Major cement manufacturers reported a decline in margins in the September quarter, mainly on account of lower prices, leading to lower sales realisation.

Barring three leading cement producers — UltraTech Cement, Ambuja Cement, and Dalmia Bharat — other smaller players, including Nuvoco Vistas Corp, JK Cement, Birla Corporation, and Heidelberg Cement, reported a decline in topline and sales volume in the second quarter of the current fiscal year.

Industry observers said the increase in sales volume of UltraTech and Ambuja Cements is mainly due to the several acquisitions by both companies that consolidated their position further in the industry.

The industry also faced challenges such as extended monsoon, floods, and a slow pickup in government demand, cumulatively leading towards a weak demand.

Power, fuel, and other costs, however, largely remained stable for the industry.

The all-India average cement price was around ₹348 per 50 kg bag in June 2024. It decreased 11% year-on-year to ₹330 per bag in September, though it increased 2% on a month-on-month basis.

In the first half of FY25, cement prices declined 10% year-on-year to ₹330 per bag. A year earlier, the average prices stood at ₹365 per bag and ₹375 per bag in FY23, according to an Icra report.

Leading cement maker Ultratech reported a 68% capacity utilisation with a 3% growth in volume terms. However, its sales realisation for grey cement declined 8.4% year-on-year (YoY) and 2.9% quarter-on-quarter (QoQ), in the July-September period.

Replying to a query on cement prices in the earnings call, UltraTech CFO Atul Daga said, “August to September, we saw improvement in prices and September to October also, the prices have been steady. So we have seen an improvement from ₹347 (in August) exit to about ₹354 currently.”

Ambuja Cements, the country’s second-largest cement maker, reported a growth of 9% YoY in sales volume at 14.2 million tonnes (MT) in the September quarter. However, its earnings before interest, taxes, depreciation, and amortisation (EBITDA) was 15% lower at ₹1,074 crore.

However, the Adani Group firm had a higher margin in the September quarter on a YoY basis driven by higher capacity utilisation and reduction in the cost of production. On a quarter-on-quarter basis, though, it had a “lower margin” than the June quarter “mainly due to industry-wise lower price realisation”.

Dalmia Bharat’s volume grew 8.4% YoY to 6.7 MT during the quarter. However, revenues dropped 2% to ₹3,087 crore due to a sharp decline in cement prices, the management said in the earnings call.

Its EBITDA declined 26.8% to ₹434 crore “on a YoY basis primarily due to softness in cement prices and higher fixed costs due to the shutdown”.

“The cement prices declined during Q2 due to weak demand scenario, particularly in south and eastern markets. These markets saw a decline of 5-7% QoQ and about 10-12% on YoY basis,” Dalmia Bharat’s management said.

It further said the month-to-date October prices are on the same lines as the September quarter average.

Birla Corporation’s sales volume was down 5% to 3.97 MT as cement demand was sluggish in the traditionally weak monsoon quarter and prices plummeted to record lows in all key markets.

“The company’s EBITDA per tonne from cement sales for the September quarter was at ₹461 compared to ₹683 in the same period last year. The cement division’s EBITDA margin at 9.8% for the September quarter represents a contraction of around 300 basis points from a year ago,” it said.

M P Birla Group firm’s revenue from the cement business was down 13.88% to ₹1,874.68 crore.

JK Cement’s net sales realisation was 0.8% higher on a QoQ basis to ₹4,708 per tonne in the September quarter in comparison to ₹4,669 per tonne in the June quarter of FY25, improved due to selective sales in high realisation areas.

Similarly Nuvoco Vistas Corp, the Nirma Group cement firm, said pan-India prices “remained under pressure and declined 4 per cent QoQ in Q2”, during which its volume declined 5% YoY.

HeidelbergCement India’s revenue from operations was down 18.54% to ₹461.41 crore, driven by a 15% decrease in volume and a decrease in price by 4%.

Moreover “driven by decrease in volume and prices, the company’s EBITDA per tonne decreased to ₹380, a decrease of 36% YoY,” it said.

The makers are expecting improvement with better sales realisation in the second half, helped by an increase in demand for housing and increased government spending on infra projects.

UltraTech Cement’s total income, which includes other income, was at ₹15,855.46 crore. File
| Photo Credit: Special arrangement

“UltraTech Cement Limited on Monday (October 21, 2024) reported a consolidated net profit of ₹825.18 crore for September quarter 2024-25. It had posted a net profit of ₹1,280.38 crore in July-September FY24,” according to a regulatory filing from the Aditya Birla group flagship firm.

Revenue from operations was at ₹15,634.73 crore in the quarter. It was at ₹16,012.13 crore in the corresponding period a year ago. Total expenses were at ₹14,837.44 crore in September quarter FY25.

According to UltraTech, its consolidated results are “not comparable” due to the acquisition of an additional stake, increasing its holding to 54.79% in the UAE-based Ras Al Khaimah Co. for White Cement & Construction Materials PSC (RAKW).

“Consequently, RAKW has become a subsidiary of UCMEIL with effect from 10/07/2024. The above results include the financial results for RAKW w.e.f. 10/07/2024 and hence the figures for the three months and six months ended 30109/2024 are not comparable with the previous corresponding periods,” it said.

UltraTech Cement’s total income, which includes other income, was at ₹15,855.46 crore. On standalone basis, UltraTech Cement’s profit from the domestic market was down 34.71% to ₹796.89 crore in the September quarter.

Similarly, its revenue from the domestic market was down 3.68% to ₹14,905.23 crore in the September quarter despite an increase in sales volume. This was at ₹15,475.99 crore in the second quarter of FY 2023-24.

“UltraTech achieved capacity utilisation of 68% during the quarter,” said an earning statement from the company adding domestic sales volume of Grey Cement grew 3% YoY to 25.75 Million Tonnes (MT) despite incessant rains throughout the country this season.

Despite this growth, UltraTech’s sales “realisation declined 8.4% YoY and 2.9% qoq,” as the cement industry is facing a decline in prices.

During the quarter, “UltraTech’s energy costs were lower by 14% YoY, while raw material costs rose 1% on account of an increase in the cost of flyash and slag.” On a consolidated basis, UltraTech’s sales volume was at 27.84 MT, which included 26.42 MT from India business and 1.66 MT from overseas units. Its exports were at 0.22 MT and 0.45 MT from white cement in the September quarter.

UltraTech Cement, which is on an expansion drive, has added a capacity 9.9 MT of grey cement till October in the current fiscal, in its total installed capacity which was at 146.2 MT by the end of FY24.

This excludes Kesoram’s Cement capacity of 10.75 MTPA and India’s cement capacity of 14.45 MTPA, for which UltraTech is awaiting regulatory approvals.

UltraTech is expanding the capacity of its existing units and going for acquisitions as it faces competition from billionaire Gautam Adani-led Ambuja Cements, which is also pacing up capacity with acquisition and brownfield expansions.

“The capacity expansion drive is on a scale that is globally unprecedented in the cement sector. With the completion of the ongoing expansion projects across India by FY27, and receipt of statutory approvals for the acquisitions of Kesoram Cement (10.75 MTPA) and The India Cements (14.45 MTPA), UltraTech’s total cement capacity will surpass 200 MTPA,” it said.

In July, UltraTech had announced acquisition of a 32.72 per cent stake from promoters and their associates in Tamil Nadu-based India Cements Ltd (ICL) for ₹3,954 crore. It had also announced a ₹3,142 crore open offer for acquiring 26 per cent share.

The Aditya Birla group firm also informed its expansion program is “progressing as per schedule”, which will help reduce operational costs and help it to leverage its strong nationwide presence and distribution network.

Over the outlook, UltraTech said its growth trajectory aligns closely with India’s broader growth story.

“By increasing its scale, the company will meet the rising demand for cement nationwide. Increase in Government spending on infrastructure sector and rising demand from the urban housing sector is expected to generate a sustainable volume growth of 7-8 per cent in future years,” it said.

Shares of UltraTech Cement were trading at ₹10,840 apiece on BSE, down 2% from the previous close.

Bombay Stock Exchange (BSE). File
| Photo Credit: Reuters

Equity benchmark indices Sensex and Nifty settled lower for the sixth straight session on Monday (October 7, 2024) due to heavy selling in bellwether stocks including HDFC Bank and Reliance Industries amid mixed trends in the global markets and outflow of foreign funds.

Falling for the sixth consecutive session, the BSE Sensex tumbled 638.45 points or 0.78% to settle at 81,050. During the day, it plummeted 962.39 points or 1.17% to 80,726.06.

The NSE Nifty slumped 218.85 points or 0.87% to end at 24,795.75.

From the 30 Sensex firms, Adani Ports & Special Economic Zones, NTPC, State Bank of India, PowerGrid, IndusInd Bank, Axis Bank, HDFC Bank, Titan and UltraTech Cement were the major laggards.

Mahindra & Mahindra, ITC, Bharti Airtel, Infosys, Bajaj Finance, Tata Consultancy Services and Tech Mahindra defied the trend.

“The Indian markets have entered a consolidation phase with high risk of underperforming to Asian peers. This phase is marked by significant corrections in the broader market due to premium valuations. There is notable global arbitrage activity, with Chinese markets attracting substantial inflows driven by its attractive valuations and stimulus measures,” Vinod Nair, Head of Research at Geojit Financial Services, said.

Global oil benchmark Brent crude surged 2.09% to $79.68 a barrel.

European markets were trading on a mixed note on Monday (October 7, 2024).

In Asian markets, Tokyo, Shanghai, Hong Kong and Seoul settled higher.

Wall Street ended with gains on Friday (October 4, 2024).

Investors are reassessing their portfolio positions and FIIs outflows are exacerbated. Amid escalating geopolitical tensions, the surging oil prices pose a further challenge to the domestic economy in the short term, Mr. Nair added.

Foreign Institutional Investors (FIIs) offloaded equities worth ₹9,896.95 crore on Friday (October 4, 2024), while Domestic Institutional Investors (DIIs) bought equities worth ₹8,905.08 crore, according to exchange data.

On Friday (October 4, 2024), the BSE Sensex tumbled 808.65 points to settle at a three-week low of 81,688.45, while NSE Nifty slumped 235.50 points to 25,014.60.

Last week, the BSE Sensex tanked 3,883.4 points, or 4.53%, and the Nifty slumped 1,164.35 points or 4.44%.

Exchange Data said that FIIs bought equities worth ₹2,208.23 crore on Tuesday (September 10, 2024). File
| Photo Credit: Reuters

Equity benchmark indices declined in early trade on Wednesday (September 11, 2024) after two days of gains amid selling in Tata Motors and weak trends in Asian markets.

The 30-share BSE Sensex fell 111.85 points to 81,809.44. The NSE Nifty dipped 39.2 points to 25,001.90.

Among the 30 Sensex firms, Tata Motors, ICICI Bank, Titan, HDFC Bank, JSW Steel, Tech Mahindra, UltraTech Cement and Axis Bank were the major laggards.

Asian Paints, Bharti Airtel, ITC and Hindustan Unilever were among the gainers.

In Asian markets, Seoul, Tokyo, Shanghai and Hong Kong were trading lower.

The U.S. markets ended mostly with gains on Tuesday (September 10, 2024).

Foreign Institutional Investors (FIIs) bought equities worth ₹2,208.23 crore on Tuesday (September 10, 2024), according to exchange data.

Global oil benchmark Brent crude climbed 0.59% to $69.60 a barrel.

The BSE benchmark climbed 361.75 points or 0.44% to settle at 81,921.29 on Tuesday (September 11, 2024). The NSE Nifty surged 104.70 points or 0.42% to 25,041.10.

Photo used for representation purpose only.
| Photo Credit: Reuters

Following the news of UltraTech Cement acquiring India Cements’ promoters stake on Sunday, it was made clear the transaction will have no bearing on the IPL franchise, Chennai Super Kings.

India Cements bought Chennai Super Kings when the IPL started in 2008, but in 2015, it transferred the team to Chennai Super Kings Cricket Limited (CSKCL), a separate company. Former skipper M.S Dhoni is one of India Cements’ vice presidents.

Former BCCI president N. Srinivasan (Vice-Chairman and Managing Director of India Cements) and his family are the promoters of CSKCL with a 28.14% stake, according to the company’s 2023 annual report, and will continue to own the five-time IPL champion.

Apart from CSK, India Cements has been supporting cricket in Chennai through patronage of various clubs in the TNCA league across divisions. The company has many former first-class and international cricketers as employees. It also operates three teams in the top-flight First Division: Vijay CC, Grand Slam CC, and UFCC (T. Nagar).

It is understood that most of the cricketers employed by India Cements have been moved to CSKCL and won’t be affected by the acquisition.

“The sporting activity of India Cements will not be affected, and the club activities across various divisions will continue without any change. Most of the former cricketers who are employed have already been moved to CSK and will be taken care of,” said a highly placed source.

With the IPL Mega Auction coming up later this year, all eyes will be on whether Dhoni will continue to play for CSK for one more year.

Aditya Birla Group Chairman Kumar Mangalam Birla. File
| Photo Credit: Shashi Ashiwal

Aditya Birla group-owned UltraTech on July 28 entered into a share purchase agreement with the promoters and their associates of India Cements Ltd to purchase 10,13,91,23 equity shares or 32.72% stake for ₹390 apiece totalling to ₹3,954 crore, subject to regulatory approvals.

In June, Ultra Tech acquired 7,05,64,656 equity shares or 22.77% stake at a price of ₹268 per share. Post the acquisition, UltraTech’s stake in India Cements will increase to 55.49%, triggering an open offer. It will become a subsidiary of UltraTech Cement Ltd.

There will not be any change in management of the company till the completion of the acquisition, as per share purchase agreements, India Cements said in a separate filing.

“Post this financial investment, the promoter group approached us as they wanted to sell their holding in the company, and we found it appropriate to acquire their stake in the company,” UltraTech said in a regulatory filing.

Given the limited availability of limestone in Tamil Nadu, it has resulted in restrictions on setting up of new integrated units in Tamil Nadu. The Company’s last integrated unit in Tamil Nadu was acquired by the Company’s parent, Grasim Industries Ltd in August 1998. The proposed transaction is therefore an endeavour to extend the Company’s footprint and presence in the highly fragmented, competitive and fast-growing Southern market in the country, particularly Tamil Nadu, where it has limited presence, UltraTech said.

The operational efficiencies arising out of acquiring ready to use assets will reduce time to market vis-a-vis greenfield projects and will also provide the Company with the opportunity to evaluate the optimization/ deferment of the Company’s existing capacity expansion plans in the Southern market, given the ready to use assets of the target.

This will help augment the Company’s only integrated unit in Tamil Nadu, Reddipalayam Cement Works (1.4 MTPA), which has paucity of limestone with limited lifecycle availability.

India Cements has a total capacity of 14.45 million tonnes per annum (MTPA) of grey cement. Of this, 12.95 MTPA is in the South (particularly Tamil Nadu) and 1.5 MTPA in Rajasthan, while UltraTech is the third largest cement producer in the world, outside of China, with a total Grey Cement capacity of 154.86 MTPA.

“The India Cements opportunity is an exciting one as it enables UltraTech to serve the Southern markets more effectively and also accelerates our path to over 200 MTPA capacity,” said Aditya Birla Group Chairman Kumar Mangalam Birla.