UltraTech making its buys work

UltraTech making its buys work
21/10/2017 , by , in ALLIED

In the just concluded quarter, the stock of UltraTech CementBSE -1.63 %, India’s biggest producer of the primary building material, slid about 5 per cent against the run of play that saw smaller rivals gain between 1 per cent and 5 per cent in the three rainiest months of the year.. In part, the decline reflected UltraTechBSE -1.63 %’s rich valuations and the lack of a concrete assessment on the profitability of the Jaiprakash AssociatesBSE -0.79 % acquisitions.

The second-quarter earnings appear to have cemented UltraTech’s leadership credentials and its ability to quickly turnaround the acquired assets: The new plants that have taken UltraTech’s rated capacity to 93 million tonnes are already adding to the company’s earnings before interest, tax, depreciation and amortisation (EBIDTA).

The EBIDTA-accretive buyouts point to stronger operating performance and robust bottom-lines in the busy season, with output at the acquired plants stabilising.Analysts point out that the Jaiprakash plants had a contribution in the company’s 17 per cent on-year volume expansion. With 93 million tonnes of installed capacity, Ultra Tech dwarfs LafargeHolcim, Shree CementsBSE -0.89 %, and the Dalmia Bharat Group in the world’s second-biggest cement market. Volumes in India’s cement industry tend to ..

Hence, the second half of FY18 should be brighter for all cement companies, including UltraTech that has a national presence. Cement demand is expected to grow substantially in the second half, underpinned by government spending on welfare and infrastructure projects, such as low-cost housing (Pradhan Mantri Awas Yojana scheme) in the central region and select pockets of eastern and western India.

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