Volumes are UltraTech’s strength
₹6,000-7,000 crore in FY24/25. It is expected to announce the next phase of growth plan this year. The pace of capacity additions and ramp-ups to gain market share is crucial, as competition worries have risen following Adani Group’s entry into the sector.
On the flip side, the gains from easing input costs have been delayed, though it is not a big concern yet. In Q1, energy costs rose due to currency devaluation and the rise in raw material cost was mainly driven by higher costs of fly ash and slag. Freight costs rose due to the resumption of the busy surcharge season.
This weighed on operating performance, which fell short of analysts’ expectations. Q1 Ebitda dropped by 1.5% year-on-year to ₹3,049 crore at a time when revenue growth stood at 17% to ₹17,737 crore. But given the inventory-related lag, the management expects the benefits from easing fuel prices to fully reflect by Q3FY24.
The bigger problem for the entire industry remains the subdued cement prices. Despite strong demand, prices have failed to sustain at higher levels in recent months, thus indicating the focus of cement companies is on volumes rather than realizations. According to UltraTech managem-ent, cement industry has seen a small increase in north and west markets in July.
However, south and east markets are not showing traction in pricing. Q2 is a seasonally weak quarter for the cement industry as construction activity tends to be muted in the monsoon. So, prices are unlikely to see a sharp improvement in the near term.
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