Lower costs and stable pricing came to the rescue of UltraTech, even as the pandemic impacted its March quarter performance. UltraTech Cement reported a 6% year-on-year increase in its consolidated net profit at Rs 1,131 crore for the quarter ended March 31. This is the company’s normalized profit.
The company has reported both normalized and net profit numbers this quarter, on account of deferred tax liabilities because of change in the tax regime from 35% to the new 25%. Normalized profit after tax (PAT) of Rs 1,131 crore is before considering the benefit of Rs 2,112 crore of reversal of deferred tax liabilities as on April 1, 2019, due to change in income tax rates. The company’s reported net profit stood at Rs 3,243 crore, including the gain of deferred tax liabilities (DTLs).
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According to HDFC Securities Institutional Research Desk, UltraTech’s volumes suffered (down 16% y-o-y) in the March quarter owing to the Covid-19 impact. However, stable pricing and lower energy cost drove unitary ebitda expansion 14% y-o-y to a solid Rs 1139/MT (up 13% quarter-on-quarter), thus moderating consolidated earnings before interest, taxes, depreciation and amortisation (ebitda) decline to 4% y-o-y. “Subsequently, higher treasury gains and lower tax rate drove up adjusted PAT by 6% y-o-y. During FY20, strong profits (ebitda/apat up 28/51%), along with working capital release and flattish capex boosted free cashflows and its net debt fell 25% y-o-y to `16.9 billion. Net debt/ebitda cooled off to 1.8x vs 3x y-o-y,” the brokerage said.
The consolidated revenue from operations declined 13% y-o-y to Rs 10,579 crore on account of disruptions led by Covid-19 related shutdowns, resulting in lower sales volumes during the quarter and the full year. “In the face of the unprecedented situation arising out of the pandemic, the company’s operations across locations were shut down in line with the government directives. Construction activity across the country was halted, which is normally at its peak in the month of March, leading to an adverse impact on the company’s operations during the quarter ended March 31, 2020,” the company statement said.
Consolidated sales volume suffered a sharp decline of 16% to 21.44 million tonne in Q4FY20, while for the full year volumes fell 4% to 82.33 million tonne.
However, the consolidated ebitda remained flat at Rs 2,639 crore, supported by lower fuel and logistics costs, though, impacted by higher raw material prices. Consequently, consolidated ebitda margins came in at 25%, a rise of 300 basis points against the figures of fourth quarter last year.
Logistics costs declined 3% y-o-y to Rs 1149 per tonne on account of benefit due to exemption of railway busy-season surcharge. The energy costs were lower by 13% y-o-y to Rs 914 per tonne with benefit from lower fuel prices and increased pet coke usage. The raw material costs increased 5% y-o-y to Rs 497 per tonne. This was on account of higher fly ash prices and increased share of new products.
Meanwhile, cement dealers across the country expect significantly sluggish sales, elongated credit period to retailers, and higher working capital needs in the wake of the Covid-19 pandemic this financial year, according to a Crisil survey. Majority of the dealers surveyed said they expected volumes to shrink 10-30% in financial year 2020-2021 in the base case scenario, if the lockdown eases in May. “Extension beyond this can worsen these figures,” rating agency noted.
Cement prices trend in May, to date, indicates that prices have been increased by Rs 20-30 per bag in the North, Central and West markets; Rs 20-50 per bag in the East markets (Rs 20-25 per bag in all states except Bihar where the price hike is Rs 50 per bag), and Rs 40-90 per bag in the south region. “If these prices sustain, price improvement in Q1FY21 should be at 6-16% quarter-on-quarter, much higher than our expectation of 0-1% q-o-q price increase. Current cement prices in the North, Central and South (net of all discounts) markets are at all-time high levels,” analysts at Emkay Research said in a recent report.