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Conference Call Details • Date: August 12, 2024 • Submission Date: August 14, 2024 • Participants: Deputy Managing Director Tushar Bhajanka, CFO Manoj Agarwal
Financial Highlights • Clinker Production: 6.86 lakh tons • Cement Production: 11.80 lakh tons • Sales Volume: Stable at 11.54 lakh tons • Total Revenue: INR 736 crores (down from INR 755 crores YoY) • EBITDA: INR 118 crores (down from INR 138 crores YoY) • Profit After Tax (PAT): INR 31 crores (down from INR 93 crores YoY)
Challenges and Adjustments • Market Challenges: Adverse weather and elections affecting momentum • Volume Growth Target: Adjusted to 14-15% from 18-20% • Pricing Trends: Declining in East, particularly West Bengal and Bihar
Operational Insights • Clinker Purchases: INR 30 crores due to technical issues, impacting profitability • Cost Control Measures: Targeting reduction in manpower costs from INR 52 crores to INR 45 crores • Capex Progress: INR 110 crores spent of planned INR 835 crores for FY '25
Project Updates • Silchar Plant: Expected operational by October 2025 • Jorhat Plant: Expected operational by October 2026 • AAC Blocks Project: Commissioning by October 2024, projected revenues of INR 70-80 crores
Market Conditions • Northeast Demand: Subdued due to monsoon, with expectations of recovery post-monsoon • Market Share: 3% growth despite an 8% decline in Q1
Future Outlook • Capex for FY '26: INR 670 crores planned for Silchar and Jorhat • Group Captive Power Model: Expected savings of INR 22-24 crores annually • Logistics Costs: Anticipated stabilization with more trucks
Competitor Insights • UltraTech Challenges: Difficulty in acquiring a mine, no identified mine yet • Local Player Issues: Meghatop facing challenges in establishing a plant
Conclusion • Optimism for Future Performance: Positive outlook for Q2 and beyond, with gratitude expressed for analyst questions.
Star Cement Limited Earnings Conference Call Summary
Date and Context • Date of Call: May 22, 2024 • Financial Results: Quarter and year ending March 31, 2024 • Key Participants: Deputy Managing Director, CEO, CFO, moderated by PhillipCapital
Financial Highlights • Q4 FY24 Production: • Clinker: 6.93 lakh tons • Cement: 13.88 lakh tons (12% increase in sales YoY) • Quarterly Financials: • Total Revenue: Rs. 914 crore • EBITDA: Rs. 188 crore • Profit After Tax: Rs. 88 crore • Full Fiscal Year Financials: • Total Revenue: Rs. 2,911 crore • EBITDA: Rs. 583 crore • Profit After Tax: Rs. 295 crore
Operational Insights • New Developments: • New cement grinding unit and long-term coal supply agreement expected to reduce costs. • Sales Strategy: • Focus on increasing institutional sales. • Target of 20% volume growth for FY25. • Cost Management: • Anticipated stabilization and reduction in costs by Q2 FY25.
Capital Expenditures (CAPEX) • Current Spending: • Rs. 1,035 crores spent of planned Rs. 1,250 crores for clinker plant. • Rs. 22 crores spent on Silchar grinding unit, with Rs. 300 crores planned for FY25. • Future Plans: • New 2 MTPA grinding plant in Jorhat. • Total FY25 CAPEX expected around Rs. 1,000 crores.
Market Dynamics • Northeast Demand: • Currently subdued due to elections; profitability expected to remain stable. • Expansion Plans: • Exploring opportunities outside Northeast, particularly in Rajasthan.
Sales Strategy • Non-Trade Sales: • Aim to increase from 3% to 20%. • Northeast Sales: • Target to increase from 25% to 28-29%.
Future Projections • Volume Growth: • Projected increase from 4.4 million tons to 5.5 million tons for FY25. • New Projects: • 12-megawatt waste heat recovery system and 24-megawatt solar plant in development.
Challenges and Market Position • Northeast Market Entry: • Logistical difficulties and land acquisition issues hinder new entrants. • Competitive Landscape: • Star Cement and Dalmia dominate the market; skepticism about new competition in the near term.
Financial Results • Quarterly Performance: • Revenue: INR 655 crores (up from INR 629 crores YoY) • EBITDA: INR 153 crores (up from INR 120 crores) • Profit After Tax: INR 74 crores (up from INR 53 crores) • Cement sales increased by 7% • Clinker production slightly down; cement production up
Future Plans • New Plant Commissions: • Guwahati grinding unit: Expected by March 1, 2024 • Clinker plant: Expected by March 31, 2024 • Capital Expenditures: • Costs lower than initially estimated for ongoing projects
Growth Expectations • Volume Growth: • Q4 industry growth: 5% to 7% • Company target: 8% to 10% • Next financial year target: 18% to 20% growth • Market Dynamics: • Competition in Northeast; plans to capture market share through aggressive strategies
Pricing Trends • Regional Pricing: • Increase in Northeast; decline in Bihar and Bengal • Premium share improved to 6.5%; trade share at 87% • Fuel costs decreased to INR 1.75 per kcal
Expansion Strategy • Future Capacity Goals: • Targeting 20 million tons by the end of the decade • Focus on organic growth; potential greenfield projects in Rajasthan • Clinker Sourcing: • Sufficient stock to manage production until new clinker unit starts
Incentives and Benefits • SGST Benefits: • Expected annual benefit from Guwahati plant: INR 150-160 crores for 5-6 years • Current quarter accrued INR 6 crores from IGST benefits (down from INR 38 crores YoY)
Profitability Insights • Profitability Comparison: • Consistent profitability outside Northeast: INR 300 • Increased profitability in Northeast: INR 1,700-1,800 • Funding for Expansion: • INR 8,000 crore capex for 10 million ton capacity expansion outside Northeast
Market Outlook • Assam Market Size: • Estimated at 7-7.5 million tons • Targeting 20% sales increase to reach 2.2-2.3 million tons in the coming year • GST Incentives: • Existing incentives to continue until 2027, benefiting current and new clinker plants
Conclusion • Management expressed gratitude for participation and encouraged further inquiries.
Financial Results • Quarter Ending September 30, 2023: • Clinker production: 6.48 lakh tonnes • Cement production: 8.94 lakh tonnes • Sales volumes: 8.96 lakh tonnes • Total revenue: Rs. 585 crore • EBITDA: Rs. 104 crore • PAT: Rs. 44 crore • Half-Year Results: • Total revenue: Rs. 1,346 crore • PAT: Rs. 134 crore
Capital Expenditures (CAPEX) • Recent Spending: • Clinkerization: ₹700 crores • Guwahati grinding unit: ₹206 crores • Total committed cost for clinkerization: ₹950 crores • Future Plans: • FY24 CAPEX: ₹800 crores (₹200 crores spent in Q2, ₹600 crores planned for Q3 and Q4) • FY25 anticipated investments: ₹600 crores
Pricing and Demand • Price Increases: • ₹10 per bag in Northeast, ₹50 per bag outside • Market Outlook: • 5% improvement in net operating demand (NOD) • Expectation of double-digit growth in upcoming quarters • Anticipated 13-14% growth in volume for FY24
Competitive Landscape • Market Dynamics: • Price increase in Bengal and Bihar • Competitive intensity from Star Cement and Dalmia • Market growth expected to mitigate price corrections
Profitability Insights • EBITDA per Tonne: • Narrowing gap between Northeast and outside Northeast • Current Capacity Utilization: • 88% • Cost Reduction Initiatives: • Ongoing projects to reduce costs, especially in fly ash transportation
Growth Prospects • Market Share Goals: • Aim to exceed 30% market share in Northeast • Non-Trade Sales: • Targeting an 85:15 ratio in non-trade portfolio • Siliguri Grinding Unit: • Capacity utilization improved to 45% • Target to increase premium cement share to 10%
Additional Notes • Waste Heat Recovery System (WHRS): • Generated ₹10 crores in Q2 • Freight Cost Reduction: • 16% reduction attributed to strategic fleet deployment • Election Risks: • Potential demand risks due to upcoming elections • Discount Structure: • Concerns about sustainability of rationalization attempts in East India
Financial Performance • Quarterly Results: • Cement production increased by over 21% to 11.74 lakh tons. • Sales rose by 19% to 11.54 lakh tons. • Total revenue reached INR 755 crores (up from INR 628 crores YoY). • EBITDA stable at INR 138 crores. • Profit after tax slightly decreased to INR 104 crores from INR 105 crores.
Capital Expenditure (Capex) • Current and Planned Expenditure: • INR 750 crores spent out of a total planned capex of INR 2,300 crores. • Remaining capex for FY 2023 expected to be INR 800 crores, with an additional INR 400 crores for FY 2025. • Project Timelines: • Guwahati plant on track for November-December 2023. • Silchar plant delayed by 3-4 months, now targeting December 2024.
Market Focus and Strategy • Regional Commitment: • Emphasis on solidifying market share in the Northeast. • Pricing stability expected in the short term. • Northeast volumes increased by 30%, while East volumes remained flat. • Expansion Plans: • Exploring opportunities in Chhattisgarh and small acquisitions (1-2.5 million tons).
Competition and Market Dynamics • Nontrade Projects: • Local players primarily servicing nontrade projects; outside competition estimated at 12%-15%. • Impact of Competitors: • Confidence in market growth accommodating new capacities despite Dalmia's expansion.
Cost Management • Electricity and Fuel Costs: • Rising electricity costs at Guwahati plant due to high coal prices. • Plans to take on INR 500 crores in debt for capex, aiming for zero debt by FY 2025. • Cost-Saving Initiatives: • Improvements in fly ash procurement logistics and waste heat recovery system expected to generate savings.
Government Incentives • Current Benefits: • 200% state GST incentive on new grinding units in Assam for 15 years. • Previous subsidy of INR 300-350 per ton has ended, affecting quarterly comparisons.
Future Capacity and Projects • Upcoming Projects: • 2-million-ton grinding unit in Assam by November-December 2023. • 3-million-ton clinker plant in January-February 2024. • 2-million-ton grinding unit in Silchar by December 2024. • Land Acquisition: • 75% secured for Silchar plant; remaining 25% to be completed soon.
Closing Remarks • Management's Outlook: • Focus on Northeast market for better margins. • Plans to utilize Siliguri plant for excess cement sales. • Ongoing efforts to reduce transportation costs and enhance product offerings. • Encouragement for Engagement: • Management invited further questions via email or direct contact with the CFO.
Financial Performance • Q4 FY23 Results: • Revenue: Rs. 820 crores (up from Rs. 748 crores) • EBITDA: Rs. 179 crores (up from Rs. 123 crores) • Profit After Tax: Rs. 96 crores (up from Rs. 88 crores) • FY23 Results: • Total Revenue: Rs. 2,696 crores • EBITDA: Rs. 520 crores • Profit After Tax: Rs. 248 crores
Production Highlights • Production Increases: • Clinker production up by 15% • Cement production up by 8% • Sales Volume: • 87% of sales in trade, with a premium share of 4% • Anticipated volume growth of 12%-13% for FY24
Expansion Plans • New Projects: • Clinker plant in Meghalaya expected to be operational by January 2024 • Various grinding units scheduled for completion in late 2023 and 2024 • Future Growth: • Five-year plan to expand outside the Northeast • Seeking acquisition opportunities for mines and smaller plants
Cost Management • Operational Efficiency: • Waste Heat Recovery System (WHRS) operational, expected savings of Rs. 40 crores • Average coal cost for FY23: Rs. 2 per GCV, slight decrease expected in Q1 • Incentives: • Rs. 125 crores accrued in FY23, limited benefits expected in FY24
Market Dynamics • Demand Growth: • 34% growth outside the Northeast for FY23 • Stabilization of future growth rates at 10-12% • Competitive Landscape: • Acknowledgment of competition from larger players like Dalmia
Management Changes and Future Outlook • New CEO: • Vinit Kumar Tiwari appointed to oversee operational efficiency and growth • Long-term Goals: • Target of 20 million tons in production over the next 5 to 10 years • Projected CAPEX: Rs. 1,300 crores for FY24 and Rs. 400 crores for FY25 • Debt Management: • Aim to be debt-free by March 2025, with a peak debt of Rs. 500 crores
Conclusion • The call concluded with gratitude to participants and a commitment to provide updates on expansion strategies by Q2 2023.
Financial Performance for Q3 FY23 • Production Metrics: • Clinker production: 739,000 tons • Cement production: 921,000 tons • Cement sales volumes: 908,000 tons • Revenue: • Total revenue: ₹617 crores (up from ₹554 crores YoY) • EBITDA: ₹120 crores (up from ₹75 crores YoY) • Profit After Tax (PAT): ₹53 crores (up from ₹44 crores YoY)
Nine-Month Performance • Financial Highlights: • Total revenue: ₹1,875 crores • EBITDA: ₹342 crores • PAT: ₹151 crores
Management Outlook • Sales Target: • Target of approximately 4 million tons for the fiscal year • Anticipated double-digit growth for FY24 • Pricing Trends: • Slight increase in December; sluggish demand in January
Operational Insights • Fuel Mix: • Nagaland coal: 25% • FSA: 5-6% • Imported/auction coal: 50% • Average cost per Kcal: ₹2.09 • Expansion Timeline: • Clinker plant in Meghalaya: January 2024 • Guwahati grinding unit: October-November 2023 • Silchar unit: Delayed until August 2024 • CAPEX: • Total CAPEX: ₹2,100 crores • ₹200 crores spent; additional ₹300-350 crores expected in Q4
Cash and Debt Position • Financial Status: • Net cash: ₹548 crores • No debt reported
Industry Pricing and Sales Growth • Pricing Expectations: • Prices unlikely to fall in Q4 due to seasonal demand • Potential cost reductions could affect Q1 prices • Sales Growth: • Current capacity utilization of Siliguri unit: 55% • Premium cement share: 4.5% (targeting 7-8%)
Waste Heat Recovery System (WHRS) • Expected Benefits: • Anticipated savings: ₹45-48 crores annually • Commissioning expected by the end of the month
Competitor Insights • Market Competition: • No specific information on new competitors like Dalmia Bharat
Capital Expenditure Projections • FY23 and FY24 Estimates: • Total CAPEX for FY23 and FY24: ₹1,200 to ₹1,300 crores • Q4 FY23 CAPEX: ₹350 crores • FY24 CAPEX: ₹1,100 to ₹1,200 crores
Conclusion • The call concluded with thanks from the moderator and participants, highlighting the company's confidence in maintaining performance metrics despite market challenges.