UltraTech Cement Q3 net profit beats estimates as tax credit helps

Aditya Birla Group company UltraTech Cement exceeded analysts’ expectations for quarterly profit thanks to a drop in finance costs and a tax credit.

Consolidated profit after tax for the quarter ended Dec. 2021 came in at Rs 1,708 crore, up 7.8% from Rs 1,584 crore in the year-ago period. Profit was almost 30% higher than the previous quarter’s earnings of Rs 1,314 crore.

Various analysts had expected profit to be in the range of Rs 1,200-1,500 crore.

The cement maker’s consolidated revenue was in line with expectations, rising 6% to Rs 12,985 crore from Rs 12,254 crore in the year-ago quarter and Rs 12,017 crore in the three months ended September 2021. 

The company, however, said its gross margin took a beating on account of a rise in input costs, including prices of coal, pet coke and freight, which went up owing to higher oil prices. Gross margin is the difference between sale price and the cost of production of the good. 

Ultratech also said there was a one-time gain of Rs. 535 crores in tax for earlier years. During the quarter, it reversed accumulated provision for tax amounting to Rs 323.35 crore and accrued Minimum Alternate Tax credit entitlement of Rs 211.86 crore.

Other key highlights:

1) Operating profit was down 23% at Rs 2,419.4 crore.

2) Although input costs rose, finance costs were down 54%, adding to the company’s profits.

3) EBITDA margin contracted to 18.6% from 25.6%.

4) Other income declined 73% to Rs 70.5 crore.

5) Volumes declined 3% to 23.13 million tonnes.

Demand environment, business outlook

Ultratech said that with business continuity plans in place, it is now better positioned to tide over the current third wave of the coronavirus pandemic. 

The company said that after gaining pace in October 2021, demand slowed down substantially in November 2021 as a result of the construction ban in the National Capital Region, extended monsoons in the south and a few states in the north, sand issues in the eastern region as well as in parts of Uttar Pradesh, and the Diwali holiday season.

Ultratech also said that its board had approved a Rs 965 crore capital expenditure spend towards modernisation and expansion of capacity at Birla White from the current 6.5 lakh tonne per annum (LTPA) to 12.53 LTPA, in a phased manner.

During the quarter, Ultratech commenced operations at its bulk terminal at Kalamboli, Navi Mumbai. This is the seventh bulk terminal of the company. The earlier six are located at Cochin in Kerala; Mangalore and Doddaballapur in Karnataka; Uran and Pune in Maharashtra; and Shankarpalli in Telangana. 

Ultratech also commissioned Line II of the Bara Grinding Unit in Uttar Pradesh, having cement capacity of 2 MTPA. Line I was commissioned in January 2020 and is already operating at a capacity utilisation of more than 80%.

The company said this additional capacity will help it to service the fast-growing cement demand in the central region of India.

During the quarter, trade sales were impacted more than non-trade sales, as overall cement demand remained subdued. With the onset of the peak season and rising construction activities, cement demand is expected to revive in Q4FY22, driven by a pick-up in the government-led infrastructure and housing projects.

Rural and urban demand is also expected to pick up. All of this augur well for the company, Ultratech said.