Demand slowdown, extended monsoon, and weak pricing weigh down UltraTech Cement’s performance in Q2 FY25.
UltraTech Cement reported a significant decline in its second-quarter net profit for the fiscal year 2025, falling by 36% compared to the same period last year.
The company’s consolidated net profit dropped to INR 820 crore in Q2 FY25, down from INR 1,280 crore in Q2 FY24.
The fall in profit was sharper than expected, as a slowdown in demand due to the monsoon and delayed projects affected the company’s price realizations.
Ultratech Cement Performance
UltraTech Cement’s revenue from operations also took a hit, falling 2.3% year-on-year to INR 15,635 crore in Q2 FY25, compared to INR 16,012 crore in the corresponding quarter last year.
Despite the dip, revenue was slightly better than market expectations, as a Moneycontrol poll of eight brokerage firms had estimated revenue at INR 15,579 crore.
Domestic grey cement sales volumes for UltraTech increased marginally by 3% year-on-year to 25.75 million tonnes.
However, this figure marked a sharp 15% decline compared to the April-June quarter of FY25, which had seen higher sales volumes due to election-related construction activity.
The company faced several challenges during the July-September period, including infrastructure delays, flooding, and labor shortages, which hampered demand.
Additionally, cement prices remained weak, with unsuccessful price hikes and low realizations further dragging down the company’s performance.
Ultratech Cement Market Trends
During the quarter, UltraTech’s domestic grey cement realizations dropped to INR 4,901 per tonne, marking a continued decline in pricing both annually and sequentially.
In the same quarter last year, the company realized INR 5,349 per tonne, and in the previous quarter (Q1 FY25), the realization stood at INR 5,045 per tonne.
This steady decline reflects the ongoing weakness in cement pricing due to sluggish demand and external challenges.
Brokerage analysts had predicted that UltraTech Cement’s Q2 results would be impacted by these factors.
Delays in infrastructure projects, combined with extended monsoon conditions, flooding, and labor shortages, made it difficult for the company to maintain its profitability.
Moreover, muted prices in the cement industry and a failure to successfully implement price hikes contributed to the weak performance.
Analysts are not optimistic about immediate improvement in cement prices, predicting that any meaningful price increases are unlikely until the second half of the next financial year.
This outlook suggests continued pressure on profit margins in the short term.
Expert Insights On Ultratech Cement
Several market experts had anticipated the challenges UltraTech Cement faced in Q2 FY25.
Analysts pointed to the unfavorable weather conditions, project delays, and weak demand as primary reasons for the company’s lower earnings.
Additionally, the inability to increase cement prices during the quarter only added to the challenges.
The company’s management is likely to focus on navigating these external challenges while trying to improve pricing and sales volumes in the upcoming quarters.
However, with significant headwinds expected to persist, UltraTech Cement may continue to face difficulties in maintaining profitability in the near term.
Conclusion
UltraTech Cement’s Q2 FY25 results highlight the ongoing challenges faced by the cement industry due to weak demand, monsoon delays, and pricing pressure.
The company’s profit decline of 36% was sharper than expected, reflecting the difficulty in raising prices and maintaining strong sales volumes.
While the second half of the next financial year may offer some relief with potential price hikes, UltraTech Cement will likely need to carefully manage its operations to weather the current market conditions.
Investors should keep a close eye on how the company navigates these challenges in the coming quarters.
