IMPROVING CEMENT PRICE TREND

Q4, and this was broadly in line with expectations.

The disappointment was largely in the cement segment. Analysts were expecting the segment to report an operating profit per tonne of over ~900, while the company managed to report about ~818 per tonne. This is primarily due to a rise in freight rates. Power and fuel costs also rose significantly (54 per cent sequentially), given the spike in coal and pet coke prices. Freight and forwarding March North April Central costs, too, saw a similar rise, taking a toll on the Q4 show. Peers ACC and Ambuja have seen a similar trend. While UltraTech had been able to manage its costs better so far, they could feel the cost pinch, given the rising coal and pet coke prices.

The company reported good volume growth, which came in at an 11 per cent on a year-on-year basis. On a sequential basis, the growth was 22 per cent, which is encouraging, East West South indicating the impact of the note ban has been fading and demand is improving. Higher volumes helped it report revenue of ~2,683 crore, better than the consensus estimates of ~2,295 crore. The per tonne realisations, at ~3,770, also improved, from ~3,699 in Q3. It is the realisations trend that the Street will be watching, as it can offset some of the cost pressure.

With the hike in prices, the disappointment on profitability during the March quarter may not lead to a significant correction in stock price. Analysts at Kotak Institutional Equities indicated the strong pricing action across regions gives visibility to earnings forecast, though they will review estimates after the results.