Coal news and updates

UltraTech Cement Ltd’s March quarter earnings are a microcosm of hopes and concerns of the cement industry investors. Among the positives: a 10% consolidated net profit growth to Rs.723 crore that was better than expected, volumes increasing 15% over a year ago and capacity utilization of 84%, an improvement of five percentage points.

However, revenue growth in the three months ended March was only 5%, an indication of cement price volatility. Realizations are down—they fell 9% for the domestic segment. Ebitda (earnings before interest, taxes, depreciation and amortization) is up by only 3% year-on-year. Ebitda margins are slightly down as well at 21.5%, despite an improvement in cost efficiencies. There are some signs of hardening of energy costs and road freight rates, which are a negative for the firm as well.

But the more pertinent point is this: If there is indeed a turnaround in the cement industry demand, it is not being matched by any across-the-board sharp increase in prices. According to Motilal Oswal Securities Ltd, while there was an increase in prices in pockets of north and central India during the March quarter, prices declined in the south and the east. The low base of last year also boosted volume growth, as the chart shows.

With rural India still in crisis mode and the threat of drought for a third straight year looming, it will be some time yet before one can confidently call a demand rebound. UltraTech Cement itself said in an investor presentation that it expected cement demand to grow 7-8% in the current fiscal year, citing the government’s focus on infrastructure development. But it also noted that cement price volatility was a key concern—not least because industry capacity utilization is still low at 71%.

Source: livemint.com