Ultratech Cements Share Q3 Results

For the December 2021 quarter, Ultratech Cement reported 5.9% YoY growth in total revenues at Rs.12,985 crore. These are consolidated numbers. There was a slowdown in demand in Nov-21 due a number of reasons. Firstly, the construction ban in NCR region disrupted cement flows. Secondly, the extended monsoons in the south and parts of North India also impacted cement demand. Volumes were up 13.2% for the 9 month period.

The operating profits for the Dec-21 quarter were lower by -28.1% at Rs.1,745 crore. This was due to a 33% spike in power and fuel costs amidst higher coal prices as has been the norm across the cement industry. However, unlike the previous quarter, the freight costs largely stabilized during the current quarter.

Operating performance could have been worse had it not been for the inventory efficiency gains resulting in lower lock-in of capital in the working capital cycle. Most of the other heads of operating costs were stable in the quarter. Operating margins fell sharply from 19.8% in Dec-20 quarter to 13.44% in the Dec-21 quarter.

Profit after tax (PAT) was up 7.8% YoY in the Dec-21 quarter at Rs.1,708 crore on the back of tax credits and lower interest costs. Let us talk about the interest cost reduction first. During the Dec-21 quarter, Ultratech repaid loans worth Rs.3,459 crore. As a result, the debt/equity ratio fell from 0.53 to 0.22 and the debt coverage ratio improved from 1.85X to 4.39X. Due to loan repayment, the interest costs nearly halved.

But the bigger boost to the profits came from the much larger tax credits. For example, Ultratech saw gains of Rs.323 crore from the reversal of accumulated tax provisions and an additional Rs.212 crore from minimum alternate tax (MAT) reversals.  Net Profit margins improved from 12.92% in the Dec-20 quarter to 13.15% in the Dec-21 quarter. Ultratech had a good quarter despite tough operating conditions.