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UltraTech: One of the Weakest Quarters in Years - Views on News from Equitymaster
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UltraTech: One of the Weakest Quarters in Years
May 18, 2017

UltraTech Cement has announced its financial results for the fourth quarter of the financial year 2016-17 (4QFY17). During the quarter, while the company's consolidated gross sales increased by 2.9% YoY, net profit decreased by 11.3% YoY. Here is our analysis of the results:

Performance summary
  • On a consolidated basis, gross sales increased by 2.9% YoY during the quarter.
  • Total sales volume increased by 1% YoY to 14.07 million tonnes.
  • The company's capacity utilisation rate stood at about 82% during the quarter.
  • Cement prices were volatile during the quarter.
  • Cost pressures resulted in operating profits declining by 8.7% YoY during the quarter. Operating profit margin contracted from 19.0% in 4QFY16 to 16.9% in 4QFY17.
  • The biggest cost escalation was seen in pet coke prices, which went up around 55% YoY. However, through reduced power consumption, improved captive power plant efficiency, and enhanced waste heat recovery share, the rise in the energy cost per tonne was restricted to 23%.
  • Similarly, despite a 27% YoY rise in diesel prices, the road freight increase was restricted to 5%. The company increased the use of sea routes. Overall, the company was able to restrict the rise in logistics cost to about 1% YoY.
  • Other income reported a sharp jump of 71.1% YoY during the quarter.
  • While depreciation charges declined by 6.2% YoY, finance costs jumped up by 29.9% YoY.
  • At the bottomline level, the consolidated net profit decreased by 11.3% YoY during the quarter.
  • Net profit margins during the quarter contracted from 10.6% in 4QFY16 to 9.2% in 4QFY17.
  • During the full financial year 2016-17 (FY17), while the topline growth was flat, net profit rose 9.6% YoY.

    Consolidated Financial Performance Snapshot
    (Rs m) 4QFY16 4QFY17 Change FY16 FY17 Change
    Gross Sales 77,003 79,240 2.9% 283,916 286,459 0.9%
    Expenditure 62,365 65,879 5.6% 234,906 234,335 -0.2%
    Operating profit (EBITDA) 14,638 13,361 -8.7% 49,010 52,124 6.4%
    Operating profit margin (%) 19.0% 16.9%   17.3% 18.2%  
    Other income 1,407 2,408 71.1% 4,638 6,481 39.7%
    Depreciation 3,789 3,555 -6.2% 13,772 13,484 -2.1%
    Finance costs 1,285 1,669 29.9% 5,663 6,401 13.0%
    Profit before Share in Profit
    of Associate and JV (net of tax)
    10,972 10,544 -3.9% 34,213 38,720 13.2%
    Share in Profit of Associate
    and JV (net of tax)
    0.1 0.1   0.1 0.1  
    Profit before Tax 10,972 10,544   34,213 38,721  
    Tax 2,787 3,283 17.8% 9,417 11,586 23.0%
    Effective tax rate 25.4% 31.1%   27.5% 29.9%  
    Profit after tax 8,186 7,261 -11.3% 24,796 27,135 9.4%
    Non-controlling Interest 5 2 -57.8% 16 -14 NA
    Net profit 8,181 7,259 -11.3% 24,780 27,149 9.6%
    Net profit margin (%) 10.6% 9.2%   8.7% 9.5%  
    No. of shares (m)         274.5  
    Diluted earnings per share (Rs)*         98.9  
    P/E ratio (x)*         45.2  

    *trailing twelve-month earnings

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