How did you find the quarterly results of Ultratech for the December 2021 quarter?
Answer
Answer
December quarter was rather challenging for the cement companies as there was a spike in power costs. However, on the demand side also the Omicron had its impact in compressing cement demand. Erratic monsoons in South India and parts of North India also played a part. For example, there was a halt in construction in NCR, which impacted cement sales. Below is a financial summary of Q3 results.
Ultratech Cement Ltd
Rs in Crore
Dec-21
Dec-20
YOY
Sep-21
QOQ
Total Income (Rs cr)
₹ 12,985
₹ 12,262
5.90%
₹ 12,017
8.06%
Operating Profit (Rs cr)
₹ 1,745
₹ 2,428
-28.13%
₹ 2,037
-14.34%
Net Profit (Rs cr)
₹ 1,708
₹ 1,584
7.79%
₹ 1,314
30.01%
Diluted EPS (Rs)
₹ 59.19
₹ 54.92
₹ 45.52
OPM
13.44%
19.80%
16.95%
Net Margins
13.15%
12.92%
10.93%
Let me talk about the top line first, the sales revenues were up 5.9% at Rs.12,985 crore. Volumes were up 13.2% for the 9 month period from Jan-21 to Dec-21. However, the spike in costs of power led to a fall in operating profits. For example, the operating profits for Dec-21 quarter fell -28.1% at Rs.1,745 crore. This can be explained by a 33% spike in power and fuel costs as the coal shortage took time to rectify.
On the positive side, the freight costs were stable post the VAT and GST cuts. In fact, the operating performance could have been worse if it had not been for the inventory efficiency gains which has actually benefitted the working capital cycle at Ultratech. Operating margins fell sharply from 19.8% in Dec-20 quarter to 13.44% in the Dec-21 quarter. This was largely due to operating costs spiking more than the growth in top line.
Net profits were up 7.8% yoy for the Dec-21 quarter at Rs.1,708 crore due to two reasons. One reason was the tax credits and the second reason was lower interest costs. During the Dec-21 quarter, Ultratech repaid loans of Rs.3,459 crore via internal accruals. As a result, debt/equity ratio fell from 0.53 to 0.22 while the debt coverage ratio or DSCR improved from 1.85X to 4.39X. interest costs were nearly halved in the quarter on yoy basis.
Actually, the big boost to profits came from tax credits. For example, Ultratech saw gains of Rs.323 crore from reversal of accumulated tax provisions of the past and an additional Rs.212 crore from MAT reversals and MAT credits. Net Profit margins, as a result, improved from 12.92% in the Dec-20 quarter to 13.15% in the Dec-21 quarter. Overall, you can call it a good quarter amidst constraints.