UltraTech reports results for the quarter ended 30 September 2008

1st October, 2008

18 October 2008

UltraTech reports results for the quarter ended 30 September 2008

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Entry into the Middle East to acquire controlling stake in ETA Star Cement

UltraTech Cement Limited, an Aditya Birla Group company, today announced its unaudited financial results for the quarter ended 30 September 2008.

Financials

The company’s net sales increased by 20 per cent from Rs.1,168 crore in Q2FY08 to Rs.1,396 crore. Profit before interest, depreciation and tax at Rs. 325 crore (Rs. 357 crore) and profit after tax at Rs.164 crore (Rs.186 crore) were lower by 9 per cent and 12 per cent respectively.

The combined cement and clinker sales of 3.98 mmt reflected a growth of 13 per cent YoY.

Domestic realisation remained flat sequentially. A sharp increase in prices of coal and raw material resulted in variable costs rising by 37 per cent compared to Q2FY08. New coal linkages have not yet become operational, while there was a short fall in Q2 on coal supplies against existing linkages. This compelled the company to increase coal purchase from the domestic market at a significantly higher price and meet the balance requirement through imports. Imported coal prices more than doubled to US$ 190 pmt year on year. These developments have put pressure on the company’s operating margins via-a-vis the previous two quarters.

Capex
The company started commercial production of clinker from the expansion line at Andhra Pradesh Cement Works (APCW) and of cement from the cement grinding unit at Ginigera in Karnataka. Upon complete commissioning of capacity at APCW, the total capacity of the company will increase to 23.1 mmt by end of CY08.

All other existing capex projects relating to expansion and modernisation are on track. Most of the thermal power plants (TPP) being set up across the company’s units will be operational in a phased manner during FY09. Commissioning of new ready mix concrete plants is in line with the expected progress.

Outlook
There is a visible slowdown in the real estate and infrastructure sector on account of the current liquidity crisis. This has resulted in a slackening of demand for cement which is now expected to grow around 7 per cent to 8 per cent as compared to earlier forecasts of 9 per cent to 10 per cent. The recent fall in the dollar price of imported coal has been partly neutralised by the falling value of the Indian Rupee. The situation is further aggravated by continuous reduction in linkage coal availability and no new linkages in operation. Further, the likely commissioning of around 90 million tonnes capacity in a phased manner over the next three years could lead to a surplus scenario by CY09 resulting in pressure on earnings, sales realisation and margins.

All of these pose a challenge to the cement industry. The company will continue to focus on sustaining plant performance and optimise efficiencies. The new capacities at APCW, grinding unit at Ginigera and the TPPs across locations will to some extent offset the effect on the company’s margins on account of rising input costs.

For more information, contact:
Dr. Pragnya Ram
Group Executive President
Corporate Communications & CSR
Aditya Birla Management Corporation Private Limited
Tel: 91-22-6652 5000 / 2499 5000
Fax: 91-22-6652 5741/ 42
Email: pragnya.ram@adityabirla.com