UltraTech hosted conference call on January 19, 2024. In the conference call the company was represented by Mr K C Jhanwar-Managing Director and MrAtul Daga-Executive Director and CFO.

Key Takeaways of the call

Revenues stood at Rs 16487 crore in Q3FY2024.

Domestic Volumes grew by 5% YoY in Q3FY2024 and international volumes grew by 20% YoY.

Domestic capacity utilization stood at 77% on Q3FY2024. In some regions utilization was around 80-85% and in some around 74%. The South market is consolidating and utilization were above 70%.

Trade volumes constituted 64% of the domestic volumes. Blended cement constituted 58% of the total cement.

Premium share volume stood at 23% of the trade sales.

Demand Environment in Q3FY2024:The company expects industry demand to have grown by 3-4% in Q3FY2024. This is due to couple of reasons including Q3 being festive season is subdued to absent of employees in project site; there was election in 4 major states Chhattisgarh, Madhya Pradesh, Telangana and Rajasthan; Fiscal challenges in states of Jharkhand, Bihar and West Bengal; floods in Tamil Nadu, Cyclone in Andhra; sand and aggregate shortage in some parts of the country and construction ban in NCR since last which is still continuing; rains in Himachal which impacted the movement of goods.

Prices: Slower demand results in lower prices and the most of the price increases achieved in the quarter has been rendered at the end of December 2023.

Realizations have increased by 2.1% and 2.8% YoY and QoQ respectively however by the end of December they have declined.

Current prices are marginally down when compared to exit of December quarter.

When All India capacity crosses 85% price tend to improve. The company expects prices to remain good when demand is good.

Cost:

Blended fuel cost stood at US$ 150/ton in Q3 when compared US$ 162/ton in Q2FY2024.

On a K cal basis k cal cost stood at Rs 2.048/k cal when compared to Rs 2.184/k.cal in Q2FY2024.

Domestic coal constituted 6% of the total fuel mix.

The company expects fuel cost to further reduce going forward.

The company plans to take green fuel mix to 60% by FY2026 of which 34% will be renewable and 26% will be WHRS.

Other Cost:

Other cost increased by 14% YoY in Q3FY2024 to Rs 849 crore. Increase in other expenses was due to preponement of maintenance expenses.

EBITDA: EBITDA per ton stood at Rs 1208/ton for India operations and expects to remain same for Q4FY2024.

Margins for RMC business is higher by around 4% when compared to grey cement.

Expansion:

All the expansion plans are progressing as per plans and some are ahead of the schedule.

The company will add capacity of 21.9 million tonnes in phase three which will take the total capacity to 179.3 Million Tonnes by FY2027. The orders have already been placed for critical technology items and the company expects the same to be completed as per schedule.

In the phase III expansion the company will add around 12-14 million tonnes of clinker capacity.

The company will receive incentive for capacity coming up in Rajasthan, Bihar and Uttar Pradesh in Phase III.

Capacity addition in Nathdwara in Rajasthan(phase III) includes 1.2 million tonnes cement capacity and 3.3 million tonnes clinker capacity.

Bulk terminal: Setting up of bulk terminal clearly depends on the market and the demand in that  market. As majority of the material from Gujarat to south is moved by rail, there is  no much bulk terminals in the east.

CAPEX:The company expects to incur CAPEX of around Rs 9000 cr in FY2024 and Rs 9000 cr in FY2025. Further the company will incur CAPEX of around Rs 7000 cr in addition to maintenance CAPEX in FY2026.  This is towards Phase II and Phase III.

Net Debt:Increase in CAPEX and some opportunity bets to add fuel inventory resulted in increase in working capital resulting in marginal increase in net debt. Net debt stood at Rs 5541 crore as on Dec 31,2023. However, the company expects improvement in cash flow in Q4.

The company expects to be zero net debt by March 2025.

Non Fossil fuel based power: The company has 455 MW of renewable power capacity and 264 MW of WHRS capacity which constitutes 24% of the total fuel consumption. The company plans to double the same by FY2025.

The company will add 16-20 MW WHRS capacity in FY2024.

As on date the company has 44 Klins of which 29 klins are covered by WHRS and by the end of Phase III expansion the company will in total have 48 klins of which 41 klins will have WHRS. All future expansion  will be with WHRS and zero thermal power.

Kesoram Acquisition: The company will acquire cement assets of Kesoram Industries and the same have been filed with stock exchanges. The company will go ahead and apply for approval from Competition Commission of India and then will undergo NCLT process. The company expects the effective date for the merger to be April 2024.

Kesoram Industries has around 10 Million Tonnes capacity.

Acquisition of Kesoram Cement business will provide good lime stone reserves for the company;It will be value accretive for the company and will help the company serve its customers better. Kesoram also has a good brand image in the markets in which it is present.

The company will continue to look of inorganic opportunities. Each opportunity will be measured on its own benefits. Inorganic growth should provide the company profitable growth opportunities, it should be value accretive and should be lime stone backed.

Burnpur cement: The company has completed the acquisition of 0.54 Million tonnes of Burnpur Cement. The acquired assets are reflecting in company’s balance sheet. Acquisition will help the company enter Jharkhand market.

Outlook:

The company has started witnessing improvement in demand since middle of December 2023. The company expects utilization to be in the range of 80-85% in Q4FY2024.

India is fundamentally poised for huge infra growth which will benefit all the cement players in the long run. Any project being initiated will go on and there is substantial construction activity happening across the country.

The company expects industry volume  growth in the range of 8-9% in Q4.

Difficult to comment on demand in H1FY2025 as there are elections and depends on the election dates.