UltraTech Cement’s focus on costs helps it beat market expectations even as competition eats into margins

UltraTech, India's largest cement maker, said it is on course to achieve more than 200 million tonnes of annual cement manufacturing capacity by 2026-27. (Reuters)

2025-01-23 19:08:00 :

MUMBAI: Fierce competition in the Indian cement industry continues to take its toll on cement manufacturers. Market leader UltraTech Cement Ltd’s profit fell in the October-December quarter from a year earlier despite rising revenue and falling fuel costs.

However, shares of UltraTech rose 6.81% to close at $Shares were trading at $11,422.70 on BSE, and analysts had expected profit margins to be hit higher due to intensifying competition in the cement industry. The benchmark Sensex closed 0.15% higher on Thursday.

India’s largest cement maker has been focusing on controlling costs to increase profit margins, deploying waste heat recovery systems and piloting water transport projects. Cement is a bulk commodity and logistics is one of the biggest costs for cement manufacturers, besides raw material and fuel costs.

Also Read | Cement prices in north India saw highest jump in third quarter. Is there room for more?

In the third quarter, Aditya Birla Group completed its acquisition of Chennai-based India Cements Ltd. UltraTech’s production capacity has also been expanded by 1.8 million tons per year, bringing its total production footprint to 171.1 tons per year.

The company said annual cement production capacity is expected to exceed 200 million tons by 2026-27.

Adani Group is India’s second largest cement producer and has entered the market for just over two years. It aims to reach a total cement production capacity of 140 tons/year by then. Adani’s rapid entry into the market has led to a ruthless fight for market share among top players, who have slashed prices to retain customers.

However, UltraTech expects India’s cement demand to grow at an annual rate of 7-8%, driven by New Delhi’s focus on infrastructure development and housing projects.

Also Read | Cement makers hike discounts after Adani entry

‘A series of good results’

UltraTech reported consolidated profit of $1,470 crore in the December quarter, down 17% from the previous three months. Its consolidated revenue increased by 3% year-on-year $17,193 crore, sales increased by one-tenth.

However, the company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) fell 11% year-on-year. $2,886 Crores. Ebitda margin narrowed 265 basis points to 16.8%.

Analyst Mangesh Bhadang, senior vice president at Centrum Broking, said UltraTech’s results exceeded his expectations. “UTCEM reported good results for the third quarter of fiscal 2025,” he said in a note, adding that the company’s EBITDA was 8% above Centrum’s expectations. Bhadang attributes this mainly to lower operating costs and better sales.

UltraTech’s delivery distance (the average distance before a cement bag reaches the buyer) decreased by 20 kilometers year-on-year to 377 kilometers. The company also increased its use of renewable energy to 33.4% of total electricity demand from 24.1% a year ago. Combined with lower fuel costs, these efforts have helped UltraTech control costs, although sales prices remain under pressure.

ALSO READ | Is the Indian cement industry finally turning a corner?

Catch all business news, corporate news, breaking news events and latest news updates on Live Mint. Download The Mint News app for daily market updates.

Business News Company Results UltraTech Cement’s focus on costs helps it beat market expectations even as competition erodes margins

moreless

Follow us On Social Media   Twitter/X

Join WhatsApp

Join Now