HEIDELBERGNSEQ1FY'23July 19, 2022

HeidelbergCement India Limited

8,156words
133turns
10analyst exchanges
3executives
Management on call
Jamshed Naval Cooper
MANAGING
Anil Sharma
CHIEF FINANCIAL OFFICER,
Vaibhav Agarwal
PHILLIPCAPITAL (INDIA)
Key numbers — 40 extracted
rs,
ce. These statements may be subject to a number of risks, uncertainties, and other important factors, which may cause the actual developments and results to differ materially from the statemen
72%
utilization, as usual we try to keep it at on a very high level. So, we operate at close to about 72% capacity utilization, which is, I would say it is under such a difficult quarter operating at thi
100%
fficult quarter operating at this level was a good task done by the team. As a Company we operate 100% blended so, on a carbon footprint, on a sustainability we are on a very high note. We are close t
15 megawatt
ower in our journey to have more and more power under renewable, and the green power. We got this 15 megawatts, clicking-in, ticking-in from March, and now at Jhansi plant we are having this power availabili
30%
to inform you that for the first time highest ever share of green power in this Company has been 30% which is a, I would say is a very welcome move of the Company towards the direction which leads t
Rs. 2.2 billion
are making our planning and while we are doing our results. Net cash in banks is close to about Rs. 2.2 billion. So, we have a good reserve here. And we continue to operate on negative working capital which ha
12 megawatt
ntribution is distributed. So, it is in Jhansi it’s 15 megawatt. In Narsinghgarh with the help of 12 megawatt WHR and 5.5- megawatt solar plant, we are able to get a good respite on terms of power from the gr
90%
story for more than two years, two and a half, three years, where we have been operating close to 90% of our power is green power. On the right-hand side, you can see how our growth trajectory has
24%
the fuel and power this has impacted us inversely. And our total cost has gone up by 24%. And on the side of realization, we have been able to takeout about 13% out of it. So, still ther
13%
as gone up by 24%. And on the side of realization, we have been able to takeout about 13% out of it. So, still there is a lot of road to catch up. It is unfortunate that the markets have
Rs. 620,
the right-hand side and the middle of it, which is a center of drawing attention, which is about Rs. 620, was taken away totally by power and fuel. This other items, you can see a little bit here. But the
Rs. 4.58 billion
ut from 23 to 26. And how it is going to be repaid. But today as of now the bank balance is about Rs. 4.58 billion, which is a good balance which we are sitting on. Coming on Slide #9, you can see that our volu
Guidance — 20 items
Management
opening
“Moving to Slide #4, which is on the Page #4, as I mentioned blended we are 100%, CO2 we are 511 kgs per tonne, and another bright spot the silver lining here is that we have water positivity of 4.4, we are working to improve it further and possibly, if this year the monsoons are good, we will be able to harvest far more water and improve this trajectory from 4.4 and upwards.”
Management
opening
“2.2 billion as of now after the debt is being paid, it will be taking its own time, which will be paid up on the right-hand side, the breakup has been given how the cash flow is going to go out from 23 to 26.”
Coming to our premium cements
opening
“Non-trade and trade, I will be very happy to inform you that earlier the difference between trade and non-trade was more.”
Coming to our premium cements
opening
“This project we took up because to address the dilemmas of the cement consumers.”
Coming to our premium cements
opening
“By this method, we are telling that here you can make a call and let us know and we will reach out to you and supply, try to see whether we can make you our dealer or not.”
Coming to our premium cements
opening
“We will expand this WhatsApp for business, which is we will expand it in the future.”
Coming to our premium cements
opening
“Outlook, just to run through quickly, we expected the GDP rate to go at 7.3% as per the forecast what has been coming now in the media.”
Coming to our premium cements
opening
“So, we expect that if this goes to 7.3%, then the cement demand should be aligned, close to it or at least a little better than this.”
Coming to our premium cements
opening
“But we expect with the coming Lok Sabha elections in 2024, the spending will go up, because the government tax collection revenues have been growing continuously at least 20% month on month basis.”
Coming to our premium cements
opening
“So, there is an imminent risk which we see that if a recession was to trigger in, what will be the state?”
Risks & concerns — 15 flagged
So, we operate at close to about 72% capacity utilization, which is, I would say it is under such a difficult quarter operating at this level was a good task done by the team.
— Management
But then these are some of them, I would say they are not critical ones, they are one off ones so that is not a major concern for us because there was some shutdown and some small things happen.
— Management
So, that's not too much of a concern for us.
— Management
But this power and fuel will remain our question of concern for us and I am sure it will for the other industry members also.
— Management
So, there is an imminent risk which we see that if a recession was to trigger in, what will be the state?
— Coming to our premium cements
So, how we see the prices so have you seen any further decline from the start of July compared to the exit of June or the average for the 1st Quarter?
— Shravan Shah
Shah, there was little pressure developing because of monsoons not coming in, but now when the monsoon is setting in, I think there will be some uptick in price.
— Management
And the fact that in Q4 we had the election so some weakness could have been there, but in Q1 it was a significant decline.
— Kamlesh Bagmar
In terms of absolute number, I agree with you, there was a little bit of pressure on price between judgment between price and volume.
— Management
Few questions, first addressing the volume decline.
— Rajesh Kumar Ravi
What do you suggest, what is the outlook because this is three consecutive quarters we have seen volume decline.
— Rajesh Kumar Ravi
So, despite volume decline in Q1 you are still hopeful of full year growth of 7% to 8%.
— Rajesh Kumar Ravi
See the demand is getting weak little bit on the government side.
— Management
Government consumes close to about 30% under non-trade, although we don't supply there, but when whosoever is filling up that demand, if they don't have then they will build pressure on prices of certain areas.
— Management
So, that will put pressure on some other coals available, so they will also try to because everybody then will move towards Russian coal.
— Management
Q&A — 10 exchanges
Q
The first question is on the pricing. So, how we see the prices so have you seen any further decline from the start of July compared to the exit of June or the average for the 1st Quarter?
Management
So, Mr. Shah, there was little pressure developing because of monsoons not coming in, but now when the monsoon is setting in, I think there will be some uptick in price. I think for this month the prices should remain flattish. Now, coming to the main question of power and fuel. So, two things, first in terms of the average fuel costs for the 1st Quarter, how much was blended? And how much more increased we can see in the in the 2nd Quarter? You are saying, for the power and fuel, both combined? Yes. Power and fuel combined; I can give a separate, separate. Yes, no issues. Okay, power for this
Q
Yes, one question on the part of volumes, our volumes are down 6% and it is the lowest volume levels since Q1FY18, we had added some capacity to debottlenecking. But we continue to lag on that part. Volumes, if we see the other peers as well, like say ACC reported 10% odd volume growth, and there also no capacity addition, and even we believe that rest of all peers could be having a growth in the vicinity of 8% to 9%. Against that we are degrowing at 6%. And the fact that in Q4 we had the election so some weakness could have been there, but in Q1 it was a significant decline.
Management
So, Kamlesh, you have noticed it correctly. But if you look at it, if you compare on a year-on- year basis, okay, last year in the same quarter we grew by 38%. But in the base, there was a COVID impact. So, I am comparing right from Q1FY18, not from year-over-year or -- Allow me to complete it, that’s what I am saying that, that time in Central India, other players did not grow by the same extent. So, our base was higher. So, the growth did not come to that extent, okay, so that is one part. In terms of absolute number, I agree with you, there was a little bit of pressure on price between judg
Q
Few questions, first addressing the volume decline. What do you suggest, what is the outlook because this is three consecutive quarters we have seen volume decline. So, what sort of number you are looking at for FY23?
Management
So, this year, for the whole year you are talking about? Yes. That is around 4.74 million INR if I am not mistaken. '21/'22, Fiscal Year it was 4.75 million in the cement volume and this year -- No, I think we have some growth in the market -- at least 6% to 7% growth must be --, this is what we are targeting it is because now the GDP numbers are coming as 7% growth, I think we should try sir, you know achieve more than that, 1% better than that. So, despite volume decline in Q1 you are still hopeful of full year growth of 7% to 8%. We will take it up to next quarter we will make it up. You di
Q
My first question is, can you give us some more granular color on cement prices in your key markets where they were in April? And how they have trended over May, June, and July?
Management
I would say it is very much constant, prices have been very flattish. In Central India, the prices have not really moved, in a very narrow range, I would say. But you can say comfortably around Rs. 380 somewhere price is in Lucknow about Rs. 360, Rs. 370 in Bhopal. So, if you take these two major markets, it will be somewhere close to, in this range bound only. So, just to understand more clearly the price hikes that you took in April, how much were they per bag, in broadly? And have the entire price hikes stuck through the last three months? I won’t be able to tell you so micro fine because I
Q
Just a quick question on the market, like in Central India, we had seen some flow of cement coming from South and East. So, has that moderated or like are we still seeing that happening?
Management
No in Central India we are not having an inflow from South. No, I remember after the Mini Rakes Scheme at least some material was starting to come in from --? Might be but right now it is not there. And I believe even some rakes are coming in from Konark Cement and all? Yes Konark comes in, that comes, but that is coming the eastern side. Yes, so but it's not as bad as it was about say one, one and a half years ago. Yes, because, earlier there used to be a freight subsidy which used to be there now those have reduced. Now the cost has gone up for everybody, I don't think people will be aggress
Q
My first question is on your coal mix, you said it is 38%. Can you split it further between domestic FSA coal, eAuction coal and international coal?
Management
For us it’s 100% domestic coal, there is no imported coal, we buy from Central India. And how much of that would be linkage and eAuction coal. There is no linkage coal, nowadays is gone, 100% is the open market, there is no coal received during this quarter under the fuel supply agreement. So, that’s why we also expect that coming quarters, the cost may reduce once we start getting the coal under our fuel supply agreement. But during this quarter it was 100% open market domestic coal. And we may start getting the linkage coal from which quarter? We expect because now when the pressure will red
Q
I just wanted to understand, there is a note given in the quarter note, that we have received Rs. 30 crores during the quarter.
Management
It is in the March quarter. Because in a quarter note it is written during the quarter, so I just wanted to clarify that. So, if you see in the note it is mentioned during the quarter March 2022 and the year in March 2022, respectively. So, this is the incentive we received or you can say we received approval from the Madhya Pradesh Government and in March quarter it was accounted for. And have we got any incentive in the current quarter --? The incentive is valid until February 2023. So, every quarter, our average amount is around Rs. 50 million INR. So, in June quarter also this line the Rs.
Q
The first question as you indicated around Rs. 50 million of other operating income in the quarter. How much was the number corresponding period last year? Was it an equivalent number?
Management
So, June 2021 quarter this amount was slightly lower, here the amount is Rs. 55 million INR. So, the question is basically, if one looks at the price growth on a year-on-year basis, it looks pretty good as compared to what other manufactures actually reported. So, is it more of a region- specific thing that we are looking at, or is it something specific to the company, reduction and discounts, our trade volumes, or direct dispatches? Was there any other measure which was actually, which contributed to better price? Ritesh there are a few things here, one is a good contribution from our premium
Q
I have two questions. First on this Gujarat Capex, I understand this is still three plus years ahead. But what would be the CAPEX size and what would be the funding mechanism? Will the parent company will be infusing equity for the same?
Management
I would say that you will have to just wait Rajesh on this and wait and watch because today we are doing some; we have some cash sitting in our account here the idea is that of this project is going to take about Rs. 2500 crores okay Rs. 1000 cores we can put from here and the Rs. 1500 crores we can look at how to get raise this money. So, if the debt push down has to be there from the group, if it is cheaper then we will look at that, or we will find out other sources of financing it, but that won't be a challenge, because the networth of the company is so good that we can borrow sufficient m
Q
Thank you on behalf of PhillipCapital (India) Private Limited. we would like thank the Management of HeidelbergCement India Limited for joining on the call. And thank you all the participants for joining on the call. With that we now conclude the call. Thank you very much sir.
Management
Speaking time
Management
60
Rajesh Kumar Ravi
15
Moderator
12
Shravan Shah
9
Ritesh
9
Amit Murarka
7
Kamlesh Bagmar
5
Pinakin Parekh
5
Prateek Kumar
4
Deep Nayan Shah
3
Opening remarks
Vaibhav Agarwal
Good afternoon everyone. On behalf of PhillipCapital (India) Private Limited, we welcome you to the Q1FY23 Call of HeidelbergCement India Limited. On the call we have with us Mr. Jamshed Naval Cooper – Managing Director and Mr. Anil Sharma – Chief Financial Officer of HeidelbergCement India Limited. I would like to mention on behalf of HeidelbergCement India Limited and its Management that certain statements that may be made or discussed on this conference call may be forward-looking statements related to future developments and the current performance. These statements may be subject to a number of risks, uncertainties, and other important factors, which may cause the actual developments and results to differ materially from the statements made. HeidelbergCement India Limited and the Management of the company assumes no obligation to update or alter these forward-looking statements, whether as a result of new information or future events or otherwise. Also, HeidelbergCement India Limi
Management
Thank you everyone who has joined this conference call today. While you would have downloaded our presentation, I will start this by saying that it was the one of the tough quarters for the industry. I am sure for others also it would be. For us it has been mainly because I would say that camp was played here by cost. So, it has been a very costly quarter, I would say. However, nevertheless, let me run through the presentation, some of the key points in the presentation which are there with you. So, the capacity utilization, as usual we try to keep it at on a very high level. So, we operate at close to about 72% capacity utilization, which is, I would say it is under such a difficult quarter operating at this level was a good task done by the team. As a Company we operate 100% blended so, on a carbon footprint, on a sustainability we are on a very high note. We are close to about 511 kgs per tonne of cement. Last time also we said that we are sourcing renewable power in our journey to
Coming to our premium cements
Happy to say that there is a 6% growth on year-on-year which is very much in-line with the trajectory we have planned. And we want to continue growing till we reach a reasonable amount. As of now, it is about 23% of our trade is premium brands. 83% of our volumes have been in trade and balance is in non-trade. Non-trade and trade, I will be very happy to inform you that earlier the difference between trade and non-trade was more. We have been able to narrow the gap, so to that extent there is some merit in selling a little bit of non-trade little more. Another thing which I want to inform you, which you might have heard or you might have not heard which is on Page 10. This is a very unique initiative, which we have launched by probably the first time in the cement industry, anywhere in the globe. This project we took up because to address the dilemmas of the cement consumers. Let me, for those people who are not aware of it, elaborate a little. Normally in Indian cement industry or lat
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