UltraTech Cement which is the leading cement maker in the country recently posted a 48.63% rise in standalone net profit for Q3FY20 at Rs 643.15 crore compared with Rs 432.70 crore in the same quarter last year. This indicates result oriented management and a string of concrete measures the company had taken in recent times.
UltraTech Cement has been constantly reducing its debt on paper and improving price realization at 4.4% leading to astounding bottomline figures in Q3FY20. While this Aditya Birla company accounts for India’s 25% of cement production, other top cement companies in India such as Shree Cements, ACC, Ramco, Binani and Ambuja have failed to charge more without compromising on volumes.
Most brokerages have revised their Earnings Per Share(EPS) targets for UltraTech Cement by 6 to 10% expecting the upcoming budget 2020 to boost real estate and construction industry largely. While this is a very positive sign for the company, it is also signalling a revival in the economy which is in doldrums from last 5 consecutive quarters.
In last few months, all India average cement prices have risen 4-5% to Rs 350 per 50 kg bag while Ultra-Tech’s cement price rose 4.9% to Rs 4,590/tonne in Q3FY20. Higher price realisations indicates stronger sales and brand recognition for the company in the market.
Company’s acquired assets have begun to pay off. The first such acquired asset was 21.2 MT of JP Associates plants. Binani Cement’s assets was second with 6.25MT, which it renamed Ultra-Tech Nathdwara. And third, the company acquired 13.4MT cement assets of Century Textiles.
In addition, reduced debt levels of UltraTech Cement because of falling petcoke prices are aiding in further improving its bottomline. Petcoke is an ingredient used in cement production kilns.
In Q3FY20, UltraTech Cement reduced debt by Rs 1,994 Cr. As a result, net debt to EBIDTA stood at 1.8 in the this quarter, compared to 2.8 in March 2019. Because of UltraTech Cement’s high capacity of 117 MT and its balance sheet strength, the company should continue to fetch premium in the cement market.
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