UltraTech Cement announces results for the quarter ended 31 December 2009

UltraTech Cement Limited, an Aditya Birla Group company, today announced its unaudited financial results for the quarter ended 31 December 2009.

Financials
The company has achieved net sales of Rs.1,652 crore (Rs.1,631 crore). Profit before interest, depreciation and tax at Rs.414 crore (Rs.451 crore) and profit after tax at Rs.196 crore (Rs.238 crore) were lower by 8% and 18% respectively.

The results have to be viewed keeping in mind the slowdown in demand growth in the markets of southern India, which constitutes around 30% of the company‘s sales. This coincided with the commissioning of new capacities in the south with a consequent fall in cement prices. The quarter also witnessed a drop in clinker export realisation due to reduced off-take in the Middle East following a meltdown in construction activities. These factors cumulatively impacted the company’s margins.

The company produced 4.40MMT (3.98MMT) of cement in Q3FY10 registering a growth of 10% YoY. Domestic sales volume at 4.34MMT (3.88MMT) reflect a rise of 12%.

Variable cost dropped by 8% mainly on account of pared down energy cost as compared to Q3FY09 and supported by the gains from new thermal power plants commissioned during the calendar year.

Corporate development
The Board of Directors at its meeting held on 15 November 2009 approved the amalgamation of Samruddhi Cement Limited (“Samruddhi”) with the company in terms of a Scheme of Amalgamation under sections 391 to 394 of the Companies Act, 1956 (“the Scheme”). The appointed date of the amalgamation is 1 July 2010.

The Board has also approved the share exchange ratio of 4 (four) equity shares of the company of face value Rs.10/- each for every 7 (seven) equity shares of Samruddhi of face value Rs.5/- each.

The Scheme is subject to the approval of shareholders, the High Court of Bombay and the High Court of Gujarat and other statutory approvals, including those from the lenders / creditors.

The cement business of Grasim Industries Limited (“Grasim”), the holding company, is currently under demerger to Samruddhi and the Scheme will take effect only upon completion of the demerger and issuance of shares of Samruddhi to the shareholders of Grasim pursuant to the demerger.

On the completion of this scheme, UltraTech is expected to emerge as the largest cement and RMC entity in the country, and 10th largest in the world in cement capacity.

Directors
The Board at its meeting held today inducted Mr. O. P. Puranmalka as Additional Director with immediate effect. Mr. Puranmalka will take over as Whole-time Director of the company with effect from 1 April 2010.

Outlook
Industry demand is likely to grow over 10% on the back of government initiatives to boost rural development, infrastructure and housing.

It is expected that industry will witness a surplus scenario over the next 18 to 24 months resulting in pressure on margins.

The company’s focus on higher volume growth together with cost efficiency would partially offset the impact on margins.