UltraTech eyes 25% sales growth in FY15

Cement prices to remain under constant pressure for some more time, says K M Birla

UltraTech Cement, the country’s largest manufacturer of the product, expects growth of 25 per cent in turnover this financial year. This is on the back of a better demand scenario and a boost for housing and infrastructure after the Narendra Modi government assumed office.

Addressing the 14th annual general meeting, chairman Kumar Mangalam Birla told the shareholders, “Growth for this year for UltraTech will be much more robust than last year. The turnover expected for 2014-15 is Rs 25,000 crore.”

With Jaiprakash’s Gujarat 4.8 my unit now fully amalgamated with UltraTech, there will be an incremental impact on sales and profitablity. UltraTech bought the unit for Rs 3,800 crore.

In FY14, UltraTech reported flat growth in net sales at Rs 20,078 crore, against Rs 20,023 crore in FY13.

 If the FY15 estimates turn out to be true, it would be the highest growth in turnover since completion of amalgamation of Grasim’s cement assets into UltraTech.

The Aditya Birla Group company already had shown  higher than expected net sales during the first quarter of this financial year. It had beaten the Street estimate with a 14 per cent rise in the April-June quarter to Rs 5,649 crore, from Rs 4,949 crore in the same quarter a year before.

“Growth of the cement industry is inextricably linked with that of the economy, housing and infrastructure. So, if we were to assume a growth of six to seven per cent for the economy this year, we will apply a multiple of 1.2 times to that (as demand for cement). (Though) one can’t commit to specific growth numbers, I expect the current year will be a much stronger year than the previous one,” said Birla.

The April-June performance shows the target could be achievable. Capacity utilisation for the quarter improved to 84 per cent from 76 per cent. In 2013-14, UltraTech’s capacity utilisation was 79 per cent.

Two factors likely to work against the estimated pace of growth are lower cement prices and higher input costs.

“The demand-supply mismatch is expected to stay for some more time. It will lead to prices remaining under constant pressure. Additionlly, the year witnessed an ongoing sure in logistics and raw material costs, given the increase in railway freight and diesel prices, which was yet another hamper,” added Birla.

Shares of UltraTech closed weaker on the BSE at Rs 2,543.85, down two per cent on Wednesday.