to UltraTech Cement forecasts, this surplus scenario may last for the next three years.

Going forward, the company sees an 8.5 per cent growth for the coming year on the back of government initiatives in rural development, infrastructure and housing. However, it noted that the pricing environment may remain challenging and with the impact of surplus capacity, margins may continue to remain under pressure.