UltraTech Cement Ltd

Research report by 'Ventura Securities Ltd'
     
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Cement major UltraTech has reported a fall in profits for the second quarter in a row. Net profits have dropped 26 per cent (to Rs 228.5 crore) over the previous year following an 18 per cent decline in the December 2009 quarter. Despite a 10 per cent growth in dispatches, sales have grown only 3 per cent effectively; a clear sign of falling realisations. Compared to a year ago level, prices were over Rs 25 per bag lower in the January-March period in the South, a key market for UltraTech Cement. The company's export realisations too were lower in the period following sluggish realty demand in West Asia. It produced 5.0 MMT of cement (4.6 MMT) up by 8% with effective capacity utilisation on expanded capacity at 97% (107%). 


Raw material and freight expenses have been significantly higher in the March quarter following higher prices of coal, gypsum, fly-ash and increase in prices of petrol and diesel compared with last year. Raw material expenses accounted for 14 per cent of sales; up from 10 per cent in the same period last year. Freight charges have risen 14 per cent. However, power expenses declined by 11 per cent, due to the in-house power generation. Profit at the operating level was down 30 per cent, and margins stood seven percentage points lower at 22 per cent. At the net level, there was some respite following lower interest charges (down 16 per cent) and lower taxation charge at Rs 72 crore (down by 43 per cent). Net profit margins shrunk by a lower 4.6 percentage points to 11.9 per cent. 


   
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