Heidelberg Cement India hosted a conference call on Oct 20,2021. In the call, the company was represented by Jamshed Naval Cooper-MD and Mr Anil Kumar Sharma-CFO.

Key Highlights of the call

Revenues of the company stood at Rs 576.5 crore in Q2FY2021. Volumes grew by 11.2% YoY. Capacity utilization stood at 78% during the quarter.

EBITDA per ton stood at Rs 976 per ton down 17.7% YoY mainly due to base effect. Also, margins were impacted due to higher fuel, power and packaging cost.

The company is a 100% blended cement company.

Premium products: Premium products contribution stood at 21% and plans to increase to 25% of the total trade sales. Premium cement are priced Rs 35-40/ per bag higher.

Trade Sales: Trade sales contribution stood at 85% of total sales

Price Trends: The company has increased prices by Rs 10-15 per bag from first of October, 2021. Further, it increased by Rs 10 from Oct 20,2021. The company expects the prices to go up from Rs 360 to Rs 400 by November opening and expects the prices to touch Rs 450/ per bag by end of November. It expects the prices to touch Rs 500 per bag by new year beginning. The company expects demand to slow down once prices touch Rs 550 per bag.In Q2FY2022, prices were subdued due to monsoon.

Rationale for increases in prices is due to increase in cost by upto Rs 400 per ton.

Power: Sourcing of power from grid stood at 60% while non grid stood at 40%.

Green power constituted 27% of the total power requirement. Of the 27%, 23% is from WHR and the balance 4 % is from solar and other alternate fuels.

The company has commenced trial runs in AFR project and also solar power project with 5.5 MW is ready. Further, for the Jansi plant the company has signed long term solar agreement for 22 Gigawatt. Nansigarh is operating at 40% green power and Ammasandra is operating at 90% green power.

The company expects power cost also to increase due to increase in coal prices as such government may remove subsidy. The current power cost is sub Rs 6 per unit.

Coal: The coal prices have increased drastically. The company does not use any imported coal. Coal and pet coke ratio stood at 70:30. The company inventory will normally be for 1 month.

Packaging:Crude prices have gone up from US $ 40 to US $ 78-80. This has resulted in PP granule prices going up resulting in increase in packaging cost.

Diesel: Diesel prices have gone up from Rs 80 per liter to 100+ per liter. This has resulted in increase in freight cost.

Fly ash: The company is facing challenges with respect to fly ash due to power plants being shut due to unavailability of coal. This has resulting in the company not getting sufficient fly ash despite entering into long term contracts. The company is sourcing fly ash from long distances.

Lead Distance: Lead distance stood at 350 kms for Q2FY2022.

CAPEX: The company expects to incur capex of around Rs 55-60 crore in the current fiscal year which include Rs 15-16 crore towards green power projects including AFR and the balance towards replacement CAPEX.

Debt: The company will be repaying its debentures in Dec quarter worth Rs 120.0 crore. The company further has interest free loan from government to the tune of Rs 234.6 crore. Net cash balance as on 30 sep was Rs 79.6 crore.

Outlook: With CY2022 being election year, the company expects good demand for cement going forward