Star Cement hosted conference call on November 09, 2023. In the conference call the company was represented by Mr Kushal Shrivatsava-Executive Director, Mr Vinit Kumar Tiwari-CEO and Mr Manoj Agarwal-CFO.

Key takeaways of the call

Volume

Clinker production stood at 6.48 lac tonnes in Q2FY2024 as against 5.12 lac tonnes in Q2FY2023

Cement Production stood at 8.94 lac tonnes in Q2FY2024 as against 8.91 lac tonnes in Q2FY2023. The company under took annual maintenance in two of its plants.

Cement sales of 8.96 lac tonnes in Q2FY2024 as against 8.91 lac tonnes in Q2FY2023.

Geography wise North East cement sales stood at 6.72 lac tones in Q2FY2024 as against 6.54 lac tonnes in Q2FY2023. Outside North East cement sales stood at 2.24 lac tonnes in Q2FY2024 as against 2.38 lac tonnes.

Revenue for the quarter stood at Rs 585 cr in Q2FY2024 as against Rs 593 cr in Q2FY2023.

EBITDA per ton stood at Rs 1164/ton as against Rs 934/ ton.

On a QoQ basis profitability was impacted mainly due to lower volumes.

Trade sales stood at 89% of the total sales in Q2FY2024 and Non trade stood at 11% in Q2FY2023.

Premium contribution stood at 6.9% of the trade sales as against 4.6% in Q2FY2023 up 37% YoY.

Lead distance stood at 214 kms. Decline in freight cost in Q2 FY2024 is on account of efficient use of company’s fleet and the bridge which was broken has been re-constructed.

Capacity utilization stood at 88% in Q2FY2024.

Power and fuel:

Fuel mix stood at 6% FSA, 32% Nagaland coal, 5% Bio fuel and balance 57% spot coal.

Power cost stood at at Rs 1.9/ per K cal against Rs 2.4/k cal in Q1FY2024.

Expansion: The company is setting up a 3 million ton clinker plant which is expected to be commissioned in February of 2024 at a cost of Rs 1300 cr.

The company is setting up a 2 million ton grinding unit in Assam which is expected to be commissioned in December 2023.

Also the company plans to set up a grinding unit in Silchar. The company has acquired 75% land for the same and the rest will be acquired at the earliest.  The company has delayed the project due to strategic reasons and plans to commission the same in FY2026.

Central India: The company is looking out for  expansion and is participating in auctions for mines in Rajasthan, Chhattisgarh etc and the company has got one composite license.

CAPEX:

The company expects to incur capex of around Rs 800 cr in FY2024 of which the company has incurred around RS 206 cr and the balance Rs 600 cr will be incurred in Q2 and Q4 of FY2024.

Of the Rs 600 cr, the company has cash balance of around Rs 210 cr and expects to generate cash of around Rs 320 cr in H2FY2024. The company plans to borrow around Rs 300 crore. by end of FY2024.

The company has also incurred CAPEX of around Rs 50 cr and Rs 100 cr towards AFR and WHR plant respectively.

In FY2024 the company plans to incur a CAPEX of around Rs 600 cr and also targets to become net cash company by the end of financial year.

Prices:

Price has improved by 5% since exit. Though the prices increased post September 15, the full impact is expected in Q3.

In North East prices has increased by Rs 10 per bag and outside north east prices have increased by Rs 50/bag.

EBITDA per ton outside North east is around Rs 300/ton while in North East it is around Rs 1500/ton. The EBITDA gap between North East and outside north east will reduce once the current price increase.

Outlook:

The company expects volume growth of 13-14% YoY in FY2024.

From demand perspective demand was good in October, and the company expects double digit volume growth in Q3 and Q4.

Once the Dalmia Bharat capacity and the company’s capacity are commissioned, the company expects some impact on volumes however the same will be offset by volume growth. The company expects to maintain the market share of 30%+ once the new capacity is commissioned.