Heidelberg Cement India hosted a conference call on July 19,2022. In the call, the company was represented by Jamshed Naval Cooper-MD and Mr Anil Kumar Sharma-CFO.

Key highlights of the call

It was one of the tough and costly quarter for the industry as a whole.

EBITDA stood at Rs 855 per ton down 23% YoY in Q1FY2023. Decline in EBITDA was mainly impacted by power and fuel. Increase in power and fuel cost resulted in increase in cost by 24%. However, realization per ton increased by 13%.

Improved realization was on back of increased contribution from premium products and narrowed down price gap between trade and non-trade sales.

Volumes declined by 6% in Q1FY2023. This was mainly due to liquidity pressure in the market and the company did not want to push volumes. However, in Q2FY2023 the liquidity situation has improved.

Revenues include Rs 8 cr other operating revenue in Q1FY2023.

Premium products: Premium products contribution stood at 23% of trade sales in Q1FY2021 Up 6% YoY.

Trade Sales: Trade sales contribution stood at 83% for the quarter.

Rail Road Mix: Rail road mix stood at 55% and 45% in Q1FY2023.

Power:Green power contribution stood at 30% in Q1FY2023. For the Jhansi plant, solar power supply started from march under the 15 MW long term agreement. The company has increased green power contribution far Narsingarh plant through its 12 MW WHR and 5.5 MW solar plant and Amansandra plant operated at more than 90% green power.

Average power cost for the quarter stood at Rs 6.5 per unit in Q1FY2023.

Coal: The coal prices have increased drastically in Q1FY2023. All of the coal and pet coke procured is domestic for the company.

Coal contribution stood at 38% for the quarter Q1FY2023.

Per Kilo cal cost of coal stood at Rs 3.25 and pet coke stood at Rs 3.1 in Q1FY2023 as against Coal Kilo cal at Rs 2.3 and pet coke at Rs 2.5 in Q4FY2022.

Presently, Russian coal is available 20-25% cheaper at US 170 per ton. With China economy slowing down, Indonesia coal is also available which is cheaper than South African coal. This might result in decline in fuel cost.

Inventory: The current inventory of fuel will last less than 25 days. However, the company plans to increase it to 30-35 days going forward.

Lead Distance: Lead distance stood at 360-375 kms for Q1FY2023. There is no much change in lead distance.

CAPEX: The company plans to incur CAPEX of Rs 100 cr in FY2023(including de-bottle necking) and similar number in FY2024(excluding Gujarat Expansion)

Gujarat Expansion: The company has mining license. The company has obtained SEZ(Special Economic Zone) clearance certificate. The company expects another 1.5 years to get all the government clearances and another 1.5 years to set up the plant.

By the time the project commences, the net-worth of the company will be around Rs 1500 and the company will be able to raise debt of Rs 1500 cr to fund the project, which will result in Debt:Equity of 1:1.

Cash:Net cash balance as on 30June 2022 was around Rs 2.2 billion. The company continues to operate net negative working capital.

TAX: The company has migrated to concessional tax rate of 25.17%.

Outlook:

GDP is expected to grow at 7.3% and the company expects the cement demand to grow at similar levels.

Government spending is little lower. However, with general election in 2024, the company expects, the government spending to improve going forward.

Russia- Ukraine war has impacted fuel prices due to supply chain disruption. However, the Russian coal is coming to India. Also, the domestic coal availability has improved which has eased on coal availability. Also, the company expects the prices of coal to ease.

Prices: The prices have improved since May and have remained more or less stable in the April, May, June and July in the range of Rs 360-380 per bag in Central India. The company plans to increase the prices where available based on the day-to-day demand.