Ladies and gentlemen, good day and welcome to the earnings conference call for quarter and half year ended September 30th, 2024 of JK Lakshmi Cement Limited, hosted by PhillipCapital India Private Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital India Private Limited. Thank you and over to you, sir.
Yeah. Thank you, Michelle. Good evening, everyone. On behalf of PhillipCapital India Private Limited, we welcome you to the Q2 and H1 FY 2025 call of JK Lakshmi Cement. I need to highlight that JK Lakshmi Cement is also the holding company of its listed entity, Udaipur Cement Works Limited, and therefore this call is also open for discussion about the performance of Udaipur Cement Works Limited. On the call we have with us Mr. Arun Kumar Shukla, President and Director, and Mr. Sudhir Bidkar, CFO at JK Lakshmi Cement.
I would like to mention on behalf of JK Lakshmi Cement and its management that certain statements that we made or discussed on this conference call may be forward-looking statements related to future developments and which are based on current expectations. These statements are subject to a number of risks, uncertainties and other important factors which may cause actual developments and results to differ materially from the statements made.
JK Lakshmi Cement Limited and the management of the company assumes no obligation to publicly alter or update these statements whether as a result of new information or future events or otherwise. I will now hand over the floor to the management of JK Lakshmi Cement for their opening remarks, which will be followed by an interactive Q&A. Thank you and over to you, sir.
Okay, Vaibhav, thank you so much and good afternoon to all of you. Welcome to this quarter two FY 2025 call of JK Lakshmi Cement along with Udaipur Cement Works Limited. Quarter two has been quite volatile, quite challenging, not only for JK Lakshmi Cement but overall industry-wise also. If you look at typically during July, September is low in demand because of cyclicity and monsoon factor. But this time around, this was also coupled with the general election and usually what happens after this general election, some kind of sluggishness which creeps in into the market.
That triggered very low demand in different geographies. Perhaps I think all of you know that demand was quite subdued in the quarter two of this year. Because of very sluggish demand, there was a lot of pressure on prices also. My estimation or our estimation goes in fact prices have dropped by about 8% and this time around I think drop has been quite substantial in case of east, west and followed by north.
For a change this time drop in prices in south and northeast were the least. Since our geographies are limited to western part of India, part of it north and east, yes I think there has been impact on us in terms of subdued demand and depressed pricing. Nevertheless, yes of course I think result would have been much better but I think what we are really taking confidence from is that wherever whichever market we operate we are holding on to the market share.
Just to get you know, part of west, part of north and east where we are there, we sell about 70% of our cement and there our market share is intact and also price-wise also we have done better than others. So that gives us the confidence that directionally we are all right. Yes, there was pressure because of external environment which we cannot control fully but whatever we could have controlled I think we have tried every bit to change that in our favor. Just to give you a very brief performance update, of course, volume and all you know that our volume is down by about 9% on a consolidated basis.
But leading indicator if you look at I think that gives us lot of confidence that directionally we are all right. So trade I think we are at about 53%, 54% quarter over. Blended cement is at 66%. Lead also we have substantially reduced. Lead was at 374 km which is about 13 km lower than last year same quarter. We have done quite well in terms of renewable energy also. Renewable energy last quarter stands at about 40% and out of that about 20% is solar and wind.
So that way I think we are progressing very well. If you look at other performance parameter, variable cost on a consolidated basis we have done better. We are lower by about 11% YoY basis. Overall cost also has been down by about 5%. Power was down by 9%, fuel by 22% and fuel cost was about INR 1.62/kg calorie . On TSR front also we have done quite well. TSR was at about 15% and operating cost also was down by about 4%.
If you look at EBITDA drop of top players in the industry in last quarter YoY basis that ranges from INR 225 per ton to about INR 400 per ton and we also fall within that range only. We just kind of get carried away if you look at percentage. I think whenever price drops I think similar kind of drop happens for every player, right? Our drop was also in line with the industry and if you look at because we have also done comparison ourselves within the players who are there in our geographies, because at times also we carried away looking at the larger player who operates in different geographies.
I told you that price drop in different geography was different this time. Overall drop was 8%, but our geography somehow I think for a change was little higher drop. And that is what has impacted our EBITDA. But we are confident that I think directionally we are all right. Leading indicators are favoring us, and I don't see any issue going forward also. Of course, I think there is always scope of improvement, and definitely, I think whatever levers we have on top-line or on cost front, we keep on working on that, and hopefully, I think we'll bounce back in this quarter and going forward. So this is what the brief update I just wanted to give you, and now we are open for question answer.
Thank you very much, sir. We will now begin with the question- and- answer session. Anyone who wishes to ask questions may press star and one on their touchtone phone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. The first question is from the line of Nigel Mascarenhas from Leo Capital. Please go ahead.
Good afternoon. Thank you for the opportunity. Couple of questions. Firstly, by when is the merger with Udaipur Cement Works expected to be completed?
Yeah. Go ahead with the second question.
My second question was, by when do you expect the expansion in the East to be completed, and how much of CapEx will be spent towards it?
To answer your first question regarding the approval and the completion of the merger. The Board had approved the consolidation of the cement business by merging the three subsidiaries of JK Lakshmi on July 31st in their Board meeting. Thereafter, the process is that we have to first approach the stock exchanges. Once both the stock exchange, which is BSE and NSE, give their approval, then they forward their joint recommendation to SEBI. Only when SEBI approves it, then we can approach the NCLT. That is the process.
While the approval from BSE and NSE together with SEBI takes anywhere between t hree to four months. For us, the stock exchanges, as we understand, have cleared that application and have forwarded it to SEBI. SEBI, the BSE people and NSE people are saying that we cannot approach them directly, and there have not been any queries there so far. We hope in the month of December, SEBI would clear it, hopefully. Thereafter, we will approach NCLT.
NCLT, based on the past experience with different companies and different case have, take anywhere between eight to nine months. As we have mentioned in our press release, which we put in, and also the presentation which we have put in the website after the Board approved the merger, anywhere in the second half of the calendar year 2025, we expect that to be in place. Though we are trying to expedite it as much as possible, but things are not in our control. NCLT take their own sweet time. They are already overloaded with other cases. But we are trying to push it.
Our endeavor would also be to do it as fast as possible. That is as far as the timing for the merger of UCWL is concerned. Now, your second question regarding the expansion in the East. Yes, we have embarked on an expansion of 4.6 million tons of cement together with about 2 million tons- 2.3 million tons of clinker at our Durg plant. Initially, we will take up the Durg clinkerization along with the grinding unit in UP. first, and follow it up with the other two grinding units at the other location, as we mentioned.
Somewhere in FY 2026, 2027, we expect that to be on stream. The first phase, which will include the clinkerization and half of the cement capacity follow in the next financial year by that. Expenditure, we have not incurred much as of now on the Durg expansion. In the current year, we expect anywhere between INR 100-INR 150 on that, primarily on account of some initial placement of orders, et c. Thereafter, the pace of expansion as well as the CapEx will gather pace in the next FY.
Got it, sir. Thank you.
Thank you.
Thank you. You may press star and one to ask questions. The next question is from the line of Ashish from Himalaya Capital. Please go ahead.
Yeah. Afternoon to the management. I have two questions.
Yeah.
Firstly, why has there been a delay in the ramp-up of our expanded facility in Udaipur Cement Works? Secondly, what sort of utilizations are we seeing operating for both clinker and cement in the UCWL expansion?
Yeah. On the first question of our ramp-up, we commissioned our grinding station at Udaipur on March 28, and as you know that this first quarter was marred by general election and followed by this impact of cyclicity and sluggish demands, which I mentioned during my opening remarks. That has impeded our progress a bit, but I think that now taking pace and the way we see trend now, I think we are on right track and whatever plan we have for this year, hopefully we'll end up achieving that.
On the second question, the utilization for both clinker and cement in the UCWL plant?
Yes. So utilization, yes.
I see.
Clinker utilization was at 83% and at Udaipur 58% and cement 65%, JK Lakshmi Cement and-
37% in UC.
...both the lines put together, right?
Yes.
Yeah. About 37% of Udaipur Cement utilization.
On consolidated?
Consolidated basis it is 57%.
Okay. Thank you. Thank you to the management.
Thank you. You may press star and one to ask questions. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hi, thank you for the opportunity. Sir, some data point. Non-cement revenue and RMC in this quarter, and what was the margin?
Yes. Non-cement revenue in this quarter was INR 126 crore, and margins were lower. As has been generally, it was down to about 5%.
Okay. How much is RMC in this?
Out of INR 126 crore, RMC is I think INR 66 crore.
INR 66 crore. Okay, understood. Firstly, this quarter our volume have de-grown by 9%. How our guidance stands, which was 8% for this year. Secondly, 9% de-growth should be assumed the company has lost market share. How you read it, like it's a regional thing or how should we read it?
First I'll address you the question which you asked, latter part of it. None of the core market we have lost our market share. In fact, in some of the market we have increased our market share. Now the volume growth which we talked about, I told you that prices were quite depressed and some of the non-core markets where we were selling, I think it was not advisable to sell in those markets because we were going below variable cost. Right?
That was a conscious call not to sell in those markets, but to kind of consolidate in the market, which is our core market. In those markets, we have improved market share a bit rather than kind of losing it. That was a conscious call not to sell in those, out of market. That is what is reflecting in our lead also. If you look at our lead was 374 km, which is 13 km lower than the same quarter last year. That was a well-thought strategy because had we sold in those markets just to go after the volume, I think you would have achieved a little better volume, but our losses would have been more. So that was a conscious call not to sell.
That was on this 9% thing which you asked about. Other thing, the guidance about in the next two quarters. I'll just give you an industry estimation, whatever our estimation is. Quarter one was almost flat industry-wise, all India-wide. Quarter two, we estimate that the growth is about 1%-3%. Quarter three is estimated industry, I'm talking about, is about 4%. And quarter four is going to be about 9%-10% kind of thing. This is what our estimation is. If you go by that, then overall all India cement demand is going to be about 4%-5% for a full year basis. So two quarters, I think our endeavor would be to go in alignment with the industry growth. That is what we see.
Understood. Tell me one thing. If I see your freight cost, which has increased sequentially by INR 50 per ton, why is that so?
Freight cost?
Sequentially, I am talking freight cost have increased by INR 50 per ton.
Okay.
Last Q1 was INR 1,040 per ton. This quarter it is looking INR 1,085 per ton.
No. Sequentially year-on-year, it has gone up by about 4%, which is in alignment with the inflation rate. And I think that has gone a bit up because of some amount of increase in clinker sale also. Right?
Okay.
More clinker sale. Lower clinker sale. Because clinker, what happens is on the net works basis more.
Yes. Understood. Got it. That is it from my side.
Thank you. Please press star and one to ask questions. The next question is from the line of Rajkumar Das from Navodaya Enterprises. Please go ahead.
Hello. Sir, my question is regarding your conveyor belt project, which has been delayed for a long time. Could you please update the current status of conveyor belt at Durg plant?
You are talking about Durg pipe conveyor, right?
Yes, sir.
Yeah. As I said before that there are some approvals which are pending and that is on the last stage of approval. You know that government approvals, it takes little bit more time and some of the things we cannot control it. But we are actively working on that and hopefully, I think we will be able to resolve this very quickly. Yes, this is taking little longer time because of again, election was also one of the factors because entire machinery was not really that focused on those kind of jobs. It was not important for them. Because of that just got delayed, but we are working on this. Maybe I think that can be listened very quickly.
Okay, sir. That is from my side. Thank you.
Thank you.
Thank you. Please press star and one to ask questions. The next question is from the line of Amit Murarka from Axis Capital. Please go ahead.
Yeah, thanks for the opportunity. Firstly, I joined the call a bit late, so if you could just share the volumes for the cement and clinker at standalone and consolid level.
In terms of volume for this quarter, cement volume, cement sales was 17.82 lakh tons and clinker was 0.84 lakh tons. Total was 18.66 lakh tons.
17.82 lakh tons and sorry, how much?
17.82 lakh tons and 0.84 lakh tons clinker, total 18.66 lakh tons.
Okay. This is standalone, right?
Sorry.
This is at the standalone level. What would be cons for?
Yeah, this is certainly on a standalone level and on a console basis, it is 23.60 lakh tons for the cement, 1.33 lakh tons clinker and total 24.93 lakh tons.
Got it. So about the comment that you made that a lot of markets, your materialization or few markets where materialization-
You are not audible. Please, you are not audible. Little louder.
Yeah. On your comment which you made that in few markets, your variable cost was higher than the realization, hence you did not participate in that market. Just wanted to understand which markets would these be and given that pricing seems to be staying subdued since quite some time, what is your strategy to combat this situation and get the volumes back up again?
Our strategy is to reinforce in the market or the battleground which we have. Where battleground for us is all those markets which are near to our plant. We keep on reinforcing our position in those markets. During quarter two also we have done the same thing. I think in all those markets our trade sales have gone up and overall markets are also, in some market it is intact and some market we have done better. Right. Those far off markets like I would say, call them secondary markets is deep into Central India, then Eastern U.P., Eastern part of U.P. and those markets.
There I think, we did not participate because our prices were not remunerative and realization was lower than even variable. That was a conscious. Those market I am talking about otherwise all those core markets like Rajasthan, Gujarat, Eastern market, Chhattisgarh, Odisha, Vidarbha part of it, Eastern M.P. and Western M.P. These are the markets where we keep on consolidating ourselves and that will keep on and the effort will be for further on to consolidate in these markets even better.
Understood. Generally also a thought, I think one and a half years back, two years back, you had said that we are embarking on a journey of improving the brand in the market and improving in that sense realization as well. How far have we moved on the journey and if that could also help address this problem?
We have progressed quite far and if you look at the bit of portion difference between the leaders and JK Lakshmi Cement last year and even first quarter also was reducing, right. That has come about because of the actions which we took and which I elaborated in my previous call. On levers, on top line, on cost, which I mentioned some of them during my opening remarks. That journey is, I would not say fully accomplished, but I would say definitely 75% we have accomplished, 25% yet to be done. The major portion still I think we are further working on brand and premiumization.
We are working on brand realization also. Perhaps when next quarter when we meet, I will update you on what actually we are going to do with the brand. That is a very ambitious project which we have already started and hopefully we will have some update during next quarter. I would say about 75% journey we have traveled and that has resulted into reduction in the gap between leaders and JK Lakshmi Cement and about 25%-30% still remains.
That is not the final thing because we keep on exploring different avenues, different opportunities, and we embarked upon them. Of course, I think digital also will help us to improve our efficiency further. Some of the plants we have already deployed some AI tools and algorithm which is going to improve our efficiency in different value chain in the operating plant. I think 25%-30% from the previous one and even going forward we will explore further all those avenues. We will just try to realize with technology, with our experience and equipment which we have available.
Understood. Thank you. Also lastly, pricing, has it improved versus Q2 averages? What you are seeing now?
Prices have improved a bit for sure. Prices have started going up from September. October was more or less stagnant, a little bit of poor trend. But now since post-Diwali, demand will improve, prices are also likely to go up. So definitely prices will go up once demand improves.
Got it. Thanks a lot. I will come back in the queue for more.
Thank you.
Thank you. You may press star and one to ask questions. The next question is from the line of Raghav Malik from Jefferies. Please go ahead.
Yeah, hi. Am I audible?
Yes.
Yes.
You're on.
Yeah. Hi. Thank you for the opportunity, sir. Just a few housekeeping questions, actually. What will the premium product mix be? I don't think you mentioned that. And the premium product mix even as a percentage of just the trade volumes.
Premium product proportion is about 25% on our trade sales. It's about 12%, 13% on an overall basis.
Okay. Got it. Just on the cost side, the fuel cost per kilo this quarter, what would that be?
Fuel cost rupee per kilo cal you are asking?
Yes.
It was INR 1.62.
INR 1.62. Okay. Thank you. That is all from my side.
Thank you. Please press star and one to ask questions. The next question is from the line of Sanjit Tambe from Centrum Broking Limited. Please go ahead.
Yeah. Hi, sir, I just wanted UCWL volume for this quarter and previous quarter.
UCWL volume they did 5.74 lakh tons cement sale and 0.84 lakh tons clinker sale. And in the preceding quarter, you wanted, no?
Yeah.
6.41 lakh tons was their cement sale and 0.9 lakh tons was their clinker, total 7.39 lakh tons.
Okay, sir. Thank you.
Thank you.
Thank you. Please press star and one to ask questions. The next question is from the line of Jatin Chaparwal from Chaparwal Enterprises. Please go ahead.
Hi, sir. I have just one question. I need to know about the CapEx plan you are planning. What's the stage of it?
CapEx, as I mentioned in response to some earlier question, we are having two, three projects on hand. One is the Surat grinding unit. We expect that to be commissioned towards the end of this financial year, wherein we are adding 1.35 million capacity therein. Then there is a Durg expansion, which will take two to three years therein. The Udaipur expansion is virtually complete. Some small ancillary jobs are left, so that is as far as the CapEx are concerned. Railway siding project is on, so we expect that to be in place in the first quarter of the next financial year. Partly, we have already started using that railway siding there at Durg.
Okay. Thank you so much.
Thank you.
Thank you. Ladies and gentlemen, this is the last reminder, and no further reminders will be given, that you may please press star and one to ask questions. The next question is from the line of Uttam Kumar Srimal from Axis Securities Limited. Please go ahead.
Yeah. Thank you, sir. Thanks for the opportunity. Sir, what is our CapEx guidance? You just gave the number of the CapEx, so we just want CapEx guidance for FY 2025 and FY 2026.
Current year, we expect we have done about INR 175 crore in the first six months. We expect in this year, FY 2024, 2025, for the full year we can do about INR 500 crore, then INR 700 next year, followed by about INR 800 crore- INR 850 crore in FY 2027.
Okay. Sir, power and per kilo cost has come down to INR 1.62. Do we expect more decline in the coming quarters, or it will remain at the same level?
Around the same level it may be. We don't see any substantial drop therein.
Okay, sir. That is all from my side. Thank you, and all the best to you.
Thank you.
Thank you. This will be the last question for today, which is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Yeah. Thank you. Sir, I think the CapEx you mentioned, it is for standalone. On console basis, in one edge we have done INR 440 odd crore. For 2025, 2026, 2027, put together at console level, what CapEx are we looking at?
You are right. Whatever figures I have given is for the standalone. We may have another INR 200 crore for Udaipur, whatever INR 500 crore as top dollar for FY 2025 on a standalone basis, and about another INR 200 crore for the Northeast project. That is as far as any subsidiaries are concerned in FY 2025. Going forward, Udaipur may be not there. Maybe only INR 30 crore, INR 40 crore normal CapEx there, including some leftover of the expansion, and another INR 200 crore- INR 250 crore for the Northeast project. Thereafter, in FY 2027, nothing for Udaipur, but Northeast may have about INR 400 crore- INR 500 crore.
Sorry, sir. I still want to tell you the number. For FY 2025, INR 500 crore is standalone INR +200 crore Northeast. Put together would be INR 700 crore full at console level, FY 2025.
Another INR 200 crore for UCWL to add.
Okay, so INR 900 crore total.
Correct.
For FY 2026, total would be INR 700 crore standalone, Durg expansion would be how much?
INR 700 crore includes Durg expansion. Northeast assets, when I say Northeast, that is the Assam project.
Yeah.
Not in Durg. Northeast doesn't mean Durg. It means the Assam project, which is in the subsidiary, right? INR 700 includes Durg expansion, right?
Okay. Northeast in FY 2026 would be INR 300 crore, you say?
Yeah.
Okay. This Durg expansion, just to clarify, first the Surat expansion. Last time we said we will be doing a 1.35 million ton in a half by October and March, but now we will be doing the entire 1.35 million ton by March end.
Yeah, around that.
Okay. For Durg expansion, the first phase also, previously we were looking to start by FY 2026, the clinker and 2.4 million ton grinding. This will be
Yeah. It may be spilling over to the first half of the next financial year.
The second phase would be in FY 2028?
Yeah, one year later.
Okay. The Northeast will also be in FY 2028, will start?
Around that. You are right.
Okay. Just a data point, the CC ratio for this quarter was how much?
What ratio?
Cement to clinker ratio.
1.45.
1.45. This RE share, which is 47%, so by March end, this will increase to, last time we said 50- odd% , so that remains the same.
Yes. We are signing will be closer to 50% because we are still working on some of the solar projects. If that gets commissioned, then we will reach there.
Okay. In terms of the overall console level cost reduction at all ton basis, how much one can look at?
As I said, Shravan, yes, we are working on one thing, which is three fields, premiumization, which we are working on. That exercise is going on and perhaps that will give us some good leeway. Apart from that, I think this operational efficiency is a continuous journey. We will keep on getting something as we progress. Definitely I see INR 50- INR 75 a ton. That is what I see. INR 50- INR 100 a ton going forward. Different actions which will be taken.
Okay. Once, as you said, in the second half, we will be doing the inline with the industry growth, but in FY 2026, we will be growing much better than the industry growth?
That is what we wish, Shravan, because now by that time, I think our capability improvement plan, which we have taken for Udaipur expansion, that will come in full force. Definitely our ambition, our plan is to grow faster than industry next year.
Okay. Got it. Thank you, and all the best, sir.
Thank you, Shravan. Thank you so much.
Thank you, sir. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Vaibhav Agarwal for closing comments. Over to you, sir.
Yeah. Thank you. On behalf of PhillipCapital India Private Limited., I would like to thank you, management of JK Lakshmi, for the call, and many thanks to all the participants joining the call. Thank you very much, sir. You may now come off the call, Michelle. Thank you.
Thank you.
Thank you, sir. On behalf of PhillipCapital India Private Limited., that concludes this conference. We thank you for joining us and you may now disconnect your lines. Thank you.