UltraTech Cement has conducted a conference call on 23^rd January 2021 to discuss the financial performance for the third quarter ended December 2020 and way forward. Mr. Atul Daga, Chief Financial Officer of UltraTech Cement, addressed the conference call.

Highlights of the Concall

• Cement Industry saw strong demand bounce-back across regions from Covid-19 led disruption, with healthy recovery in West and South as well led by pickup in infrastructure activities and housing. With strong rural growth, revival in manufacturing sentiment, buoyancy in GST, and tax collections, the Company expects demand to grow on the back of the Government's push on infrastructure projects. Strong monsoon and higher sowing has supported rural income which aided in strong IHB and rural housing demand which also got a fillip from increased government spending.

• The Company all markets registered growth for the Q3FY21 indicating strong demand recovery. IHB and rural housing continued to drive demand in the North/Central/Eastern markets while West and Southern markets saw strong recovery in infrastructure segment as also supported by housing.

• The Company has posted 210% jump in consolidated net profit to Rs 1,584.58 crore on 17% jump in top line to Rs 12,254.12 crore for the third quarter ended December 2020, on the back of stronger sales volume growth and operational efficiencies. The Company's reported robust operating margin (OPM) at 25.3%, a jump of 820 bps from corresponding previous quarter, driven by both revenue growth and tight cost management. The consolidated sales volume (including overseas) inclined 14.3% to 23.88 million tonnes (mt).

• The Company 14.6 mtpa cement plants acquired during the previous financial year have been making good progress on integration with production ramped up to nearly 84% toward the exit of Q3. The timely acquisition has enabled the Company to meet the growing demand in the central and east markets.

• The Company Freight costs grew 5% to Rs 1178/tonne yoy for the Q3FY21 higher diesel prices (up 10% yoy) and increased lead distance due to increased movement of cement from Maharashtra/Central/South plants to the east.

• The Company energy costs declined 3% yoy to Rs 952/tonne for the Q3FY21, as the company was able to utilize low-cost pet coke and imported coal inventory in the quarter and increase in share of green power. Petcoke consumption at 44% and imported coal consumption at 43%. ‘Green power' share in power mix raised to 13% (LY: 11%). The Company expects a likely 10% rise in energy costs in H2FY21 due to the recent increase in the prices of global pet coke. To mitigate the impact, the company has started using high calorific value imported thermal coal, which is cheaper than pet coke. Also, Company plans aggressive WHRS expansion from 103MW in FY20 to 272MW in FY23 which likely to help absorb some cost inflation.

• The Company raw material costs remained stable at Rs 501/tonne for the Q3FY21, as stable Raw material prices i.e. Flyash, Gypsum etc. and improved clinker to cement conversion ratio.

• The Company other costs declined 10% yoy to Rs 639/tonne for the Q3FY21, due to reduction in cost overheads partially offset by bump up in ad spends and likewise expenses. The Company expects advertisement costs and other volume linked costs to return to normalized levels, but expect roughly 10% of permanent savings on overhead costs from reduced travel etc.

• The Company net debt decreased by Rs 2696 crore qoq in Q3FY21 (Rs 7424 crore YTD), on the back of repayments as well as strong cash flows and divestment of non-core assets. Company also freed up Rs 780 crore of working capital during the Q3FY21, further shoring up cash reserves which aided in net debt reduction. Consolidated net debt/EBITDA has reduced from 1.87x to 0.84x.

• The Company has approved capex of Rs 5477 crore towards increasing the Company's capacity by 12.8 mtpa with a mix of brown field and green field expansion. The additional capacity is being created in the fast-growing markets of the east, central, and north regions of the country which are expected to be largely commissioned in FY23. This expansion is in addition to the Company's 6.7 mtpa capacity addition that is currently underway in Uttar Pradesh, Odisha, Bihar, and West Bengal, which has picked up pace and is expected to get commissioned by FY22, in a phased manner.

• Company's Thermal CPP capacity stands at ~1100MW. No plans for setting up additional thermal capacity, while plans are to take its WHRS capacity to 302 MW in the next 3-4 years (by FY24), and to meet 34% of their electricity requirements from ‘Green' power (compared to ~13% currently).

• The company plans to increase focus on RMC business, it being a high margin and return profile business. Currently, company has a network of 109 RMC plants.

• With strong rural growth, revival in manufacturing sentiment, buoyancy in GST, and tax collections, the Company expects demand to grow on the back of the Government's push on infrastructure projects.