Ultratech Cem

The market was not very enthused after Ultra Tech Cement announced its Q3FY13 numbers. The performance was lackluster with the company posting a 3% YoY drop in net profit at Rs.601 crore on a 6% rise in net sales at Rs.4857 crore. Operating expenses rose 6%, led mainly by freight and forwarding cost, which was up 12%. Interest outgo was up 86% atRs.52 crore. But for the other income of Rs.96, which the company booked on account of subsidy received through state investment promotion scheme, the net profit would have been much lower. Energy cost, which is imported coal remained at US$ 100/t levels. The benefit of softening in coal prices was partly offset by the depreciation in rupee.

The cement demand was subdued. Domestic cement sales growth of grey cement remained flat at 9.62 MnT (9.61 MnT) while it was 2.62 LmT (2.46 LmT) for white cement and wall care putty. The on-going capex towards setting up of additional clinkerisation plants at Chhattisgarh and Karnataka is on track. These projects are expected to be operational by early FY14. They will augment the company's cement capacity by 9.2 mtpa bringing it to a total of 62 mtpa. The company has not given a positive outlook for the future, expecting long term demand growth of 8%, with housing, infrastructure and allied spending being the key value drivers. However, the surplus scenario is expected to continue over the next three years. Input costs are likely to increase in line with general inflation with margins remaining range bound.