Capitaline

Analyst Meet / AGM 07-May-13

Conference Call

Heidelberg Cement India

Not witnessing any pre election spending in the state of Madhya Pradesh so far

Heidelberg Cement conducted a conference call to discuss the financial performance during the quarter ended March 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 Q1CY13 despite higher cement volumes during the quarter.
The net sales rose to Rs 370.43 crore for the quarter ended March 31, 2013 as against Rs 287.69 crores during the corresponding quarter of the previous year.
Higher operating expenses caused the net profit in Q1CY13 to come in at Rs 2.2 crores as compared to Rs 11.43 crores during Q1CY12.
EBITDA per tonne during Q1CY13 rose 17% to Rs 394 per tonne. Increase in EBITDA was mainly contributed by 21% increase in volumes from 7.9 lakh tonnes in Q1CY12 to 9.5 lakh tonnes in Q1CY13 and 5% increase in net sales realization (net of freight and forwarding charges) from Rs 3,116 per tonne in Q1CY12 to Rs 3,266 per tonne in Q1CY13.
The cost per tonne rose from Rs 2806 per tonne in Q1CY12 to Rs 2884 per tonne in Q1CY13.
But the power & fuel expenses rose 43% Y-o-Y, while the freight expenses rose 47%.
The company sold 75% of its cement produce in Central India (90% retail and 10% institutional) while 15% and 10% was sold in the Western market and the southern market respectively.
As per the company estimates the all India cement production during Q1CY13 witnessed a growth of 4.6% Y-o-Y as against Q1CY12 growth of 9.2% Y-o-Y.
The overall cement production rose to 67.7 mn tonnes in Q1CY13 as compared to 64.8 mn tonnes in Q1CY12.
The company cement production increased in Q1CY2013 by 25% Y-o-Y (47% Q-o-Q) to 9.74 lakh tonnes as its new facilities in Central India were stabilized.
The company cement sales- including clinker and Ground-granulated blast-furnace slag (GGBS) increased in Q1CY2013 by 21% Y-o-Y (41% Q-o-Q) to 9.5 lakh tonnes.
Due to increase in capacity in central India the region's share of the total net revenues for the company has increased from 69% in Q1CY12 to 75% in Q1CY13.
Western and the southern regions contribution to the total net revenue shrinked to 16% and 9% respectively in Q1CY13 as compared to 19% and 12% in CY12.
The company expects the cement demand to grow by 8% in CY13 and the company will resort to sharp price increases as and when the opportunity presents itself in order to recover the losses the company incurred by not passing on the cost increases since 2011.
But the company is not witnessing any pre election spending in the state of Madhya Pradesh so far.
The cement realization has fallen since the end of March and now the realization is 2-3% lower than the March prices.
Since the pet coke prices have sharply come down, company plans to use pet coke for the expanded capacity besides the linkage coal. The current landed cost of pet coke is Rs 7000 per tonne.
Currently the company uses 40% pet coke and 60 % linkage coal.
The company's average cost of debt is around 10.5% - 11%.
The company intends to increase its market share in the Madhya Pradesh and Utter Pradesh market from 6-7% to 10% in the next two years.
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.
The company constructed 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.
OLBC will not only substantially reduce the dependence on road transport but also reduce the transportation costs.
Cost saving of Rs 70-100 per tonne is expected due to the stabilization of OLBC from the next quarter.
The company also erected 20 Km long 33 KV Power transmission line for Patharia mines, 38 Km long 132 KV Power transmission line from Damoh to Narsingarh unit and 5 Km long 132 KV Power transmission line at Jhansi.
Besides improvement projects in the existing capacity such as modernization of existing railway siding, packers etc. are also being undertaken.

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