Earnings Review: UltraTech bottomline hit by high input costs Apr-Jun

22 Jul 2022

An 82% jump in blended petcoke and coal costs was a key factor that led UltraTech Cement Ltd to post a fall in its consolidated operating profit and consolidated net profit in the quarter ended June.

The company which reported a decline of 7.1% on the year in its consolidated net profit to 15.8 bln rupees and a 8.8% fall in the operating profit to 32 bln rupees, got caught in cost headwinds once again in the June quarter, after having faced similar challenges in the previous three quarters.

It did, however, beat brokerages’ estimate of 13.2 bln rupees for its consolidated net profit.

The cost factor was so intense that the company hedged itself when giving its near term outlook today. It said that going forward the “headwinds arising out of rising cost pressure could put some pressure on the profitability of cement companies.”

On the other hand the company also said that going forward the strong momentum in housing and government’s thrust on infrastructure and industrial development will swing cement demand upwards in 2022-23 (Apr-Mar).

On an analysis of the operating costs of UltraTech Cement, the surge in power and fuel costs stands out. Driven by the 82% rise in blended petcock and coal costs the company’s power and fuel costs, which made up for one-third of all operating expenses in Apr-Jun, jumped 65% to 40.1 bln rupees.

Cost of materials consumed was also elevated, rising 29%, but at 20 bln rupees it made up for one-sixth of total operating expenses.

UltraTech’s profitability would be further hit had its logistics cost not stayed stable. The freight and forwarding expenses were up by 24% to 33 bln rupees. It made up for 27% of total operating costs.

On a per tn basis, power and fuel costs rose sharply by 54% on the year to 1,573 rupees while raw material costs were up 13% to 577 rupees and logistics cost was up only 6% to 1,253 rupees.

UltraTech Cement’s earnings performance was partly saved by a good topline growth. Its consolidated revenue from operations was sharply up by 28% on the year to 151.6 bln rupees driven by a good 16% increase in consolidated sales volume to 25 mln tn.

The revenue was higher than brokerages’ estimate of 143 bln rupees.

Today, UltraTech also said that Kailash Chandra Jhanwar was re-appointed as the managing director for a further period of two years from Jan 1 next year.