24 August 2005
Highlights of the Chairman’s address at UltraTech’s fifth AGM
Addressing the shareholders at the UltraTech AGM held in Mumbai today, Mr Kumar Mangalam Birla, the Chairman, said that the growth in revenues and earnings over the last year had indeed been encouraging.
“As the aggressive investment made in UltraTech called for a competitive return, the management of your company has focused on: firstly, asset sweating and enhancing operational efficiencies; secondly, rationalisation of high cost debts, and thirdly, leveraging synergies with Grasim,” said Mr Birla.
Asset sweating and enhancing operational efficiency
During the year, UltraTech stabilised its capacity utilisation to over 91 per cent across its plants. Rising cost of power and fuel continue to be areas of concern. Use of alternative fuel is being actioned. Over Rs. 600 crore have been committed for the installation of captive power plants. Additionally, over Rs.190 crore has been earmarked towards capex for improving productivity and operational efficiencies.
Domestic cement realisation improved by 10 per cent while the clinker exports realisation increased by 26 per cent. The transition from L&T to ‘UltraTech Cement – the Engineer’s Choice’ was smooth. It was accomplished way ahead of the time assigned for the use of the L&T mark. This was achieved without sacrificing the premium and market share in any way. UltraTech is well accepted in all markets across India.
Rationalisation of high cost debt
UltraTech has repaid a major portion of its high cost debts, resulting in lowering of the interest cost. The company raised Rs.500 crore and repaid Rs. 612 crore of long-term borrowings. Consequently, the finance cost is down from 7.7 per cent in FY 04 to 6.8 per cent in FY 05.
“Measures have been initiated for realising synergy gains with Grasim. Task forces were formed to receive recommendations for synergy gains in procurement of raw materials, logistics and sharing of best practices between the companies. Their recommendations have been implemented,” averred Mr Birla.
First quarter results
The first quarter of the current fiscal saw UltraTech posting improved results. Increased domestic offtake coupled with improved domestic and export realisation have been the growth drivers. Net sales at Rs.815 crore was 20 per cent higher than the first quarter of the previous year at Rs. 680 crore. Profit before tax was Rs. 87 crore. In the previous year, it was Rs. 19 crore. Profit after tax stood at Rs. 60 crore as against Rs.11 crore in the earlier year.
“Gujarat and Maharashtra represent nearly 50 per cent of your company’s sales, and therefore the recent floods in the two states have adversely impacted. In fact, UltraTech’s largest plant at Kovayya in Gujarat was flooded on 29 June 2005 resulting in the suspension of production and shipments. This quarter also coincides with annual maintenance of our plants, and consequently reduced availability of material,” commented Mr Birla.
The directors recommendation of a dividend of Rs. 0.75 per share as compared to Rs.0.50 per share paid in the previous year met with shareholder approval. The total outgo of the dividend to be paid to the shareholders, inclusive of corporate tax, will be Rs.10.6 crore as against Rs.7.0 crore paid in the previous year.
Mr Birla viewed the outlook of the cement business as challenging. While the surplus supply situation in the company’s key markets is likely to continue putting pressure on cement prices, its major thrust would be to bring down the cost of sales. He stated, moreover, the export boom to the Middle East is subject to commissioning of over 30 mn tonnes per annum new capacity in that region over the next 18 months. The government’s thrust on infrastructure such as roads, ports, airports and housing, would fuel growth. Cement demand is expected to grow by over 8 per cent.
For more information, contact:
Dr. Pragnya Ram
Group Executive President
Corporate Communications & CSR
Aditya Birla Management Corporation Private Limited
Tel: 91-22-6652 5000 / 2499 5000
Fax: 91-22-6652 5741/ 42