Mumbai: In a landscape where construction and infrastructure development are vital to economic growth, UltraTech Cement Limited finds itself navigating turbulent waters. On 21 October 2024, the company disclosed its unaudited financial results for the quarter and half-year ending 30 September 2024. These results tell a story of declining revenues and profits, prompting a closer examination of the underlying factors affecting this leading player in the cement industry.
The company’s revenue saw a marginal increase of 3.7 per cent year-on-year, reaching Rs 15,634.73 crore. However, despite this rise in top-line growth, profitability was under pressure due to escalating costs, causing a 35.5 per cent decline in net profit compared to the same quarter last year.
The quarter was marked by an environment of rising costs, notably in power and fuel expenses, which accounted for Rs 3,837.69 crore, a 12.5 per cent decline from the previous quarter but still high compared to historical levels. Additionally, freight and forwarding expenses surged by nearly 2 per cent year-on-year to Rs 3,583.51 crore, further eroding the company’s operating margins. Employee costs also saw a significant rise, reaching Rs 913.86 crore, a 12.5 per cent increase year-on-year.
Despite these challenges, UltraTech Cement managed to maintain a steady volume growth and revenue stability, driven by ongoing infrastructure developments and a resurgence in the real estate sector. However, the company’s efforts to manage costs through operational efficiencies and alternative fuel strategies fell short of countering the broader cost inflation impacts.
UltraTech Cement, managing director, K.C. Jhanwar commented, “While we have seen revenue growth supported by increased sales volume and price improvements, the cost inflation in key inputs such as power and logistics remains a significant challenge. We are focusing on optimising our fuel mix and enhancing our efficiency to mitigate these impacts.”
The company’s net profit stood at Rs 825.18 crore for the quarter, down from Rs 1,280.38 crore in the same period last year, indicating a tightening profit margin from 8 per cent to 5 per cent. On the brighter side, UltraTech’s ongoing expansion plans remain on track, with a commitment to increasing capacity by 22.6 million tonnes per annum by FY26, aiming to cement its leadership in the Indian market.
Analysts point out that while revenue growth is encouraging, the impact of elevated costs on UltraTech’s profitability raises concerns about its near-term performance. As cement demand is expected to continue its upward trajectory, the company’s ability to manage cost pressures will be critical in determining future growth.