ORIENTCEMNSEQ1 FY2024August 10, 2023

Orient Cement Limited

10,585words
86turns
8analyst exchanges
2executives
Management on call
Navin Sahadeo
ICICI SECURITIES LIMITED
Deepak Khetrapal
MANAGING DIRECTOR & CHIEF
Key numbers — 40 extracted
rs,
it is called annual I cannot call it annual because we have actually done it after nearly two years, so it has bunched up cost that happens the entire refractories gets replaced, all the other equipm
15%
these challenges we have reported as you have already noticed the volume growth over last year of 15%, sequentially yes, there is a degrowth of 7% but that I believe all of us do expect that Q4 numbe
7%
already noticed the volume growth over last year of 15%, sequentially yes, there is a degrowth of 7% but that I believe all of us do expect that Q4 numbers are always the highest and Q1 while it tra
Rs.5200
l of that Y- O-Y we have managed to maintain our realisations almost there. We are a shade under Rs.5200 a tone which is flat over last year but what I understand some people are actually taken by surpri
6%
nd the sequential shrinkage in the rupees terms, in terms of turnover we managed to contain up to 6% against the loss of revenue or the decrease in revenue over 7%, so that is on the sales and the v
103 Crore
ady mentioned the impact that is there. The EBITDA for the quarter which has shown I think it was 103 Crores it is flat over last year while on the surface as I said this might look a little soft, but if y
24 Crore
arkets so that cost also has been booked in the same quarter. So, the 20 plus crores actually, 23-24 Crores, little bit of distortion please do not take that (inaudible) 10:38. The transportation cost inc
25 Crore
the cement industry so I am just reminding people that we need to remember despite taking nearly 25 Crores in additional costs over last year same quarter we still are reporting flat EBITDA so that is so
18%
hich if you compare the domestic coal prices, they have actually gone up during the year by 17 to 18% over the same quarter last year. If you make a similar comparison with Chittapur obviously the
14%
year. If you make a similar comparison with Chittapur obviously the pet coke prices are lower by 14% for the quarter, now these are actual prices. Domestic prices are up 17-18% coal prices and inter
9%
he fuel cost for the kiln they are down to about 1925 per million kilocalories and down by nearly 9% and at Chittapur on landed cost million kilocalories basis they are down about 12%. The power and
12%
own by nearly 9% and at Chittapur on landed cost million kilocalories basis they are down about 12%. The power and fuel cost put together is up despite this and that is led by the fuel mix that we
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Guidance — 20 items
Deepak Khetrapal
opening
“This quarter we have seen the B2C actually are falling to 47% with 53% being B2B which is like I said beyond 50% we never expect it to go, but if the contributions keep coming in, I think we are okay.”
Deepak Khetrapal
opening
“The net-net I think implication of what I told you about OPC-PPC mix, it basically means that Chittapur once again will be under pressure towards the end of the year to meet the OPC demand given the consent to operate.”
Deepak Khetrapal
opening
“So, preheater part which is nearly 20% maybe delayed by another four weeks but within August we should get the power from at least the cooler waste heat and as we always anticipate the savings from this are going to be about 3 Crores plus per month, so it is a very, very important project for us to commission at this stage.”
Deepak Khetrapal
opening
“Our cost management like I said has not suffered any setback although in the quarterly results it will appear as if we have incurred a lot more cost than you people expect us to do, but there are absolutely clear reasons for them and as things are normalizing now, we will get back to the same efficiencies and costs.”
Deepak Khetrapal
opening
“At the end I think another update which all of you do look for is borrowing status, our bank borrowings are now down to, I will talk about the project borrowings against capex borrowings they are at 203 Crores as on June 30, 2023.”
Deepak Khetrapal
opening
“I think another three quarters left and that old one will be done and now the new borrowings that we have against the waste heat recovery plant and the fly ash handling system those I think around 100 cores will be payable over a longer period of time.”
Deepak Khetrapal
opening
“Prospects looking forward, I do believe the prospects remain strong although the extremely heavy rains that most of you yourself experienced in the city like Mumbai, they have had a dampening impact on the project work all around.”
Deepak Khetrapal
opening
“As we returned to the market a little bit of uptake will happen in the pet coke prices that is our reading, but they will still be much lower than our last purchased pet coke that should help going forward.”
Deepak Khetrapal
opening
“I am still hopeful that we will be able to start the work in third quarter as we are considering maybe not early third quarter but towards the end of third quarter.”
Deepak Khetrapal
opening
“I am talking about that grinding unit more from the perspective of one getting the much-needed diversification of our market exposure and also to start the work for line four at Devapur in Telangana which will be feeding that grinding unit.”
Risks & concerns — 5 flagged
Obviously, the impact of international fuel prices has got blunted with the plant mix in this particular quarter and with the coal and the fuel mix that we have had to use.
— Deepak Khetrapal
It still has one side effect, and that side effect is that it consumes more of clinker, and we have a consent to operate limitation on the clinker that we can produce, so we are very well aware of that pressure and hopefully we will have solutions for that like we had last year also but in terms of contributions we are doing fine there.
— Deepak Khetrapal
The net-net I think implication of what I told you about OPC-PPC mix, it basically means that Chittapur once again will be under pressure towards the end of the year to meet the OPC demand given the consent to operate.
— Deepak Khetrapal
As long as the fly ash is available from nearby plants, we are okay to transport it by trucks but the moment we run into a problem and that is the risk mitigation measures that we have taken, so that also is ready and has already been commissioned we are using it.
— Deepak Khetrapal
The energy prices have been softening and the full impact of that softening as all of us know would start emerging as the year progresses as we consume the old inventory.
— Deepak Khetrapal
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Q&A — 8 exchanges
Q
Yes, thank you. Good afternoon Sir and thank you for this opportunity. Firstly, I would like to compliment you on very impressive details in the annual report with regards to various green energy initiatives and also your premiumization efforts. Sir my first question is on the WHRS plant so this 3 Crores per month saving are we expected to get that at least for six to seven months in this year or there is also a ramp up schedule and you also detailed about some delays in few parts of the plant so what sort of say FY2024 is available for that and the 3 Crores should be fully available per month
Deepak Khetrapal
Yes absolutely. So on the delay part since you mentioned assuming that in August we start drawing power as I mentioned to you that will be 80%, so maybe in the month of September or maybe early October it may be slightly less but towards the end of the year when the entire 10 megawatts start becoming available we will still be able to meet the targets on average of 3 Crores a month and FY2025 you can certainly take it that way. Got it at least from fourth quarter January onwards this should be the run rate of savings? Yes. Got that. Sir second question is on the sequencing of these various pro
Q
Hi Sir. Good afternoon. You explained on the fuel cost and why it went up, could you share the fuel cost per million Kcal number for the quarter Q1?
Deepak Khetrapal
How will that help you, you need to know my cost of how I am sort of doing it but anyway since you people get into nitty gritty which you cannot even relate to the reality, I will give you a number if you wish and I have the number which is readily available with me are for two individual plants. At Devapur in the last quarter we had 1925 and at Chittapur it is 2340. 1.92 something like that okay? Chittapur is 2.340 which is imported pet coke. 2340 Ok, this Chittapur costing is higher right compared to Devapur? Yes, because Devapur has mines nearby Chittapur has no mines nearby, it is a landed
Q
Thank you for the opportunity. It is great to see the premium cement sale is picking up can you give some sense about how are the margins in premium versus other cements and also if there is a margin differential between the StrongCrete which you have been selling from long years and between OrientGreen the more sort of a recently launched cement?
Deepak Khetrapal
Yes, our OrientGreen is which we introduced just a few months ago that is midway between our PPC cement and our StrongCrete. StrongCrete, we sell at Rs.45 higher than our PPC and OrientGreen is priced at Rs.25 plus so it is a premium product, but not as high. So now today our StrongCrete is a super-premium product, and the premium is OrientGreen. Understood and what was the fuel mix for the quarter? Back to the same question again it never changes something never change. Fuel mix for the quarter once again I am repeating for everybody else, please do not ask me again 53% domestic coal in this
Q
I wanted to understand primarily the Maharashtra market which is our key prime market because according to my understanding we are selling almost 50% plus volume into the Maharashtra. The last two capacity additions which we have done into Maharashtra are almost at the level of 35% to 40% utilization at the industry level. Now again Ambuja is adding almost 6 million tonne in Maharashtra other than the Mumbai market, which is primarily your core region of Vidarbha, Marathwada, Khandesh and the Pune so how do you see further two years down the line the Maharashtra particularly market as in the p
Deepak Khetrapal
You are talking about the supply side we also had to remember that there is a demand side to the equation is not it? So, the way that demand has been growing in these markets obviously has encouraged people to put up more capacity. If the demand was not that high who would want to put up capacity. So while we very quickly are able to calculate the new capacity coming in we are not adding and Maharashtra as it is, is the largest market in India if it keeps growing at a percentage as growing today obviously the demand in Maharashtra will be far higher than the other places and the capacity for u
Q
Thanks for the opportunity. Just a couple of basic questions. If I have to go back a year or two like we were prioritizing Devapur expansion with Tiroda grinding unit and I know that Tiroda got called off but why is now Chittapur given priority over Devapur I just wanted to understand what is the change which is compared to that?
Deepak Khetrapal
See this change come in one we do not have a grinding unit that we were setting in Tiroda that sent us all over again on a wild-goose chase to look at another site where we could put a grinding unit and without the grinding unit, I do not need more clinker in Devapur so that got delayed because we did not have a grinding unit site right. In the meantime, at Chittapur the demand came more towards OPC from some very good customers because of which my overall capacity of the plant, which is 3 million tonnes that we speak about, 3 million tonnes is a certain assumption of OPC, PPC. In FY2023 itsel
Q
My questions are mostly answered previous. Just one suggestion regarding your opening remarks I would suggest you put this in an investor presentation rather than it saves you energy as well and we can be prepared beforehand to ask questions, otherwise my questions have been answered.
Deepak Khetrapal
Thank you so much. See in presentation the reason I do it, it is twofold. One is the nuances that I can bring out in my delivery I cannot put that in a presentation because then the presentation will be far too long, right. There are lots of nuances that I explained when I am giving the information right, but I do get the hint that you do not like my voice, so I will try and speak less. Thank you.
Q
Thank you for the opportunity and of course as always, the great initial introduction or the comments which take care of most of the questions, so I really request you to continue with that. Having said that just a couple of questions. Sir the capex you guided as of now for FY2024 more like 1000 Crores in the same way assuming everything falls as per plans, what should we pencil in for 2025?
Deepak Khetrapal
2025 I am sort of still struggling to get my 1000 Crores going that is my worry, but typically speaking now if we go by the fact that we have Chittapur cost close to 1500 crores logically thinking. If I am doing 600 in this financial year so obviously, I want to complete that within the next financial year it will be 900 Crores for Chittapur itself right straightforward calculations. When the project is on I spend 600, balance is 900 to be spent and I want the project to be ready before the end of next financial year, so 900 for Chittapur maybe another 100-150 Crores of investment in Rajasthan
Q
Thank you. I personally make all my comments as opening comments themselves. My closing comment only is to thank all the participants once again for sparing the time and listen to my long introduction that I give and asking questions which are intelligent and which push our thinking even further, this grinding unit in Maharashtra if you listened this question it was very intelligent which came to me earlier we have worked on that and today and I really gave a response to that and I really appreciate the engagement that all of you show in our business. Thank you very much.
Management
Speaking time
Deepak Khetrapal
36
Rajesh Ravi
14
Moderator
10
Sumangal Nevatia
7
Navin Sahadeo
5
Raghav Maheshwari
5
Keshav Lahoti
4
Amit Murarka
4
Vaibhav Jain
1
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Opening remarks
Navin Sahadeo
Thank you Yashashri. Good afternoon, everyone. On behalf of ICICI Securities I welcome you all to the Q1 FY2024 earnings call of Orient Cement. From the management we have with us MD and CEO, Mr. Deepak Khetrapal, so without any further ado I hand over the call to Mr. Khetrapal for his opening comments followed by interactive Q&A. Over to you Sir!
Deepak Khetrapal
Thank you Navin and good afternoon all the participants who already joined in. I am told that number is still going up, but I think we do not want to keep the people who joined in time waiting, so a very warm welcome to this earnings call. Happy to have you here and thankful to all of you to take time out and listen to us. In terms of I think the Q1 FY2024 performance the most important thing that I would first like to start with which was actually towards the end of my call that I did on Q4 where I had already indicated that this Q1 on the surface is likely to look soft. I had sort of in a way made the disclosure three months ago itself and this is how it spans out and I am using the word carefully it looks like it is softer and I think the number that you have seen, you would have actually seen that while we are reporting a very strong growth in volumes in terms of EBITDA obviously the numbers look a little soft so here is the perspective which I started building last quarter itself,
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