Ramco Cements Limited Q3 FY2024 Earnings Conference Call Summary
Key Participants
• Hosted by Batlivala & Karani Securities
• Key management members:
• Chairman: M.F. Farooqui
• CEO: A.V. Dharmakrishnan
• CFO: S. Vaithiyanathan
Financial Performance
• Cement Demand Impact: Heavy rains in Tamil Nadu and Andhra Pradesh affected demand.
• Sales Growth:
• 10% increase in cement sales.
• Premium product share rose to 27%.
• Revenue:
• 5% increase in net revenue.
• EBITDA: Rs. 402 Crores with a 19% margin.
Capacity Expansion Plans
• Clinker Capacity:
• Current increase of 0.65 MTPA.
• Future plans to reach 19 MTPA by FY2026.
• Cement Capacity: Targeting 26 MTPA by FY2026.
• Capex Guidance: Revised to Rs. 2,000 Crores for FY2024, funded through internal accruals.
Financial Strategy
• Debt Management:
• Net debt to EBITDA stable at 3.5 times.
• Anticipated free cash flow of Rs. 1,700 Crores in FY2025.
• Net Debt: Peaked at Rs. 5,000 Crores; plans to use free cash flow for future capex without increasing borrowings.
Production Outlook
• Production Targets:
• Total production of 17.5 million tons for FY2024.
• 5 million tons expected in Q4 FY2024.
• Anticipated rise to 19-20 million tons for FY2025.
• Cost Stability: Expected stable cost per ton with a Kcal cost of 1.64.
Challenges and Concerns
• Weather Impact: Loss of approximately 300,000 tons due to flooding and adverse weather conditions.
• Capex Timeline: Environmental clearances may extend project timelines to 2026.
• Market Volatility: Pricing trends remain volatile.
Q&A Highlights
• Clinker Utilization: Approximately 10.5 million tons produced over nine months.
• Land Acquisition: Urgent and complex, with an incremental spend of Rs. 500 Crores for Bommanahalli.
• Future Capex: Management is cautious about leverage and may monetize non-core assets if necessary.
Overall Outlook
• Management conveyed a cautious yet optimistic outlook on production and pricing, addressing operational challenges and market dynamics.

Key Management Participants
• Chairman: MF Farooqui
• CEO: A.V. Dharmakrishnan
• CFO: S. Vaithiyanathan
Financial Highlights
• Cement Demand: Sales increased to 4.61 million tons (up 38% YoY).
• Net Revenue: Rs. 2,343 crores (31% growth).
• EBITDA: Improved to Rs. 412 crores with an 18% margin.
• Cost Management: Decrease in power and fuel costs; green power usage increased to 38%.
Capacity Expansion and Capital Expenditure
• Ongoing Projects: New units and projects in progress.
• CapEx: Rs. 941 crores for the quarter; projected Rs. 1,600-1,650 crores for FY24.
• Limestone Reserves: New mines to increase reserves by 140 million tons.
Future Outlook
• Production Capacity: Expected cement capacity to reach 24 million tons by FY25.
• Geographic Expansion: Interest in expanding but limited by mining lease availability.
• Pricing Trends: Significant price increase in October sustained into November.
Alternative Fuel and Green Power
• AFR Usage: Decreased share due to unchanged prices.
• Green Power Goals: Increase from 38% to 40% in 2024, potentially up to 52% by 2025.
Market Dynamics and Growth Projections
• Volume Growth: Projected volume of around 18 million tons for the year (20% growth).
• Regional Focus: 70% capacity in the south, 30% in the east; limited expansion in eastern markets.
Management's Commitment
• Debt Management: Aim to maintain a net debt-to-EBITDA ratio around 2x.
• Transparency: Commitment to clear communication with stakeholders.
Closing Remarks
• Management expressed gratitude for participation and extended Diwali wishes.

Key Highlights
• Sales and Revenue Growth
• 46% increase in sales volumes to 4.7 million tons.
• Revenue rose from Rs. 1,719 crores to Rs. 2,581 crores.
• First quarterly revenue surpassing Rs. 2,500 crores.
• EBITDA increased to Rs. 424 crores; profit before tax up 26% to Rs. 207 crores.
• Future Outlook
• Optimism about demand growth, especially in infrastructure.
• Expected profitability improvement in FY24 due to declining fuel prices.
Management Insights
• Volume Guidance
• Internal growth target of 30% for FY23-24.
• Success attributed to capacity, demand, infrastructure, and product diversity.
• Capacity and Expansion Plans
• Current capacity utilization will not be limited.
• Expansion plans include a second line in Kurnool and further developments in Karnataka.
Financial Strategies
• Capital Expenditure (CAPEX)
• Planned CAPEX of Rs. 800 crores for FY24.
• Focus on balancing debt reduction and growth.
• Cash Flow and Working Capital
• Potential working capital releases and land sales to support financial health.
Environmental and Operational Updates
• Green Power Usage
• Andhra Pradesh achieving 70-80% of clinker electricity needs from green sources.
• Overall green power for cement expected to reach 34% by FY24.
• Alternative Fuel Usage
• Decline from 20% to 13% due to rising costs compared to coal.
Regional Performance and Challenges
• Cost Overruns
• Rs. 120 crores in overruns attributed to steel price increases.
• All regions performed equally.
• Limestone Reserves
• Sufficient reserves for expansion for the next 30-40 years; no leases expiring before 2030.
Additional Inquiries
• Dry Mortar Revenue
• Small volume of 2 lakh tons compared to total production; minimal impact on overall numbers.
• CO2 Emissions Reduction
• 20% reduction attributed to focused cement applications.
• Future Capacity Expansion Costs
• Estimated costs for adding 5 to 10 million tons of capacity around Rs. 5,000 crores.
Conclusion
• Management expressed gratitude for inquiries and reaffirmed commitment to sustained growth.

Conference Call Details
• Date: February 7, 2023
• Hosted by: Antique Stock Broking
• Key Management Present:
• P.R. Venketrama Raja (Managing Director)
• A.V. Dharmakrishnan (CEO)
• S. Vaithiyanathan (CFO)
Financial Performance
• Revenue Growth:
• Increased from INR 1,556 crores to INR 2,018 crores
• First quarter exceeding INR 2,000 crores
• EBITDA:
• Rose to INR 294 crores
• Challenges:
• High fuel costs and railway surcharge impacting profitability
• Net Debt:
• Decreased to INR 4,556 crores
• Average borrowing cost rose to 7.13%
Capacity Expansion and Investments
• Capex in Q3: INR 390 crores
• Ongoing Projects:
• Kolimigundla plant and dry mix product units
• Future Plans:
• Awaiting government approval for a greenfield plant in Karnataka
Market Dynamics
• Cement Pricing Trends:
• Acknowledged volatility in prices, with potential increases
• Competitor Capacity Additions:
• Expected demand growth of 4-5% over the past decade, with a recent uptick of 12%
Strategic Focus
• Capex Plans:
• INR 892 crores earmarked, contingent on approvals and asset sales
• Growth Strategy:
• Targeting non-trade customers and premium cement sales increased to 26%
• Cost Reduction Initiatives:
• Waste heat recovery projected savings of INR 200 to INR 300 per ton
Operational Updates
• R.R. Nagar Plant:
• Incremental capacity of 1.5 million tons expected before March
• Capacity Utilization:
• Significant increase from 12 million to 21 million tons, aiming for over 80% utilization
• Freight Costs:
• Sequential increase of INR 50 per ton
Future Outlook
• Debt Management:
• Plans to sell non-core assets valued at INR 300-400 crores
• Energy Opportunities:
• Potential conversion of windmill capacity for captive use
• Fuel Cost Projections:
• Conservative outlook with potential decreases anticipated in Q4
Conclusion
• Management expressed confidence in achieving growth and deleveraging goals despite market uncertainties.