Dalmia Bharat Q2FY25 profits plummet by over 60%, but there’s a silver lining

Dalmia Bharat Limited, a prominent cement manufacturer in India, reported a mixed financial performance for Q2 FY25. While sales volume grew by 8.4% year-over-year (YoY), the company saw its profit after tax (PAT) plummet by 60.2% to Rs 49 crore due to a drop in cement prices and rising operational challenges.

Key Quarter Highlights

Dalmia Bharat Limited, traded on BSE as 542216 and on NSE under the symbol DALBHARAT, reported unaudited consolidated results for the quarter ended September 30, 2024. The company achieved a total sales volume of 6.7 million tonnes (MnT), marking an 8.4% increase YoY. However, its revenue from operations was down by 2.1% to Rs 3,087 crore, as ongoing market pressures led to a decline in cement prices.

The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) also decreased significantly by 26.8% to Rs 434 crore for the quarter. The EBITDA per tonne (EBITDA/T) dropped to Rs 650/T, reflecting a 32.4% reduction. Meanwhile, PAT saw a steep decline from Rs 123 crore in Q2 FY24 to just Rs 49 crore in the current quarter, attributed mainly to exceptional market conditions and rising costs.

Phase II Expansion on Track Despite Profit Slide

Puneet Dalmia, Managing Director and CEO of Dalmia Bharat Limited, expressed optimism regarding the company’s growth trajectory, despite the recent setbacks. He noted that the government’s focus on infrastructure and manufacturing growth plays a crucial role in boosting the cement sector, and announced that Dalmia Bharat plans to move forward with its Phase II expansions in the next nine months. The company aims to achieve its interim milestone of 75 MnT by FY28.

Focus on Sustainability and Renewable Energy

In line with its commitment to environmental sustainability, Dalmia Bharat has been increasing its focus on renewable energy. Renewable energy consumption accounted for 39% of its energy needs in Q2 FY25, and the company executed renewable power agreements for an additional 151 MW, adding to the 127 MW signed earlier. As per CFO Dharmender Tuteja, this commitment to renewable energy aligns with Dalmia Bharat’s target to become carbon negative by 2040.

Dalmia Bharat also commissioned a 16 MW solar power plant in Sattur, Tamil Nadu, increasing its renewable energy capacity to 202 MW.

Expert Insights on Earnings

Financial analyst Rajeev Kumar commented that Dalmia Bharat’s profit shrinkage reflects broader industry challenges, particularly fluctuating raw material costs and a persistent softness in cement pricing. He observed that Dalmia Bharat’s debt ratio remains solid, with net debt to EBITDA improving to 0.25x from 0.59x YoY, underscoring a prudent approach towards leveraging.

Kumar noted, “While the decrease in profitability is concerning, the company’s focus on capacity expansion and renewable energy investments is commendable. Investors will need to watch how these initiatives impact both revenue growth and margins in the coming quarters.”

Dividend and Recognitions

The company declared an interim dividend of Rs 4 per share, reiterating its focus on shareholder returns amidst a challenging environment. Moreover, it received multiple recognitions during the quarter, including being named one of India’s most sustainable companies by Business World and winning accolades from the CII’s 25th Energy Management Award 2024.

Future Prospects and Stock Sentiment

Dalmia Bharat’s ongoing expansion projects and its focus on renewable energy could positively influence its stock sentiment. However, the steep fall in PAT and EBITDA could dampen short-term investor enthusiasm. As of today, Dalmia Bharat shares traded on NSE saw a marginal dip following the announcement of these results, reflecting investor caution over the steep profit fall despite a robust volume performance.

Summary: Key Stats from Q2 FY25 Financial Results

• Sales Volume: Increased 8.4% YoY to 6.7 MnT.
• EBITDA: Down 26.8% YoY to Rs 434 crore.
• PAT: Declined 60.2% YoY to Rs 49 crore.
• Net Debt to EBITDA Ratio: Improved to 0.25x, reflecting reduced leverage.
• Renewable Energy Capacity: Increased to 202 MW following recent commissioning.