India’s largest cement company, UltraTech Cement, posted its September quarter (Q2FY22) results on Monday, 18 October 2021.
UltraTech’s consolidated revenues (topline) stood at ₹11,743 crore, up 14% year-on-year. The company’s operating margins stood at 24%, against 28% in the same quarter last year. It’s consolidated net profit stood at ₹1,314 crore showing a flat growth year-on-year. UltraTech’s profits broadly met the street estimates.
The main reason for the fall in the company's margins was high energy costs. Coal & pet coke prices nearly doubled in the current quarter, which resulted in energy costs rising by 17% year-on-year.
The company is of the opinion that the rising input costs of coal, diesel and pet coke prices can pose a challenge to the cement industry.
UltraTech Cement plans to start mining operations in its Madhya Pradesh’s coal block, which will help in reducing dependence on coal purchases.
Apart from the fuel costs, the company's packing cost also increased by 20%, thereby keeping the pressure on the margins.
According to the company, recovery in rural housing and pickup in infrastructure-led construction activity are likely to drive cement demand off-take.
In the current financial year, the company's share price has risen by 10%. On the other hand, the Nifty50 Index has risen by almost 26%, which shows that UltraTech Cement has underperformed as compared to the Nifty50.