JKLAKSHMINSEQ4 FY22May 19, 2022

JK Lakshmi Cement Limited

7,806words
198turns
18analyst exchanges
3executives
Management on call
Sudhir Bidkar
CFO OF JK LAKSHMI CEMENT
Shailendra Chouksey
WHOLE TIME DIRECTOR, JK LAKSHMI CEMENT
Vaibhav Agarwal
PHILLIPCAPITAL (INDIA) PRIVATE LIMITED
Key numbers — 40 extracted
Rs. 80,
and fuel cost for us for Q3 was 9,500 per ton and we were expecting a 10,000 for this quarter and Rs. 80, and Rs. 85 kind of an increase, but actually it has decline on QoQ front, so if you can help us wh
Rs. 85
t for us for Q3 was 9,500 per ton and we were expecting a 10,000 for this quarter and Rs. 80, and Rs. 85 kind of an increase, but actually it has decline on QoQ front, so if you can help us what was the
10 megawatt
cost is concerned the first thing is that the full benefit of the waste heat recovery project of 10 megawatt which was setup and installed at Sirohi that has come in that is number one that has helped us to
14%
benefitted us basically and we have started using more of the alternate fuel basically this about 14% now we have been able to use as against 10%. Other than that, the full impact of the increase inv
10%
using more of the alternate fuel basically this about 14% now we have been able to use as against 10%. Other than that, the full impact of the increase inventory cost will come in the coming quarter
7%
ound 9,000 that was the average cost of the fuel which was debited that time. It will be at least 7%, 8% higher than that. Shravan Shah: And in terms of the other expenses is there any one off or
8%
9,000 that was the average cost of the fuel which was debited that time. It will be at least 7%, 8% higher than that. Shravan Shah: And in terms of the other expenses is there any one off or anyt
168 crore
That is you are talking of the decrease in cost on QoQ basis or what? Shravan Shah: QoQ from 168 crores 149 crore other expenses on consoled basis I am talking from 168 crore to 149 crore? Managemen
149 crore
you are talking of the decrease in cost on QoQ basis or what? Shravan Shah: QoQ from 168 crores 149 crore other expenses on consoled basis I am talking from 168 crore to 149 crore? Management: We sho
30%
arter? Management: Fuel mix we had done as I mentioned we have done about in this quarter about 30% of coal, 56 is the petcoke and other biomass etcetera about 8. As far as the trade is concerned w
55%
omass etcetera about 8. As far as the trade is concerned we have done 56 in this quarter over for 55% and trade percentage is 55 and lead distance 395. Shravan Shah: And rail road mix? Management
1,650 crore
channel, so I hope nothing changes in terms of the costing front whatever we mentioned last time 1,650 crore so just wanted because last time we talk about that we will discuss the right issue? Management
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Guidance — 20 items
Vaibhav Agarwal
opening
“I will now hand over the floor to management of JK Lakshmi Cement for their opening remarks which will be followed by interactive Q&A.”
Management
qa
“As far as the power and fuel cost is concerned the first thing is that the full benefit of the waste heat recovery project of 10 megawatt which was setup and installed at Sirohi that has come in that is number one that has helped us to reduce the cost as far as power and fuel is concerned.”
Management
qa
“That will be basically because of the higher cost inventory which will now get utilized in the current quarter and the full benefit of the waste heat recovery was already there, some efficiency improvement impact will also help us to offset that, but still there will be we expect that to be there.”
Shravan Shah
qa
“Any number in terms of how much increase we can expect in the first quarter?”
Management
qa
“It will be at least 7%, 8% higher than that.”
Management
qa
“Right issue has been (Inaudible) 08:16 and the board meeting held on 17th and the project (Inaudible) 16th.”
Pinakin Parekh
qa
“And sir this 25 to 30 in the North taken in the month of April has it been fully absorbed into May, what is the sense of demand because year-on-year demand comparison may not be valid because of last year delta wave, but how is demand trending at this point of time especially government project because they work on a fixed price basis?”
Management
qa
“So, I am expecting now the demand to pick up which was delayed by about 15 days in the month of May that should pick up and immediate supply that will be resumed and also the high temperature this year relative to the earlier summer that also affected some of the markets in Haryana and UP, but gradually we are hoping that this thing will subside and demand will pick up because we still have two and half months to go before the monsoon start impacting the North.”
Pinakin Parekh
qa
“And sir my last question essentially is that if you were to take today’s coal prices, today pet coke prices basically the prevailing spot prices of various commodities which given that we are in May and we will be flow through in the September quarter in your P&L, sir how much percentage increase would the power and fuel cost on a per ton basis be what you reported in the March quarter?”
Management
qa
“Yes we expect to get it commission by March of 24.”
Risks & concerns — 5 flagged
85 kind of an increase, but actually it has decline on QoQ front, so if you can help us what was the cause and why it has decline and how do you see the first, second quarters in terms of power and fuel cost?
— Shravan Shah
Other than that, the full impact of the increase inventory cost will come in the coming quarter obviously.
— Management
We also believe that there has been some concern on the working at East Chhattisgarh unit, but I think that too has improved now this year considerably twice the regime at Chhattisgarh has been quite low and that possibly could have been a reason, but I think that correction has taken place and that should also help, but I think more than that we would be keen to hear from investors like you what in your opinion needs to be done for correcting the ratings.
— Management
Just one question if I may the expansion which we are currently working on is at UCWL is there a possibility or rather a feasibility from a limestone availability perspective that we can have these expansions also at the standalone entity level going forward or there will be a challenge to that?
— Navin Sahadeo
There will certainly be an improvement over last year based on various efficiencies drive which you have carried out and full impact of which will come in the coming year.
— Management
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Q&A — 18 exchanges
Q
Sir first question obviously the normal question is on the costing front so we have seen improvement on the power and fuel cost and other expenses so if you can help me because last time when we had a call we said that in terms of the power and fuel cost for us for Q3 was 9,500 per ton and we were expecting a 10,000 for this quarter and Rs. 80, and Rs. 85 kind of an increase, but actually it has decline on QoQ front, so if you can help us what was the cause and why it has decline and how do you see the first, second quarters in terms of power and fuel cost? JK Laskhmi Cement May 19,2022
Management
As far as the power and fuel cost is concerned the first thing is that the full benefit of the waste heat recovery project of 10 megawatt which was setup and installed at Sirohi that has come in that is number one that has helped us to reduce the cost as far as power and fuel is concerned. Other than that, obviously the change in the mix has benefitted us basically and we have started using more of the alternate fuel basically this about 14% now we have been able to use as against 10%. Other than that, the full impact of the increase inventory cost will come in the coming quarter obviously. In
Q
Sir my first question relates to realization in prices now there has been lot of talk about price increases, can you give us a sense of what is the price today versus the March quarter average in your key markets?
Management
We have seen some increase in the month of April by about Rs. 25 to Rs. 30 a bag that varies from market-to-market, but on an average you can say about 25 to 30 is there in the market in the North. As on the East is concerned we have seen an increase of about Rs. 15 to Rs. 20 a bag. And sir this 25 to 30 in the North taken in the month of April has it been fully absorbed into May, what is the sense of demand because year-on-year demand comparison may not be valid because of last year delta wave, but how is demand trending at this point of time especially government project because they work on
Q
Sir few basic numbers about sales volume standalone, consol and clinkers?
Management
Sales volume in this quarter were on a standalone basis 31.44 lakh ton of total which includes 29.16 of cement and 2.28 of clinker and on a consolidated basis it is 30.84 cement, 2.11 clinker and 32.91 of cement total. And sir what about production number of standalone and consol UCWL? Consolidated production while is only submission only because production does not get offset. So, JK. Lakshmi production quarter was 26.19 cement and UCWL production was at 4.21. What is the non-cement revenue in this quarter out of that how much is RMC? This quarter the total non-cement revenues of our 103 cror
Q
Just correct me if I am wrong like we have already taken a price hike of Rs. 25 per bag which means like Rs. 500 per ton increase has happened, so is it fine enough to offset the cost that has increased from March quarter?
Management
No, not exactly, it may not be good enough because besides the fuel cost there has also been an increase in the costing of freight this too has moved up by about 10%. So, I think there is a need to compensate that as well. Therefore, we are looking at further increases, but much will depend when the demand really sustain in a meaningful manner then only an increase would be possible. Sir what kind of incremental hike is we need to take to offset that rise in the freight cost? Minimum of Rs. 50 a bag would be necessary for compensating to some extent. Rs. 50 a bag? No 15. So, you mean to say li
Q
My question was more on the valuation upfront, of course performance is great in general the balance sheet has seen like material improvement now there is growth visibility, the ROE numbers looks fantastic and I am sure investors would also be eager to hear this that in your assessment what is the reason for JK Lakshmi Trading so materially cheap if I say versus other stalks especially North base or East also for that matter where there is enough growth? JK Laskhmi Cement May 19,2022
Management
Basically, we do not see any reason as management we perceived we are undervalued. It is for the investors like you to analyze and let the market know that this is undervalued stock and as a potential for use of ton. I do not see any reason why it should be valued at such a low rate because it has huge potential only thing it is question of people keep asking about the question of Rs. 1,000 EBITDA per ton that eventually will come. We have done all the things right whatever efficiency improvements were required to be done we are already working on that other improvement will come in due course
Q
Firstly, I wanted to understand on the cost side, there has been reduction in employee cost, so is this purely because of volume or is there is other element to it as well?
Management
Sorry come again can you repeat your question. Sir the per ton employee cost has also gone down, so is this only because of higher volumes or there is some element as well? It is because of the higher volumes. That is the only thing there is nothing else? Yes nothing else. And sir on the other expenses you said that there were lower advertisement cost and efficiencies in fixed cost, so what was the nature of that efficiencies if you can spell out? Lower fixed cost was basically as I mentioned for two reasons one was the lower advertisement cost and other fixed cost being the other expenses pri
Q
Sir my question pertains to our capacity utilization so on a standalone basis we are already at 90% capacity utilization, so how do you want to grow the volume so any volume guidance for FY23?
Management
We can further increase the capacity utilizations and improve the blending that can always go up. So, that will help us to the volume. Sir what has been blending ratio this quarter? Blending we did about 55% blended. Sir with regard to value added products so what kind of traction you are seeing in value added products or what could be your guidance for this year? As far as value added products are concerned and this full year we did about total value of about 373 crores. So, we would see some improvement therein maybe 8% to 10% value growth. And now last question was on premium cement so how
Q
One question on the part of MAT credit so how much is the balance left as on FY21 and FY22?
Management
FY22 we have a balance of about Rs. 260 crores left. JK Laskhmi Cement May 19,2022 And how much we have consumed in this year? We would have consumed about Rs. 44 crores. And sir on the part of this expansion project so like is it 1,550 or 1,650 HAM what is the CAPEX cost? 1,650 it is being funded throughout the debt equity of 2:1 Rs. 1,100 crores is the loan and 550 is the promoter contribution out of which they have announced the rights issue which maybe up to Rs. 450 crores. Given the cash flow which we are generating like say operating cash flow we would be having about Rs. 800 odd crores
Q
My question pertains to first again on the margins we see this sharp fall sequentially in the absolute employee cost and other expenses one explanation for other expenses you mentioned is reduction in advertisement cost, but the amount seems to be significantly lower so were there some big provisions which have been reversed in this quarter also if you look the other expenses as percentage of net sales historically last 7 quarters, 8 quarters have ranged between 12% to 13% thereby this quarter it has come down to almost 9% odd on a consol basis, so how do you read into these numbers?
Management
Actually, what happens when we do the quarterly accounting and at the start of the year we will make a budget of wages expansion and all the expenses shall not get booked on a quarterly basis. So, at times in the native provision in the respective quarter otherwise this all expenses were to be booked in the fourth quarter then obviously then those loading will come in the fourth quarter. At times it so happens that when we do a pro rata provisioning quarter wise in the year we find that actual expenses may in some cases be lower than the provision which we have made through the years. So, that
Q
First question out of the total CAPEX guidance of 1,650 crores what are we targeting for the JK Laskhmi Cement May 19,2022 current financial year?
Management
About 700 crores. That will be at the consol number? You are talking of 1,650 that is an expansion project of UCWL. And for standalone? In response to that I am saying that out of that about 700 will get spent in the current financial year. In JK Lakshmi we are not doing any major CAPEX. So, only normative CAPEX of about 70 crores, 80 crores would be there. In all it can be around 780 to 800 crores of numbers? Depending on the progress of the project around 800 crore should be there. With respect to our current cash and borrowing level if I can combine the current investments and cash balance
Q
I have two questions first after the 10-megawatt capacity expansion of WHRS that we have done how much further scope we have to expand on WHRS and what is the pipeline we have right now? JK Laskhmi Cement May 19,2022
Management
Frankly we do not have much scope now on further addition in the waste heat capacity. We have reached the 33-megawatt waste heat recovery which is 25 at the mother plant in Serio and about 8 in Durg. As of now we do not see any further addition, but some technical improvement can always increase the capacity by 1 or 2 megawatt. There may not be any quantum increase like we have done this time. So, there may not be opportunity there in, some technical innovation improvement can always help us to increase the 33 capacity to 35, 37 like that. But the new capacity expansion that we are doing it wi
Q
Sir just I have a question from the sales mix, is it possible to provide the sales breakup between the North and East region?
Management
No we do not provide that sorry. Can you get an idea on how much will be the head wise figure for the Q4 FY22 and last year figure? Head wise expenses we do not share in the investor call. And sir is this the correct understanding that in the Q3 because of the strike we have build up some inventory and that inventory has also benefitted in this quarter? Yes there was a strike in the Eastern side Durg plant we have transport price which impacted. So, that impairment the production was also cut down and the strike was it is not only the dispatches. Some benefits are there, some carry forward inv
Q
I had one question regarding 1,650 crore expansion like as you said 350 crores borrowing done by UCWL, so how much debt we are going to borrow with respect to this expansion and apart from right issue subscription what would be advances or funding requirement to be given to UCWL from standalone basis?
Management
As far as UCWL is concerned this total expansion of Rs. 1,650 crores is being funded through a debt of Rs. 1,100 crore out of which 350 was borrowed in March balance will come in the current and next year the balance 750 so that will be the 350 plus 750 we will make it Rs. 1,100 crores. As regards the promoters contribution of Rs. 550 crores about Rs, 100 crores to Rs. 150 crores will come from their internal accruals and balance 400 to 450 would be the rights issue and our subscription will be pro rata in the rights issue depending on who we hope that it will subscribe fully to their share of
Q
Just one more question sir recently as in the same board meeting Arun Shukla ji has been elevated as a Director to the company, so just wanted to understand does it change any role for him, does he get more responsibilities in the active day-to-day management I believe he was looking at sales and marketing, so if you can just throw some light for his role in the day-to-day management? JK Laskhmi Cement May 19,2022
Management
He was not only looking after sales and marketing he was looking after the entire operation as President of the company. So, right from the day he joined the way we have been talking that in the concall earlier also that he is basically the president of the company looking after both the operations as well as the marketing side so that is number one and yes you are right in the recent meeting he has been elevated to the level of President and Director. So, obviously his role will be wider as the President as well as the Director of the company.
Q
So, just a two question first is the UCWL 1.5 MTPA which is the next grinding unit, so currently by October we will be having a 1 MTPA grinding at Udaipur and 1.5 where it will come in Rajasthan?
Management
This we should have talked earlier also now finally after a lot of consideration deliberation and due diligence of various places finally UCWL has decided to do the entire grinding capacity of 2.5 million at the mother plant itself. So, there will not be any split location grinding unit for UCWL. The entire Clinkerization of 1.5 million clinker and 2.5 million cement capacity will come. So, while there would be some saving in the project cost on emanating from the shifting of the grinding unit from a split location to the mother plant, but that based on their recent increase in the commodity p
Q
Would you please be able to quantify like how much was the IPL like that particular expense in the base quarter and were there BCG consultancy charging in the base quarter?
Management
There were some BCG consultancy, but head wise we do not provide these IPL charges how much are there, how much is this we do not share. But sir on a steady run rate basis how much could be the other expenses because like if we see to this year like on an average it has been roughly around like last year it was Rs. 500 prior to that it was around Rs. 370 and this quarter it has been much lower as compared to what it used to be and for the year as a whole like say it has been roughly about Rs. 550 per ton, but this quarter it was 400 only? 550 for the year is a right figure some escalation on a
Q
Quickly one question as you have shared the Q4 sales volume so could you share the clinker production number of the sales volume for FY22 on a consol and standalone basis this is the only question I have?
Management
Total sales volume were 105.77 lakh tons JKLC almost 96 lakh were cement and 9.78 clinker and on consol level it is 112 lakh tons, 101 cement and 11 clinker.
Q
Thank you. Just one thing Bidkar Sir if you can also share the consol volume for the full year adjusted for the inter-company adjustment if you can give that number please?
Management
Yes that is adjusted that full value 112 is adjusted for the inter unit sales. Thank you. On behalf of PhillipCapital (India) Private Limited we would like to thank the management JK Lakshmi Cement for the call and many thanks to the participants joining the call. Inba you may now close the call. Thank you. Mr. Vaibhav and thank you everyone.
Speaking time
Management
90
Moderator
20
Shravan Shah
13
Rajesh Ravi
12
Sandip Bansal
10
Kamlesh Bhagmar
10
Sanjay Nandi
6
Keshav Lahoti
5
Navin Sahadeo
5
Uttam Srimal
5
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Opening remarks
Vaibhav Agarwal
Thank you Inba. On behalf of PhillipCapital (India) Private Limited we welcome you to the Q4 FY22 & FY22 Call of Lakshmi Cement. I need to highlight that Lakshmi Cement Limited is also the holding company of Udaipur Cement Works Limited and therefore the call is also opened for discussion about the performance of Udaipur Cement Works. On the call, we have with us Mr. Sudhir Bidkar – CFO of JK Lakshmi Cement and Dr. Shailendra Chouksey – Whole Time Director he is expected to be joined the call very shortly. I would like to mention on behalf of JK Cement Limited and its Management that certain statements that may be made or discussed on the conference call maybe forward-looking statements related to future developments and current performance. The statements are subject to number of risks, uncertainties and another important factors which may cause the actual developments to differ materially from the statements made. JK Lakshmi Cement Limited and the management of the company assumes no
Management
Thank you Mr. Vaibhav and good afternoon ladies and ladies for this Q4 concall of JK Lakshmi. Results you would have all seen so without any waste of time let us I am leaving the floor open for question and answers.
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