UltraTech Cement Q2 net profit up 21% in September quarter

Mumbai: The cement industry in India is in a "sweet spot", said market leader UltraTech Cement's chief, optimistic that prices will continue to improve in the next few months. The Aditya Birla Group company on Monday reported a 21% year-on-year increase in profit for the September quarter.

"In a normal year, cement prices slip during July and August as rains slow site (work) and dealers chase volumes," chief financial officer Atul Daga said. "This year, the industry largely avoided that," he added. July-September is typically the weakest for cement-makers, both in terms of prices and demand as monsoon rains disrupt construction activities and impact demand.

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"The September quarter is always the one where monsoon writes a part of the script," Daga said. "This year, it brought a different twist, a weak monsoon that kept construction going, alongside a West Asia conflict that flared up again and pushed fuel costs higher".

A near 14% year-on-year growth in grey cement volumes to 35.94 mt in the domestic market, though, helped UltraTech clock in a near 19% year-on-year growth in consolidated sales to ₹23,295 crore. This also helped the profit before interest, depreciation and tax rise more than 17% to ₹3,832 crore. Consolidated profit for the quarter rose 21% on-year to ₹1,501 crore.

Cement prices started rising in September, and have continued to move higher in October.

"My sense is that there is more price improvement that will happen in the next couple of months," Daga said on a call to analysts post the company's earnings. "The festive weeks may slow down on how quickly these prices are absorbed. So, we expect the full benefit of these price increases to reflect in the Q3 earnings rather than immediately," he said.

UltraTech is now stepping into the strongest season of the year, with better prices, more capacity and a cost structure that improves with scale. "I won't pretend that the second half will be free of cost pressures. What I can promise is that we will manage it much better than anybody else under the sun," Daga said.

He also remained optimistic on demand prospects over the next two-three years. "That is the biggest ask that we as cement players are looking for. A good volume growth, good demand in the economy will lead to everything else also falling in line," he said. UltraTech reported its earnings during market hours on Monday, and its shares ended at ₹10,620.10 on the BSE, down 3% from the previous close.