Capitaline

Analyst Meet / AGM 01-Aug-13

Conference Call

Heidelberg Cement India

Sale of cement grinding facility in Maharashtra is expected to be concluded by October

Heidelberg Cement conducted a conference call on 31^st July 2013 to discuss the financial performance during the quarter ended June 2013 and the macro trend going forward. The Managing Director & CEO Mr. Ashish Guha addressed the call.
Highlights-

Heidelberg Cement India posted disappointing performance in Q2CY13 despite higher cement volumes during the quarter.

The net sale rose to Rs 358.64 crores for the quarter ended June 2013 as against Rs 304.98 crores during the corresponding quarter of the previous year.

The EBIDTA margin fell to 11.1% in Q2CY13 as compared to 12.9% in Q2CY12.

Absolute EBIDTA rose 1.3% Y-o-Y to Rs 40 crore in Q2CY13 as compared to Rs 39.5 crore in Q2CY12.

EBITDA per tonne decreased by 17% Y-o-Y to Rs 421 per tonne in Q2CY13 as compared to Rs 508 per tonne in Q2CY12.

The cement volumes though rose 22% Y-o-Y to 9.51 lakh tonnes in Q2CY13 as compared to 7.77 lakh tonnes in Q2CY12.

The net sales realization (net of freight & forwarding charges) fell 6.7% to Rs 3173 per tonne in Q2CY13 as compared to Rs 3,402 per tonne in Q2CY12.

Coupled with labor shortages experienced by the company in the month of April and May, heavy rains in Madhya Pradesh and Uttar Pradesh during the month of June impacted the cement realization.

The demand in the company's major markets continues to be soft although the company expects the demand to pick up in the fourth quarter of the current calendar due to infrastructure spending.

The Power & fuel cost increased by 33% and freight cost by 40%.

The company sold 79% of its cement produce in Central India while the rest was sold in the Western market and the southern market.

As per company's estimates the cement demand in central India during the first half of the current calendar year should have grown by 6-6.5% but the overall demand continues to remain sluggish.

Growth in demand in central India was due to infrastructure spending in Madhya Pradesh.

The construction of around 20 km long Overland Belt Conveyor (OLBC), which is one of the longest in the Country for transportation of limestone from the mines at Patharia to the clinkerization unit at Narsingarh was temporarily disrupted although now the installation is being handled by the supplier at no extra cost.

OLBC would be operational by October 2013.

OLBC will not only substantially reduce the dependence on road transport but also reduce the transportation costs.

Cost saving of Rs 70-80 per tonne is expected due to the stabilization of OLBC from the fourth quarter.

The company's board of Directors approved the sale of its cement grinding facility in Raigad, Maharashtra, to JSW Group, as a going concern on slump sale basis.

The company had been exploring possible ways of improving margins of this grinding unit including the possibility to scale up operations but the same was not feasible due to infrastructural bottlenecks.

The parties are currently negotiating and finalizing the transaction documents. The transaction is subject to all relevant approvals including that of shareholders.

The sale is expected to conclude by October this year.

The company expects total cement volumes of 4 mn tonnes in CY13.

The company's Karnataka plant operated at 50-55% capacity utilization in Q2CY13 and this is expected to increase to 60% in the next quarter.

Commercial production began at the new plant in Jhansi (U.P.) since 16th January, thus increasing the capacity there from 0.8 mn tonnes to 2.7 mn tonnes.

Commercial production also commenced from the new plants at Narsingarh and Imlai in Damoh (M.P.) on 18th February 2013 thus increasing the clinker capacity there from 1.2 mn tonnes to 3.1 mn tonnes and the cement grinding capacity from 1 mn tonnes to 2 mn tonnes.

Company used 45% pet coke and 65 % linkage coal in Q2CY13 as compared to 35% pet coke and 65% linkage coal in Q2CY12.

The long term debt in the company's book at the end of June 2013 is Rs 975 crore. The peak debt is expected to be around Rs 1000-1100 crore.

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