UltraTech Cement Q2FY25: Performance Hit by Higher Expenses and Declining Realizations

by Manish Chowdhury, Head of Research, Stoxbox 

• UltraTech Cement Ltd. recorded a net revenue from operations of Rs. 15,635 crores (down 13.5% QoQ / down 2.4% YoY) against an estimated Rs. 15,711 crores. The sales volume for the quarter ended September 2024 stood at 26.42 MT (down 15% QoQ / up 3% YoY). Domestic sales volume grew YoY on a consolidated basis despite incessant rains throughout the country this season. The sales realization stood at Rs. 4,901 (down 2.9% QoQ/down 8.4% YoY).
• The raw material cost for the company increased to Rs. 2,917 (down 9.5% QoQ / up 16.9% YoY) due to an increase in the cost of fly ash and slag. The power and fuel cost stood at Rs. 3,838 crores (down 14.6% QoQ / down 12.5% YoY). The logistics stood at Rs. 3,584 (down 14.3% QoQ / up 2% YoY). Other costs stood at Rs 2,365 (down 1.2% QoQ / up 4.8% YoY).
• The quarter’s EBITDA stood at Rs. 2,018 crores (down 33.6% QoQ / down 20.9% YoY) failing to meet the market estimate of Rs. 2,314 crores. Margin stood at 12.9% (down 391 bps QoQ / down 302 bps YoY). This was due to increased employee expenses and seasonality effects.
• The company earned a PAT of Rs. 825 crores for the quarter ended September 2024, which fell significantly at 35% annually. The net profit margin stood at 5.3%. The EPS for the quarter stood at Rs. 28.43.
• The installed capacity as of the quarter ended September 2024 stood at 150.7 MT, and capacity utilization was 68%.
• The RMC sales volume stood at 3.01 million cubic meters.
•  The lead distance during the quarter reduced to 388 Km compared to 403 Km in the previous year’s quarter.
• The company’s green power mix stood at 23.4% (up 47% YoY), with the renewable power capacity rising to 650 at 13.5% and the WHRS capacity standing at 18.4%.

View:
The company reported a disappointing quarter, missing market expectations across all metrics due to several challenges, including delays in government project tenderization, sand shortages, and the impact of the monsoon season. Revenue growth was sluggish, driven by seasonality and lower sales realizations. EBITDA margins also contracted due to higher costs and an unfavourable product mix. However, with the company’s ongoing capacity expansion and recent statutory approvals for the Kesoram Cement (10.75 MTPA) and India Cements (14.45 MTPA) acquisition, improved performance is anticipated in the coming quarters. This acquisition is expected to lower operational costs and enhance the company’s strong national footprint by surpassing the cement capacity of 200 MTPA. Additionally, increased government infrastructure spending and rising demand in the urban housing sector are projected to drive sustainable volume growth of 7-8% going forward, positioning the company to capitalize on growing cement demand within the industry.