Lower price realisations, due mainly to overcapacity in the industry, impacted the December-quarter numbers of cement manufacturers.
UltraTech Cement’s results were below expectations. Total operating revenues increased by just 1.9% year on year. Though volumes increased 10.3%, a drop of 8.3% in price realisation offset a good part of the gains. The company’s biggest market is in the south, accounting for nearly a third of sales.
To the company’s detriment, the southern and western regions saw the sharpest drops in prices. Also, total raw material costs increased by a whopping 174.9% to Rs 264.87 crore, leading to a 268 basis points (100 basis points make one percentage point) decline in operating profit margins to 24.03%. Net profit declined 17.7% to Rs 196.03 crore.
ACC’s results were more or less in line with analyst estimates. Revenues increased marginally, by 0.4%, under the impact of negative surprises in sales volume and lower price realisation.
Volumes increased by only 4% on the back of poor cement demand in the domestic market and limited capacity additions by the company last year. Net price realisations declined 3.5% to Rs 3,584 per tonne, led by increased supplies from new capacities commenced in the last 2-3 quarters. Operating profit margins, however, expanded 140 basis points to 22.42%, led mainly by a 1.3% drop in total expenditure. Net profit declined 7% to Rs 280.7 crore.
Ambuja Cements’ numbers were adversely impacted on account of weak cement price realisations and higher-than-expected costs.
Revenues increased 9.1%, helped by a 4.7% increase in total sales volume. Domestic volumes did relatively better than exports and increased 8.5%. However, this was offset by a 60.8% decline in exports on account of poor demand from the Middle East. Net price realisations increased 4.3% to Rs 3,690 per tonne.
Operating profit margins expanded 80 basis points to 24.3%, helped by a 9.5% drop in raw material costs to Rs 443 per tonne. Net profit increased 6.9% to Rs 239.7 crore.
Grasim’s Industries’ cement business numbers were in line with expectations, while the viscose staple fibre (VSF) business put in a better-than-expected show. Revenues increased 14.6% year on year, driven mainly by a 71% increase in VSF revenues and a 17.3% increase in cement revenues. Higher capacity utilisation and increased demand boosted VSF revenues. Operating profit margins expanded 1,326 basis points to 33.1%, helped by strong operating performance of the VSF business and lower costs in the cement business. Net profit increased 81.3% to Rs 595.9 crore.
Outlook for the industry remains poor, given the massive capacity additions expected and the resultant pressure on prices. This is likely to weigh heavily on cement stocks in the days to come.
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