UltraTech Cement plans to set up five waste-heat-recovery plants with an investment of ₹500 crore.
The new plants, coming up at select manufacturing units, will have a cumulative capacity to generate 63 MW power and will take its overall capacity from the waste-heat recovery process to 121 MW. The company will be able to meet 50 per cent of its power requirement from these plants.
Although cement volume grew in double-digits, surging operating expenses and interest cost weighed on overall financial performance. Freight, energy and raw material costs continue to head northwards. Increased diesel prices pushed logistics costs higher. Additional royalty on limestone mines transfer and higher additive costs impacted raw material costs. Further, the company increased its petroleum coke (petcoke) usage from 75% in the previous quarter to 83% in the June quarter. Prices of this key input material have increased around 35% year-on-year. Also, its import duty was raised to 10% a few months ago from 2.5%. Since most cement makers meet their petcoke requirements through imports, the depreciating rupee is adding fuel to the fire.
Why is this important
Hence, the company has been taking various measures to bring down overall costs by improving efficiency. The waste-heat recovery plants will bring down the power cost to 50 paise per unit from ₹4 when they go on stream in two years. This will also protect the company from sudden swings in thermal coal prices. The sharp increase in operational cost and stagnant cement prices have hit the company’s bottomline in the June quarter.
Stock to be impacted
Thus in the wake of stagnating cement prices and rising input costs, the above efforts of Ultratech can aid to curtail the costs to a great extent, stemming tailwinds for the same
Ultratech Cement (CMP 3856, M. Cap 1,05,892 crores, 12.1 FY21 EV/Ebitda)