HEIDELBERGNSEOctober 18, 2022

HeidelbergCement India Limited

10,162words
129turns
14analyst exchanges
1executives
Management on call
Jamshed Naval Cooper
Managing Director and Mr. Anil Sharma –
Key numbers — 40 extracted
rs,
These statements are 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.
34%
tion to you. You know for the first time our green share of green power has increased to 34 m and 34%, and in the future we are trying to see that this is maintained and increase further. So, in term
100%
ent of share of the total variable cost. It is one of the highest today. We continue to produce 100% blended cement, which is one again a very clear message that you we want to remain green and we w
19%
o remain clean. In terms of volume, yes, we have slipped on the volume by 19% on year-on-year basis and 10% on quarter-on-quarter basis. This is mainly, it should not have hap
10%
lume, yes, we have slipped on the volume by 19% on year-on-year basis and 10% on quarter-on-quarter basis. This is mainly, it should not have happened but, you know, we were u
8%
permanent impact on our results. So, it is we suffered because of this. Prices have increased by 8% and a little bit down on the quarter-on-quarter basis, but the trend seems to be now that the pri
50%
re we see that the prices of fuel may come down. We delivered an EBITDA of 476 per ton which is 50% lower. So, I think this is the bottom what we would have touched, and quarter going forward shoul
109 million
e continue to operate on negative net operating working capital, and our net debt stands at about 109 million as on date. Taking you to the next slide, as we show you the whole chart, today we are at 34% as
90%
Very happy to inform you that Ammasandra plant operates mostly on green power which is more than 90% of the green power, and it has worked out very well in our favor at Ammasandra. Similarly, we put
Rs. 2.37 billion
ion and the cash and bank balances. So, we have provided this slide on Slide #9. You can see that Rs. 2.37 billion as on September '22. Out of it, the debt is 2.346. So, there is a minor net debt lower of 109 whi
55%
s also sitting on the book. Next. We, now going to Slide #10, happy to inform you that, you know, 55% of our premium products sales is now in the trade segment, and this is a significant improvement.
31%
cepting it very well. Coming to our sales volumes in terms of rail and road, it is 50-50. Coal is 31%. That is 70, close to 69, 70% is our petcoke consumption, and this blend of petcoke consumption h
Guidance — 20 items
Management
opening
“So, I think this is the bottom what we would have touched, and quarter going forward should be, you know, we should be able to recover back, bounce back, and the prices seem to be supporting that in the months to come.”
Management
opening
“Despite the efforts what we need to reduce our fuel consumption, today, we are quite low on fuel, but yes, now this gives us one more thought process that there is further room for improvement which we will have to really take up and reduce our fuel consumption further, and for that we are working on little bit of debottlenecking of our plant which will happen in the next year.”
Management
opening
“Until such time we start doing some investments which will come in the next year.”
Management
opening
“So, you know, the GDP, the forecast which had been made is 6.8, and I don't know, but as of now it seems to be still a good rate of GDP because if you compare it with anywhere part of the international arena, this is one of the best GDP country which has the highest growth rate.”
Management
opening
“So, we will be able to safeguard our shelf space and continue to deliver positive results.”
Management
opening
“So, this is a concern for us because in Central India it is more of an agricultural economy, and we are dependent quite a lot on this, but we will come to know just after Diwali how the market pans out in the coming 15 days, and then we will be able to figure out how the October, November and December look like.”
Management
opening
“So, people will continue to, you know, put money on to the housing sector, and another thing is post Diwali, we always expect some good demand.”
Management
opening
“So, there will be three festivals almost in one month starting with Dussehra in the beginning first week, then now coming Diwali, so third weekend, and then the fourth week we are into Chhath puja.”
Management
qa
“Now we have classified this and corrected in our system that any material which is undergoing under an MRP bag will be considered as trade sales.”
Management
qa
“So, whether it goes in bulk or whether it goes in anything which is not for resale, which is not in resale, and it is going to be resold, it will be classified.”
Risks & concerns — 9 flagged
The biggest impact for us is the volume, which is negative, and the impact of it is significant impact of that happens on the EBITDA also.
— Management
We can see the repo rates going up, and the government is trying to contain inflation, but it seems to be a little difficult at this point of time.
— Management
If the market for other period, the demand for other products does not seem to be low or the footfall in the retail counters and the retail malls are going to be strong, we have not too much of a concern to worry that people are worried about recession.
— Management
So, this is a concern for us because in Central India it is more of an agricultural economy, and we are dependent quite a lot on this, but we will come to know just after Diwali how the market pans out in the coming 15 days, and then we will be able to figure out how the October, November and December look like.
— Management
Let me stretch here or stress here that we have a very, very, very, very transparent discount structure.
— Management
So, is it only because of operating deleverage that we faced because of suppressed volumes or was there any pressure point that we witnessed during the quarter in RM cost?
— Aman Agarwal
I don't think there is so much of a concern because these all these capacities, you take it at one stage.
— Management
So, to be acquired by some of the big names, would it be that the ramp up would create surplus capacity and hence further pressure in the Central market?
— Rajesh Kumar Ravi
So, for the full FY '23, can we see a 2 to 4% kind of a volume decline?
— Shravan Shah
Q&A — 14 exchanges
Q
Thanks for the detailed presentation. Sir, I have a few housekeeping numbers. I see that the last year trade sales number has been restated from 83% declared earlier to 86% for last year Q2. And also, you mentioned that the premium cement share has gone up. So, what exactly went into, you know, increasing this almost doubling of premium cement share number? And third, landed fuel cost, can you talk on a per kilo cal basis the pricing, the convention cost in Q2? And how it changed versus Q1?
Management
Let me put it the non-trade component. You were talking about it has dropped from 86. So, you know, there is a little bit of change here. What we did is earlier what we were doing when we were doing sold rates, cement whole full sold rate, that time we were capturing it as non-trade supply. Now what we have done is, we have regularized it because we are supplying MRP bags. Okay. Non-trade material by nomenclature is a bag which goes which is not for resale. It goes in a separate type of a bag. It is a very distinct bag. So, that does not penetrate in to the local market. So, these have a syste
Q
Sir, three questions. First is, sir, at the parent level, the name has moved from HeidelbergCement to Heidelberg Materials. How should we read what it means for the India operation? So, that's the first question.
Management
So, Ritesh, this is a global thought process which the group is pursuing that we were HeidelbergCement. Basically, we are not only as well into cement. We are into building materials, and we are into concrete and every sort of possible you can name it under the sun it is there. So, the group decided that, you know, it is high time that we are pushing the agenda of green. So, they said, let us make it more consumer-oriented company name, group name, and that is why right now also the HeidelbergCement as a group remain till there is no change in the name of the company at the group level also. B
Q
Thank you, sir. I have two questions for you, sir. Given the demand in Central region got impacted by heavy monsoon in Q2, whether pent-up demand is expected in Q3, sir?
Management
So, Sandesh, the message is clearly that, you know, cement industry always sees a pent-up demand, and then it comes all of a sudden it blasts into the market. If that has happened in the past on several occasions, I would say that there is no reason why it should not repeat in the months of November and December, and I'm expecting that November and December should be really good months for cement, because we have seen July batch, August batch, September, lot of holidays. I think October, November, November, December should be better. Sir, how much as GST incentive amount have we booked in Q2,
Q
Thanks for the opportunity, sir. Sir, firstly, on the quarterly performance, just want to ensure that my understanding is correct. Our realization has dropped around 3.3% on a sequential basis. So, how does it stand versus the other peers in the Central market? Have we saw it better because of premium product share is drastically increased during the quarter? Is this understanding correct, sir?
Management
No, I think, you know, let me clarify here. We were about 25, 30%, close to 30%, 25, 30% previously also under premium products. Okay. The premium products, the blend, it has nothing to do with the premium products. Okay. The price what we are getting, this will continue. This premium product, the premiums will continue. I don't think, you know, that the whole benefit which has come to us is because of the premium products purely. There is a price increase we have taken from time to time. There is a branding exercise what we did. We have taken little bit of premiumization in terms of pushing t
Q
Sir, my first question is on pricing as you mentioned about it, but like some of the other regions have seen some improvement in pricing since September and October. How are the prices changed like it's bottoming out in October, September in your region, Central?
Management
So, if you look at it on the GSR side, there is a dip over the previous quarter of June. Okay. And we are back to our March quarter prices GSR. So, this I don't think in Central India, there was a movement which really helps us the pricing improvement. I doubt very much the Central India players who have been playing in this market have seen any betterment on prices. Maybe on all India basis maybe I don't know, some players from south, yes, little bit of improvement, but I'm not very sure that, you know, the market has given us an opportunity to increase prices significantly. Maybe in October,
Q
Thank you for the opportunity, sir. Sir, my question is more on the longer term view. So, as we are seeing in cement industry, most of the players, mid, some of the larger players are into expansion mode for let's say 5 to 7 years or 10 years. So, do you have any plans to expand capacity let's say from 6 million ton currently to 10 or 12 million in the next 7 to 10 years or 5 to 7 years? Anything on that, sir.
Management
So, yes, you are right that, you know, people are expanding. We also are working on the debottlenecking and other things. Today also our capacity utilization is close to about 80%, 78%, 79%, and we are working towards to see that, you know, first, let us consume this, but also the debottlenecking project once it comes in, it will add some good amount of cement and clinker to our kitty. Plus, it will reduce our fuel consumption and other things. So, we are operating also are working on both sides. Another site is the Gujarat project which we are working on. So, the Gujarat project will be there
Q
Sir, just one follow-up question to the one which was previously asked about the outlook for the pricing in the region. So, will the dynamics tend to change if JP Assets were to be acquired or like, you know, the deal around the JP Assets tend to happen? Because as I see it, all these plants are really close to each other largely in and around the Panna district. So, with I think two capacities, ACC and JK coming up, and then if JP Associates plant also like gets sold for some reason, do you think the dynamics will change or it would still largely remain the same?
Management
Cement availability, Naveen, it is the same no, same even if JP goes in transact, the operator has changed. Cement availability remains the same. Clinker availability remains the same. May be a different brand will come. That's it. Again, they have limitations of their mines and things like that. So, you know, I cannot say how much of the difference will it make. What Mr. Sharma told you, Anil told you earlier that, you know, if we look at the market of about 16 million tons and grows at a rate of 8%, 5 million tons of capacity it will absorb any, every year. So, not to worry about it. I would
Q
So, wanted to understand this worry is Gulbarga plant. So, what would be the size of the expansion? And also, what would be the cost of the same?
Management
I don't think we should discuss Gulbarga and Zuari here, because it is not a part of HCIL. And just one other question. So, basically, sir, wanted to like have your take on LC3 cement, and how far like before, you know, it sees light of the day, like well stock, like when can we expect LC3 to materialize? So, LC3 is a product where you require Calcined Clay or a clay for certain nature. Now these clay reserve are not available easily. Okay. They are available in places at a very different locations, and bringing these clay here into such a long distances and processing and LC3 is not a viable
Q
I just want to understand a couple of things. With respect to the interest expenses which has been included in the numbers, it was almost close to expenses 20.6 crores, right, as against 8.0 crores. So, there is information provided against remain that if you can provide some colors on that, it will be helpful for us to take it forward.
Management
So, Shri Ram, we have also given one note in our Company's result because the significant increase in interest expenses during this quarter as compared to last year as well as the June quarter, we have taken provision of around Rs. 10 crore during this quarter on account of one- off litigations, and this is the provision, and we will also appropriately account for this interest and all depending upon outcome of such matter in the Court of Appeal. So, whether the extent of this provision is likely to continue for upcoming quarters or else when does the judgment will be held upon, sir? Judgment
Q
Sir, what would be the lead distance for this quarter?
Management
Distance is close to about 20, 50, 350 only. It remains same consistent.
Q
Sir, you talked about debottlenecking of line 2. So, what would be the capacity that would be debottlenecked?
Management
It would be around, you know, about 3 lakh tons of clinker. And how much cement that we would be able to produce from this 0.5 to 0.6 million tons? Factor of clinker, factor of 1.6. Around 4.5 lakhs. 4.5 lakhs. 4.5 lakhs. Okay.
Q
I just have a question. If you look at the Central region, you mentioned the new capacity, the current demand size is close to 16 million ton. This year alone we would be seeing UltraTech 2.7 million ton clinker, JK Cement 4 million ton, and ACC adding another 2 to 3 million ton capacity in that market. So, don't you think that would have an impact for companies like you? On volume growth also, will it impact your volume growth in addition to the regional pricing?
Management
I don't think there is so much of a concern because these all these capacities, you take it at one stage. You know, somebody says 3 million tons, 3 million tons does not come on the first day. Okay. First, we have the capacity comes is about 40%. Next time it comes to 60, 65, 70, and then it goes to 70, 80. Okay. At best even you can't operate a cement plant unless, you know, the market is really gone more than 80% normally under normal circumstances. It would be not correct to assume that all these capacities will stand any in our face from day one. No, even if I take 40% utilization, there w
Q
Sir, just to clarify, we say, the last time we said that for FY '23, we were expecting 6 to 7% volume growth, but this first half we have already declined by 12.5. So, for the full FY '23, can we see a 2 to 4% kind of a volume decline?
Management
Let us wait and watch for the full year, financial year. I have not yet clear, you know, how the demand pans from October and November onwards. So, I think, you know, there is upside. We will be able to pull up volumes in these in another coming two quarters significantly well. That's my belief. So, you know, it's not ending on a negative note. Secondly, just to clarify on the debottlenecking, you said 3 lakh clinker and 4.5 lakh cement we can add. So, this is just from the one line or you mentioned line 2 and 3. So, both put together, this is the extra capacity that we will get. Both put toge
Q
Thank you. On behalf of PhillipCapital (India) Pvt. Ltd., I would like to thank the Management of HeidelbergCement for the call. And many thanks to the participants for joining on the call. Thank you very much, sir. Steven, you can conclude the call. Thank you.
Management
Thank you.
Speaking time
Management
59
Moderator
16
Rajesh Kumar Ravi
9
Hiten Boricha
8
Sandesh Barmecha
6
Aman Agarwal
5
Navin Sahadeo
5
Ritesh Shah
4
Shravan Shah
4
Sriram
3
Opening remarks
Vaibhav Agarwal
Thank you, Steven. Good afternoon everyone. On behalf of PhillipCapital (India) Pvt. Ltd., we welcome you to the Q2 FY '23 and H1 FY '23 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 will be made or discussed on this conference call may be forward-looking statements related to future developments and the current performance. These statements are 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.
Management
Thank you, Vaibhav, for this organization, and thank you all the people who have attended this for our investors' call. Taking you, I suppose you would have received all the presentation, the entire presentation and you have gone through it. I'll run through it. So, for the September quarter has some of the highlights which I should express to you and mention to you. You know for the first time our green share of green power has increased to 34 m and 34%, and in the future we are trying to see that this is maintained and increase further. So, in terms of our future security on power, we are working on this so that the company remains on a strong foothold on power because nowadays power and fuel is a very high element of share of the total variable cost. It is one of the highest today. We continue to produce 100% blended cement, which is one again a very clear message that you we want to remain green and we want to remain clean. In terms of volume, yes, we have slipped on the volume by
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