UltaTech Cement on Monday reported a 36 per cent drop in net profit in the second quarter of the fiscal to ₹820.04 crore against ₹1,281.45 crore a year ago, which was way off analyst estimates.

India’s No. 1 cement company attributed the sharp drop in second-quarter profit to persistently low prices of the construction material, in a seasonally weak quarter for the cement sector.

Analysts were expecting the company to report profits in the region of ₹1,000 crore.

The Kumar Mangalam-Birla company is engaged in a battle for market dominance with Gautam Adani, who looks to boost his presence in the sector both organically and through acquisitions.

The quarter saw UltraTech posting lower revenues of ₹15,634.73 crore against ₹16,012.13 crore in the year-ago period. Bloomberg had estimated a topline of ₹15,711.18 crore.

Ahead of the numbers, analysts had projected a soft quarter for the cement sector because of factors such as heavy rainfall, shortage of labour and delays in budgetary allocation for infrastructure projects.

This comes after a challenging first quarter that was marked by the general elections, which affected demand and extreme heat conditions.

During the July-September quarter, UltraTech’s domestic grey cement sales volumes rose 3 per cent over the previous year period to 25.75 million tonnes. On a sequential basis, it marked a fall of 15 per cent.

The company said major infrastructure projects such as the Dwarka Expressway, Ram Temple and Samruddhi Expressway were nearing completion and there was a delay in the announcement of new projects.

Analysts remain optimistic of the company’s prospects: “UltraTech targets double digit volume growth for the second half of 2024-25 along with improvement in profitability,” Ronald Siyoni, associate vice-president, Sharekhan by BNP Paribas, said.

“Infra investments gathering pace, good rural demand and sustained momentum in urban housing remain growth drivers for the second half along with cost efficiency tailwinds. We retain buy on the stock,’’ he said.

UltraTech said it was seeing early signs of a price recovery. “Prices have been improving since the end of August and so far in October, have held steady,” Atul Daga, UltraTech’s finance chief said in a post-earnings call.

Daga said the price of a cement bag was currently at ₹354, up from ₹347 at the end of August.

Cement prices hit a five-year low of ₹336 rupees per bag in the September quarter, Ambit Capital said, due to an industry-wide ramp up in production and thus supply.

Deal closure

Daga said the company “does not foresee” major challenges in obtaining regulatory approvals for the acquisition of India Cements, a Money Control report said.

UltraTech is locked in a battle for market share in the southern markets with Adani, where India Cements is a major player.

The queries received from the Competition Commission of India are routine, Daga said.

He said it is a “matter of time” before UltraTech will complete the India Cements deal.

With inputs from Reuters