Despite margin pressure, UltraTech Cement net doubles to Rs 279 cr

UltraTech Cement, India's largest cement firm, reported a more than doubling in second quarter profits on Thursday helped by a low base, even as the company warned that high input and energy costs and a market surplus would squeeze margins going forward.

Cement demand in India, the world's second-largest producer after China, has declined in recent months on a slump in the construction and real estate industries due to high interest rates and growth moderation in Asia's third-largest economy.

[caption id="attachment_112553" align="alignleft" width="380" caption="Net sales rose 21.6 percent over the same period to Rs 391 crore. AFP"][/caption]

UltraTech, which has installed capacity of about 52 million tonnes and hopes to increase that by over 9 million tonnes by mid-2014, warned that a surplus scenario in the Indian cement industry would likely continue for 2-3 years.

"Variable cost rose by 14 percent (during the quarter) because of the increase in input and energy costs. The 30 percent increase in the price of domestic coal, continuous rise in prices of imported coal together with escalation of freight costs... have constrained the company's performance," the firm said in a statement.

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"Growing input costs will result in a squeeze in margins."

UltraTech said that net profit in the quarter to end-September stood at Rs 279 crore ($56.8 million) from Rs 116 crore a year previously. Net sales rose 21.6 percent over the same period to Rs 391 crore ($795.4 million).

Net profit and sales were however sharply lower than Rs 683 crore and Rs 4,365 crore reported in the April-June quarter.

UltraTech, part of the diversified Aditya Birla Group, and major competitors ACC, Ambuja Cement and Jaiprakash Associates account for around 50 percent of India's cement market.

Reuters