Ultratech Q1 thrives on higher volumes and utilization

Most cement numbers were expected to do well in this quarter and we saw indications from ACC results. However, Ultratech Cements is the largest Indian cement company by a margin. It reported 54% sales growth but there was more to the Ultratech story in the Jun-21 quarter. Cement sales volumes were up 47% YoY while the cement capacity utilization ramped up from 46% to 73%. With cement production of 21.53 MT in the Jun-21 quarter, it made all the difference.

Let us now get to the specific top-line and bottom-line numbers. Ultratech Cement reported 54.21% growth in total sales revenues for the Jun-21 quarter at Rs.11,830 crore. During the same period, the net profits more than doubled to Rs.1,703 crore as the combination of higher volumes and higher capacity utilization became a force multiplier for profits. Like in the case of most industries, sequential sales and sequential profits were lower due to COVID 2.0, but that is a temporary phenomenon. What matters is that cement is having a whale of a time with the government spending heavily on infrastructure and Ultratech, being the market leader, is an obvious beneficiary of this trend.

Read: Cement Sector Updates

If you thought that higher volumes and higher capacity utilization must be a simple business, think again. Ultratech had to contend with 7% spike in raw material costs, 12% rise in power costs and 6% higher logistics costs. It managed to compensate for these costs through cost controls and inventory efficiency gains. For the quarter, Ultratech reported Rs.1,689 as EBITDA/ton, which is at par with the best in the industry. The best story of Ultratech came from the net margins at 14.39%; better than 10.35% in the Jun-20 quarter and 12.32% in the sequential Mar-21 quarter.