Jaypee buy weighs on UltraTech Q2

UltraTech Cement, the country’s largest firm in the sector, with annual output capacity of 93 million tonnes (mt), reported a decline of 31 per cent in net profit at ~423 crore for the quarter ended September, compared with ~614 crore in the year-before period.

The two figures are strictly not comparable, as the Aditya Birla Group entity is in the process of digesting one of the country’s biggest acquisitions, of Jaypee Cement’s 21.2 mt capacity. Even so, the profit was better than market expectations by nearly 12 per cent.

Bloomberg had estimated a net profit of ~377 crore.

Higher depreciation and increased interest cost related to the acquired units, stated the company, dented profitability during the period, the first operating quarter after the acquisition. Sales, however, increased to ~6,840 crore, a year-on-year rise of a fifth, largely in line with expectations.

UltraTech’s shares, after a weak start, traded strongly in the second half of Wednesday’s trading session till the results announcement, touching an intra-day high of ~4,180 on the BSE. However, it finally closed at ~4,090.75, almost flat over Tuesday’s closing.

The company said the quarter had “continued to witness increasing cost trends, attributable to increase in fuel prices”.

Jaypee’s acquired units will enhance UltraTech’s presence in the high growth markets of the central region, Himachal Pradesh, eastern Uttar Pradesh and coastal Andhra. UltraTech had completed the ~16,189-crore acquisition in June. “The critical aspect has been to improve and stabilise the quality of cement being manufactured at these plants and bringing it up to standard,” said UltraTech.

It added the acquisition was completed with the onset of monsoon and acute shortage of sand in most markets had impacted the performance. UltraTech will now aim at increasing its presence in the newly acquired markets and driving sales.