Ladies and gentlemen, good day and welcome to the Q3 FY 2024 earnings conference call of Nuvoco Vistas Corporation Limited. We must remind you that the discussion on today's call may include certain forward-looking statements and must be therefore viewed in conjunction with the risks that the company faces. The company assumes no responsibility to publicly amend, modify, or revise any forward-looking statement on the basis of any subsequent development, information, or events, or otherwise. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Madhumita Basu, Chief Marketing, Innovation, North Sales, and Business Development of the company.
Thank you, over to you, Ms. Basu.
Thank you, Robin. I am happy to take over from here. Good evening, everyone. Thank you for joining the Nuvoco call to review the third quarter results. I know it has been a busy day with a number of corporates reporting, and we appreciate your interest in attending today's call. I trust everybody has had a chance to review our earnings release documents, which are available on our website as well as stock exchanges. I shall touch briefly on the macro environment before reviewing the Q3 FY 2024 performance. Indian economy continues to show resilience and buoyancy despite global economy remaining fragile. The headline PMI for the manufacturing sector has remained over 50 consecutively for the past 13 months, indicating expansion in the sector. GST collections grew by 10.3% YOY to INR 1.65 lakh crores in December 2023. This marks the seventh month so far this year with collections exceeding INR 1.6 lakh crores.
Real gross domestic product is projected to drop 7.3% in 2023-2024 from 7.2% in the previous year. This augurs well for cement demand. Looking internally now at Nuvoco's performance for the quarter ending 31st December 2023. During the quarter, EBITDA grew 55% YOY to INR 421 crores. The company has worked on a number of levers to deliver EBITDA per ton of INR 1,048, the highest in the past 10 quarters. Despite volume degrowth, we stuck to our strategy of value over volume, which resulted in robust uptick in realization per ton. We reduced our operating costs primarily in the areas of raw material and power and fuel. Moreover, our EBITDA per ton number should be studied in the context that it does not factor in incentives from Panagarh and Rajasthan plants, which cumulatively have an impact of INR 45 per ton.
It is pertinent to mention that we stopped accruing the incentives from Panagarh plant effective April 2023, and the incentives from Rajasthan plant ended in June FY 2023. Net-net, our strong EBITDA growth and margin expansion are a testament to our operational excellence, which focuses on cost efficiency and value-led growth. We will continue to maintain rigorous attention to operating costs. Let me brief you on three major cement cost elements. Power and fuel costs reduced 7% quarter-over-quarter due to higher linkage mix, decline in coal and petcoke prices, and higher utilization of CPPs and double rate charge. Cement raw material cost per ton decreased 13% quarter-over-quarter due to decline in slag and fly ash costs. On slag, Nuvoco continues to be better placed due to its long-term supply agreement.
Distribution cost per ton remained flattish quarter-over-quarter despite the busy season surcharge on base freight practically for the entire Q3 period. On cost-saving initiatives, our Project Bridge program, which focuses on cost-saving measures purely from efficiency improvements, is progressing well. As shared in earlier calls to improve margins, Nuvoco remains focused on measures such as premiumization, innovation, geo-optimization, trade share improvement, fuel mix optimization, brand strengthening, and cost efficiency. Additionally, the company flagged off a channel integration program offering premium brands Concreto and Duraguard Microfiber to the Double Bull channel. On premiumization, premium products continue to remain a key focus for the company and have contributed significantly with a 36% share of the company's cement trade volumes in Q3 FY 2024. Our trade share also increased year-over-year to 73%, thus reinforcing the strength of the network.
Building upon this leadership, we recently launched a brand-new marketing campaign for the Duraguard franchise, "City Badle Duraguard Khade," which underscores its unique features and reinforces customer trust. As part of the IHB-driven rural reach program, the company also introduced an engaging brand activation program, showcasing impactful stories of sarpanches contributing to their village developments. We also rolled out the new cement packaging designs. The Nuvoco logo will now be prominently placed on the front of the cement packs. The new design will highlight a much stronger bond between the mother brand and its sub-brands, while also instilling confidence in our channel partners and IHB's individual owners. On the cement demand front, as you are aware, all-India industry volume growth for Q3 FY 2024 has been relatively benign at a 3% growth. For Nuvoco, demand in the north region remains strong and was better than the industry.
In the east, core markets of West Bengal, Bihar, and Jharkhand witnessed weak demand during the quarter. Festivities, assembly elections, coupled with fiscal challenges by states had an impact on the cement demand during the quarter. We remain optimistic on the demand going forward as significant portion of infrastructure programs are under execution by the government. Currently, as we speak, 30 lakh houses under PMAY program are pending for completion in the east, out of which 14 lakh houses pertain to just West Bengal. 20,000 kilometers of roads under the Bharatmala Pariyojana Phase One is yet to be constructed, out of which 3,600 kilometers is in the eastern region. Our strategy in the east continues to remain prioritizing value over volume growth. In the north, as Haryana Cement Plant expansion is complete, we are in much better footing to consolidate our position in the region.
On debt, as part of our de-leveraging plan, we have reduced net debt by INR 632 crore YOY to INR 4,533 crore as on December 31. Historically, net debt has been on a declining trend as our focus on net debt reduction remains a top priority. Interest rate at 8.47% on the other hand, reduced by two bits compared to March 2023, despite repo rates remaining the same. I will now briefly touch upon our readymix and modern building materials businesses. Both businesses are performing well. On the ready-mix concrete business we have commissioned five new plants in the current fiscal, bringing our total to 56 plants pan-India. We believe readymix business has a lot of scope in India, given that the business is at a relatively nascent market level with penetration hovering barely at 10%.
In modern building materials, as our products provide superior, durable and sustainable solutions to its customers, we are seeing improved traction in the cement channels to offer complementary products such as construction chemicals, readymix mortars, and tile application products. Sustainability. At Nuvoco, we recognize that robust sustainability management and performance is essential in creating value for our stakeholders, including customers, workforce, communities, suppliers and shareholders. Our sustainability program called Protect Our Planet aims at achieving environmental and social sustainability through participation from cross-functional teams across the organization. It encompasses sustainability roadmap, circular economy initiatives, green energy contribution, water positivity, and biodiversity management. We are focusing on enhancing the use of Alternative Fuels, improving the share of composite cement and conserving natural resources. I would now like to share the progress on each sustainability parameter.
As mentioned during previous calls, we have one of the lowest carbon footprint in the cement industry at 462 kg CO2 per ton of cementitious materials, duly validated by KPMG for the year FY 2023. Our Alternative Fuel Rate has improved by 5% on YOY basis to 14% in Q3 FY 2024. During the quarter, Chittor Cement Plant demonstrated capability of 35% AFR, while Nimbol, you will recall when the AFR feeding system was recently commissioned in Q4 FY 2023 has also demonstrated capability of up to 25% AFR. Finally, a roundup on our growth projects. A quick update on our key ongoing CapEx programs. I am happy to share that we have successfully commissioned the 1.2 million ton per annum cement mill at Haryana Cement Plant, elevating the overall cement capacity to 25 million tons per annum. Rail-based mining projects at Odisha and Sonadih is progressing well. Currently, track laying activities are under progress.
With this, I conclude my opening remarks. I am joined here by Mr. Jayakumar Krishnaswamy, Managing Director, Nuvoco Vistas, and Mr. Maneesh Agrawal, Chief Financial Officer of the company. We are here together to answer your questions. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on their touchtone telephone. If you wish to withdraw yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Raghav Maheshwari from Asian Market Securities. Please go ahead.
Hi. Congratulations, firstly. Good set of the profitability. My question is regarding to the volume. There are very few occasions where we will see the volume degrowth in primarily Q3 rather than compared to the Q2. Can you please, a little bit elaborate what is the reason? It's because of the East price hike in the end of the Q2 and the start of the Q3, or there is some other reason?
Thank you, Maheshwari, for your question. Yes, it's been a mixed bag, as I mentioned in my call speech too. We have seen significantly muted demand in the key states of Bihar, Bengal, and Jharkhand. While there is a lot of potential in the pipeline in terms of Bharatmala roads and the PMAY programs, its actual fruition at market level is something we have not seen in either Q2 or Q3.
Ma'am, industry has de-grown from the larger number compared to the Nuvoco [volume drop]install or how we place against the industry, in particularly in the Eastern markets.
Just to take you back on a few calls in which we have been mentioning, our footprint is strong in the markets of Bihar, Bengal and Jharkhand. Definitely, muted demand in this part of the geography would have a specific impact on our footprint and business.
Ma'am, I just wanted to understand only prospect to east. East industry, particularly east industry has also de-grown significantly or our number is better compared to the industry in terms of the volume degrowth?
If you want to look at it different, almost all companies have got an all-India footprint, and they have reported volume growth or degrowth or muted growth at an all-India level. We are a company which is highly indexed on east and good presence in north, but solid presence in east. We cannot publish region-wise sales of all companies as that's not there. In general, if you see the core states which my colleague spoke about, Bihar, Bengal, and Jharkhand, did have muted demand as well as reduction in offtake in the months of October, November, December. While your question insinuates that the price variance happened in October, did cause drop in demand. That was a very short phenomenon because no industry has continued the reduction in demand in spite of price, because eventually house building will always happen in the medium to long run.
Maybe a few weeks, one or two weeks, there can obviously some changes, but eventually demand picks up. Surprisingly, this quarter, Q3, in many years of the industry, the demand post-festivities normally picks up, but this quarter did not pick up and continued to be very dull entering November as well as all the way through to December. If one were to look at arrivals of all the major players in east, certainly I think all the leading players in east will have a reduction in sales in the east region, more so in Bengal, Bihar and Jharkhand. Of course, elections also played a part in Chhattisgarh and in general MP elections and general election was also there, which also played a part in November and December.
Net-net, if you have to look at it, Q3 has been a quarter, especially in East because of reduction in demand. By having said that, my colleague also said that market will grow. The intrinsic capability of the Indian economy as infrastructure will grow going forward. I guess this is a temporary phenomenon. We'll have to take it on our stride and then look forward. Where we had a good focus in North, we grew handsomely in the North. Our growth in Q3 is one of the highest in the entire history of Nuvoco in North. That's the kind of sales we have achieved in the northern region in the last six months. We will continue to and that's our 1.2 million ton capacity. North is also going to help us to grow deep automaking. Nimbol will also help us to grow our North business.
North is one area where while our capacity is limited, but we will really grow ahead of industry, which happened in Q3. East is a region where in general the market was a little bit subdued. I guess this quarter has been a little bit of a challenging quarter for the entire cement industry East. In January and going forward, I think things will improve. We are fairly confident that the market will rebound very quickly.
Okay, sir. Got it. Thanks for the detailed answers. The last question for the Emami side. How is the Emami brand doing right now, particularly in the Eastern market? Is it doing better? What is the price gap between Double Bull and the Nuvoco's old products of the Lafarge Nuvoco Duraguard? How it's placed between the Emami and Nuvoco portfolio basically.
In the past many calls, we acquired the Double Bull brand through the acquisition, and it had very good presence in certain markets. But over a period of time, we realized that Duraguard is a much stronger franchise than the Double Bull franchise. My colleague had explained in the last two, three calls ago that we have a phased and a detailed plan to move from Double Bull to Duraguard product portfolio in the channels. That phasing is already happening barring two, three markets. I think in markets of Bengal, Bihar, and Jharkhand, quite a bit of shift has happened and couple of other markets, I think they're doing it a phased change.
As the company strategy, one of the points which my colleague mentioned a little while ago was, the first thing we did was to place a premium Concreto in the Double Bull franchise to ensure that channel is clued on to our portfolio of Concreto and premium products. Over a period of next two to three quarters, we will gradually move the other end of product, which is the Double Bull into Duraguard franchise. Certainly for sure that we will not put an abrupt stop to the product overnight. It will be a phased plan. We have a strategy in place and we are very well executing the strategy as per the plan which we have made for ourselves. Maybe two, three quarters is when complete shift will happen, but till then there'll be tapering down of the Double Bull channel.
Sir, some time before we have launched the Emami in north also, Double Bull. What's the strategy when we are removing from the one market and introducing in other market? It's because there is an acceptability of the beyond the Duraguard, it's introducing as new brand. What's the strategy behind that?
I think good question. This launch of Double Bull happened right one quarter after the acquisition of the company. At that time, we had additional capacity available with us, our short-term strategy was to somehow find a way to fill the pipeline in north and get some immediate bids. However, even when we launched Double Bull in north, we were very clear that we will launch Double Bull only one or two markets of Haryana and Western U.P. We did not launch Double Bull in Gujarat or in Western M.P. or Rajasthan. These are very large markets for us. We wanted to grow only in Duraguard. It's a little bit of a short-term tactic to kind of get a thing going.
Having said that, the key progress for the company is to do a brand rationalization, have two key products, Concreto on the slag cement category and Duraguard at the next level and non-trade at Infracem. There are still one or two markets in north where we sell Double Bull, over a period of next three to four quarters, we will phase out that as well.
Okay, sir. Got it. Thank you so much, sir.
Thank you. Ladies and gentlemen, we request that you please restrict your questions to two questions per participant. You may rejoin the queue for follow-up questions. The next question is from the line of Aman Agarwal from Equirus. Please go ahead.
Yes, sir. Thank you for the opportunity and congratulations on a good EBITDA quarter number. Sir, our first question was pertaining to the RMC business, RMC plus Modern Building Material business. Just wanted to understand on your strategy for that business. This question is coming because if we see on EBIT level, the contribution from that segment has not been anything meaningful in the last, say, 12, 13 quarters. Wanted to understand on the margins that you operate in this business on the EBITDA side and strategy going ahead.
First of all, we will be in ready-mix business. That's something we have strong plans for growing all the three verticals of cement, ready-mix concrete, and modern building materials. That's the first point I would like to inform you. Secondly, ready-mix business is an all-India business. You know that the business came to our fold way back in 2010 with the L&T business which got acquired into the organization. Around COVID time, we had a serious challenge because the entire metro-based construction had come to a halt and then we also did a major decision of closing down, winding up or turning down all the operations for a period of three to four quarters. From then on, from 2019 till 2023, this business has made a huge turnaround. We are one of the most profitable ready-mix business in the country.
Like in cement we call contribution, in readymix we have contribution margins or MOMDP is what we call. That number in quarter three delivered the highest in the history of the company at INR 975 per cubic meter. This is one of the highest in the entire industry. Having said that, how did all these things happen? Certainly our entire portfolio, Nuvoco is a premium product in cement. It is also premium in readymix, so we are very clear on that. Credit used to be a big challenge in the business, so we sorted out the entire credit thing. We have about 35% of the business on cash and carry business. We sell in IHB. We exited many project verticals in this because project is a low margin business. We kind of rationed the entire portfolio from 60 to 63 plants to 52 plants during the COVID time.
Now that we have a proven successful model of selling in commercial as well as IHB through cash and carry and fixed credit business model, we are slowly scaling up the business. Like Madhumita said, we have 56 plants now. Happy to say only yesterday we inaugurated the 57th plant and by the end of next fiscal, which is FY 2025, we have plans to take the business to 80 plants and then in the next two years it will go to 100 plants. Sustaining at about INR 975,000 contribution margin. This will give a sizable absolute EBITDA to the company, even though the EBITDA percentage margin will be much lower than the cement. That's the nature of the business. We have to run this business profitably and expand the business.
Understood, sir. Understood. Very happy to listen about the expansion plans that we have for this business. Next is, wanted a clarification or understanding on our cost efficiency program that we have running internally. Where do we stand right now? We talked about some INR 250 per ton kind of a saving, and more than half of the saving was already delivered. Just wanted to understand how are those parameters shaping up and on the cost item-wise, which line item do you think has the highest potential to deliver cost savings from here on?
Aman, thank you for that question. We really need to take it up in two parts. When you are referring to the INR 250 per ton piece, it is Project Sprint. We have successfully closed this project, and I have handled it a couple of calls back. If you're comfortable, I will walk you through Project Sprint separately. You are welcome to get in touch with me or the IM team. The program which we have now flagged off and which I mentioned in the previous quarter call is Project Bridge. On the Project Bridge, we are looking at all areas of efficiency optimization. Just to give you some examples, optimizing the power and fuel cost by working on lead indicators like SFC and SPC, elimination of transit losses, controlling damages and damages in transit, improving warehouse utilization.
It's a certain short list of programs which is being driven with periodic reviews from the MD's office. We were looking at an order of INR 50 per ton savings out of the Project Bridge program, rolling in over a 12-month period. We are happy to mention that about INR 20 per ton of saving is what we are already seeing since the start of this project about four months back.
Sure, ma'am.
Thank you.
Thank you. The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Yeah, ma'am. Just to continue, does that mean that we can see INR 30 per ton more saving is still possible?
Thank you, Shravan, for that question. Definitely, it is a program and we are chasing that number. As I said, we see it rolling in over a running 12-month period.
Okay. Two, three things. First, on the volume front, nine months we have a half a percent decline. Looking at the number, correct me if I'm wrong, I see still we will be seeing a 7%-10% kind of a volume degrowth in the fourth quarter also. Will you please help us how one can look at in terms of whatever that till now we have seen in January in terms of the how one can see the volume for this quarter, fourth quarter?
Shravan, just as a continuity with the call speech and the discussions we had so far. We did see a degrowth in two quarters on the run, particularly in some of our key states and in overall arrivals into the eastern region. However, we'd like to reiterate two things. Firstly, North, we have been riding more than the growth. We were to some extent restricted, but now with the commissioning of the Haryana cement plant, we would definitely like to push ourselves more to capitalize on all those opportunities in the North market. In the East, we are still very optimistic on the potential in the pipeline. We have an election year that has come up. There are budgets lying on various government projects and basically the challenge has been in terms of fiscal deficiency in the markets because these projects were not moving at the expected pace.
We would continue to remain optimistic as we enter Q4. Definitely every attempt to maximize volume in both regions. It is important to state here that with 25 million tons, we have well spread out headroom in all geographies to optimize on the market gains.
Okay, got it. Just to understand in terms of the prices, current prices are broadly January. Our dealer channel check suggests that it is lower than the average for the third quarter. If you can quantify in terms of East and North, what's the broader INR 5, INR 8 decline versus the third quarter average?
I will give all India blended price. I would not be giving a regional pricing. That would not be right. As we ended December and we are on the 30th of January, I have hardly seen some INR 20, INR 30 per ton of change in pricing on the lower side. That's not very big at all. That monthly changes will always happen to the tune of INR 3, INR 4 per bag. I'm not greatly worried, but not a big drop has happened from what we were in December and Q3 average and January now. I don't see any indication at this point of time for any big change in the pricing. My view is, going forward in February and March, this kind of price should hold maybe a sensitivity of INR 2 per bag overall, INR 3 in January, another INR 2 in February.
Overall, you're looking at about a INR 5 per bag kind of sensitivity. Having said that, there are very clear initiatives we are adopting in the company. One is to increase premium. In fact, east is trending at a premium of close to about 49%, 50%, and at a blended level, we are operating at a premium for over 36% as a company. That will be one big lever. Second is again, the geo mix lever of trying to sell more in states where the pricing and realization is much better. That's the second lever. Third is the pricing acceleration program in the company where we tweak prices at an appropriate time. Even in the last four, five months, we have gone and taken a price increase in Concreto. We have taken price increase in Double Bull in Bengal. We've taken price increase in Duraguard in North India.
overall, we have made small price increase independent of the prevailing market prices. Our aim is in the coming quarter, we will find a way to adjust the price in such a way that we don't have a major impact due to any external factors.
simply put it, INR 1,000 plus kind of EBITDA per ton considering the INR 30 cost further saving will be there over the next nine, 10 months, and the pricing remains stable. We can see a INR 1,000 plus kind of EBITDA per ton. That's the most important. Just last on the expansion and the CapEx. How much we have done and what's the new number for this year and next year? Definitely it depends on our Chittorgarh expansion, but when we'll like to go ahead with the INR 3,500 crore to INR 4,000 crore net debt. When we see that net debt and when we'll announce that expansion?
Consistently the hallmark of investors call is that something right here. I'm going to say something which I have been telling in the past itself, which is the CapEx plans. You wanted to know about the CapEx plans for this year. Our CapEx plan broadly had Nimbol expansion, Sonadih railway siding, Odisha railway siding, and Bhiwani expansion.
I wanted the number.
Yeah, I'll give you. Since you asked the question, you got to listen to my answer. That's how the whole thing happens. This year, 9 months, we are at INR 457 crores of CapEx. In January, February, March, we'll end up spending another INR 150, give or take INR 10 crores here and there. We're looking at about INR 600-INR 610. If you remember 2 calls back, I said our CapEx outlay for this year is around INR 650 crores. We'll be ending about INR 610-INR 615 crores will be this year's CapEx. Balance INR 20-INR 30 crores will be unfinished of the current CapEx, which will happen in next year. Next year, we'll have 2 bits. One is the routine CapEx. Here we are looking at close to about INR 700 crores as current outlay of CapEx for next year.
As regards to the greenfield or the brownfield expansion, either in Chittorgarh or any other place, we will inform you at the time when we make a decision to start construction. The baseline condition for looking at expansion will be to pare our debts to thereabouts of INR 3,500-INR 4,000 crores. Right now we're at INR 4,533 crores . We expect in Q4 end and somewhere in April, we will come to that kind of ballpark number. That's when we'll make the serious decision of when we will start the expansion for the company.
Shravan, we've allowed you 4 questions with that.
Okay. Thank you, ma'am.
We'll be happy to issue any further information from the IM team.
Thank you. Thank you, ma'am.
Thank you. Ladies and gentlemen, to ensure the management is able to address questions from all participants in the conference, please limit your questions to two per participant. You may rejoin the queue for follow-up questions. We have the next question from the line of Satyadeep Jain from Ambit Capital. Please go ahead.
Hi, thank you. In the last few quarters, we've been seeing some market share losses, but good to see decent price gains this quarter. On that strategy, I want to come back. We've seen some management changes on the marketing sales front in the last few months. What changes have we seen in the last few months in the new team for marketing and sales? I believe all these things would have been tried historically also, premiumization and all geo mix. What is different that you are doing now versus what was there? Are there any different strategies between north and east when you look at different levers for increasing prices? That's the first question.
I will talk about org design and Madhumita Basu will talk about the market strategy. I don't think we have made any organization change at all. We had one more which happened many months ago, and that necessitated internal realignment. In terms of leading the marketing function, Madhumita Basu continues to head marketing, which she was doing prior to that change, just that she has an additional responsibility to run north sales along with her other portfolios. There's a consistency in the approach. There's not any change, not an iota of change in the way we look at the market a year ago and a year now. We've been consistent. As regards to approach to North and East, I will request Madhumita Basu to explain to you what are the broad themes and how we are going about enacting those themes in the market.
Satyadeep Jain, thanks for the question. Basically, as you know, the North and the East markets for us is different in its construct as well as the presence and footprint of our brands. In East, our focus continues to remain on maximizing business in geo-optimizing states of Bihar, Bengal and Jharkhand. We work in all these three markets with a very strong Concreto franchisee now. We have Concreto and Concreto Uno. We have a good brand portfolio of Duraguard with premium products Duraguard Xtra F2F and Duraguard Microfiber. To extend with a 50%-52% premiumization share in the eastern part of the country, our principal strategy is geo-optimizing and driving the premiumization. At that strategy level, what is different in North? North, firstly, we have seen the benefit of increasing volumes progressively in this year. Firstly, there was a debottlenecking in Neemuch.
This made available to us more cement from the Neemuch plant itself. Further, recently, we have now seen the addition of the Haryana cement capacity of 1.2 million tons. In North, we have been able to stretch our premiumization levels in a market where premiumization barely hovers around 8%-9%. We are at a 14% premiumization in North. Premiumization, there is a good journey and way forward plan. Primarily in North, we have driven the levers of good market presence, sustained branding and communication programs, and driving volumes both in non-trade and in trade. Volume-driven strategy is what remains basic and fundamental. We have length speed and have had the capability to optimize on these opportunities, given the additional volumes which has come in in North. I hope that answers your question.
Yes. Just a clarification on that. When you say geo mix, basically walking away, is it correct to say that you're walking away from markets like Chhattisgarh and Odisha, where you have maybe a lower pricing, higher competitive intensity and thus lower margins? Would that be correct in focusing on maybe Bihar, Jharkhand, Bengal, where you have a Concreto and maybe higher pricing margin?
Satyadeep, I think you are a veteran, price cannot be the only criteria. Obviously, contribution is very important. For some beautiful positive reason, Chhattisgarh and Odisha are high contribution markets in East right now. We run a program called Vijay Chhattisgarh in Chhattisgarh to take our numbers in Chhattisgarh to achieve 40% more than last year's actual in the coming year. We've got a robust plan to get volume growth in Chhattisgarh within the staff. Odisha is currently trending at probably, I won't say historical high contribution margins, but the numbers are very attractive actually. In fact, Odisha contribution margins are higher than neighboring states. Our thrust in Odisha will improve in the coming year. Within the framework of Bengal, Bihar, Jharkhand, they were the key markets for us in the past.
Along with these three markets, Chhattisgarh and Odisha becomes a equally attractive market for us to drive volumes and thereby get more contribution.
What's clear on geo mix then. Geo mix is not tied to any states as such. You're looking at different states as a certain pocket where you get better contribution margin. Is that right?
In Chhattisgarh, we've got three factories. At one time, we used to have a little bit of a challenge. It just created some challenge in Chhattisgarh, I think that's kind of off and now with elections happening in Chhattisgarh, we see a good demand picking up in the state. We have Risda, Sonadih and Arasmeta high throughput factories. We would try and maximize road freight market in Chhattisgarh.
Satyadeep, I'd just like to add a point here. It is very definitely a strategic advantage that we had with the acquisition of the Emami facilities. We have a footprint today across five states, and definitely we would want to be more agile in adapting our tactical plans at a market level.
Okay. Just one clarification question lastly on the routine CapEx. You mentioned INR 500 crore. Is it sustaining CapEx number without growth CapEx? That seems slightly high for a 25 million ton capacity. Would that be right?
No. I can't give a break-up of what will constitute INR 500 crore. It will have land, it will have some growth CapEx, it will have some sustaining CapEx, some overflow from this year to next year. Let's start the year and I guess I'll come back and maybe during the next call, I'll give a clear picture of what we intend doing in the coming year. It won't be more than that kind of number which I mentioned.
Thank you so much, and wish you all the best.
Yeah.
Thank you, Satyadeep.
Thank you. The next question is from the line of Jashandeep Singh from Nomura. Please go ahead.
Hi. Thanks for the opportunity, congratulations on great set of unit EBITDA numbers. My first question is regarding raw material, especially slag cost. I understand Nuvoco has a long-term agreement with Tata Steel. Wanted to understand, the management can give us directionally, especially quantifiably, how much delta is there? How much YOY slag cost has increased for Nuvoco versus for the industry? Even a ballpark figure helps us understand the data. My first question.
I can talk about Nuvoco. I cannot talk about what price other companies have got. If we look at our blended slag cost, along with our long-term strategy with Tata Steel and spot buying, we ended up spending close to about INR 1,335 per ton of cement. That was the slag cost for us. That was cost per slag, not per ton of cement. Slag consumption rate is INR 1,333 per ton. Market rates and spot rates are trending at INR 2,000 per ton outside. We have made a very conscious call because demand has also been a little bit tepid in quarter three. We also walked away from high-cost slag, since we have backend tie-up, that is where we are then focusing on our own long-term slag. Q3 was INR 1,333 at a nine-month average is at INR 1,430.
Okay. Sir, what will be the slag cost YOY last year? In months.
Say it again, please.
Sir, what will be the slag cost one year back?
One year back, obviously, it was high. One year Q3, pre-Q last year was INR 1,319. Pre-Q this year is INR 1,333, about INR 10 more.
Understood, sir. Sir, just talking about the volume mix, we see that C to C ratio has marginally declined this quarter. Does that mean that the share of north volumes was higher this quarter? What I meant is north and central combined. With Haryana steel coming in, what can be a sustainable volume mix for ex-east regions? If you can just clarify that.
Jashandeep, very correctly summarized. The north volumes have had some bit of an impact, we also have to face the fact that we are just prior to an election period. There has been a very good uptake in the infrastructure projects, wherever opportunities have looked attractive, we have gone for the business. Haryana cement plant will be 1.2 million tons of completely blended cement. The slight uptake that we have seen in OPC volumes in this year would definitely moderate as trade volumes pick up depending on how the post-election projects and the mix of business settles. Directionally, we have touched a high of 1.82. We are now trending above 1.72, 1.73. Definitely, as capacity utilizations improve, we will be driving back to that CC ratio of 1.8.
Understood. Just two more questions, one, two, three. The WHRS, have you fully extracted all the potential savings from them since you're acquiring Emami? Is that completely done or is there any incremental saving opportunity there available too?
WHR, in fact, it's not an Emami phenomenon, it was a Nuvoco phenomenon. Even before we acquired Emami Cement business, all our kilns had WHR, which we started installing from 2018 onwards. Every single kiln, along with the Risda kiln, all the six kilns in the company have WHR. The installing capacity is close to 45 MW of WHR. We're also debottlenecking to improve the WHR capacity by another, roughly four MW in the coming year. Having said that, all the WHRS are working in full capacity. Just that since the volume is little bit low, we had to shut the kilns for some periods of time for de-lining. Full potential of WHR didn't happen, next year, Q4 and beyond, once all the kilns run to market demand, we'll get the maximum benefit of WHRS.
Okay. Thanks. What was the CapEx for this quarter? If I missed earlier.
Nine months was INR 457. We'll end up spending another INR 150 crores, INR 160 crores January, February, March. We'll end up close to INR 600, give or take INR 10 crores.
Okay. Thank you so much. I'll join back with you.
Thank you, Jashandeep.
Thank you. The next question is from the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead.
Yeah. Hi, good evening to the team. My question first pertains to the housekeeping numbers. What was this fuel cost per kcal in the fuel mix? Could you also share blended cement share in the production mix?
Rajesh, could you please repeat the second question?
Yeah. Fuel cost per kcal, fuel mix, and share of blended cement.
Okay. Fuel cost, I will say fuel cost in Q3 for the company was INR 1.67 per million kcal. Comparison with Q2 was INR 1.74, and the same quarter last year, INR 2.74. We are at INR 1.67 per million kcal in Q3.
Fuel mix?
Fuel mix. Linkage at 28%, non-linkage 1%, overall linkage and non-linkage domestic coal 29%, petcoke at 56%, and imported coal small 1%. AFR at 14.2%.
Linkage you said is around how much, 25%?
Linkage at 28% and 1% non-linkage.
Okay. 14% AFR. This is helping you in terms of your cost stabilization, which a few quarters were impacted earlier.
Yeah. This is one of the best quarters for us. Even last quarter four also we were making improvements, but I guess at 1.67, we will be right at the top.
Are you expecting further savings on the fuel side, sir? Given the current fuel cost trends?
That's very difficult. What are the levers we have? I think the linkage coal rates are more or less kind of bottomed out at INR 1.30 million kcal. I don't think it will go below this. In terms of petcoke, there is some scope. As you see, currently, we are booking petcoke at $118 per ton, which translates to about INR 1.80, INR 1.81 per million kcal. Last quarter, we are at INR 1.90 per million kcal. AFR also we can improve from current 14.2% to maybe 18%. Net-net, I see a play of about INR 50 going forward.
Okay. Sir, lastly, this market volume loss which we have seen in Q3. While you have mentioned there's a market demand, you have been muted, you have seen a 10% decline. Is this also a phenomenon of aggressive volumes from capacity additions which have happened in the market, and that is why this is an actual market share loss, and this may continue for next few quarters?
I can safely say one thing. No capacity expansion of the industry resulted in reduction in demand actually. I guess that's not certainly the case. If demand was there, we won't have a sitting tight not selling. I guess it's simple that the overall uptake has been low in each market in the last three months. I guess once the demand opens, you will see us growing in line with market.
Okay. No. This quarter, your volume loss is higher than what the industry declined or it is in line with the industry?
Region-wise, it's very difficult to say. All I can say is from the arrivals, I guess we track arrivals, in terms of arrivals, I think at a broad-based number, everybody's numbers dropped.
Okay. Lastly, on this cement to clinker ratio which has tapered down to 1.72, given that you will be ramping up volumes in Haryana where the CC ratio would obviously be lower than this ratio. Is it fair to assume that 1.72 or this ratio will remain close around this level for next one, two years?
Rajesh, I just took that question from Jashandeep. I clarified that the Haryana cement plant is a fully blended cement plant.
It's blend, yeah. It would not be producing slag cement, right? Which has a higher CC ratio.
Agreed. This quarter number has reduced our CC ratio a little bit lower. East will open up, we will sell more slag cement. Our CC ratio for east will go to 2.1. There will be some changes because of the overall ramp-up of our products in north, because even though we don't sell so much OPC, we still do PPC.
CC ratio will be lower than a slag cement. Net-net, if you see, our number will go back to 1.8 plus in the one or two quarters from now.
Great. Lastly, what is the blended cement production? Share of blended cement?
Rajesh, we will give you that data point later.
I have the figure from the records.
No issues.
little later. Our guys will give you a detailed interview.
No issues. Ajay, sir, that's all from my end. Thank you, ma'am. Thank you, Sidharth.
Thank you.
Thank you. The next question is from the line of Tejas Pradhan from Citigroup. Please go ahead.
Thanks, sir. Just most of my questions were answered. Just wanted a data point on the lead distance this quarter. Hello? Hello?
Sorry, I was on mute. Last quarter, the lead distance was 340. In Q3, it became 342. 2 kilometers increase.
Okay, thanks. That's all from my side.
Thank you. The next question is from the line of Amit Murarka from Axis Capital. Go ahead.
Yeah. Hi, good evening. Thanks for the opportunity. About the market growth, you used to share the market numbers for North and East earlier. Any commentary around that?
I don't think in our calls we have given region-wise market growth. At least in this quarter, I can stick my neck out and say that East, obviously, market shrunk. North market grew. We are a small player in North, but with that small player status also, we have grown higher up market. Technically, we have moved our market share in North in the second decimal for sure. East is where market shrank, and right now I won't be able to comment what has been the extent of shrinkage in East.
Sure. It seems it's more than 10%, right? If you've grown in North, then North decline is more than 10%.
Yeah. Obviously, mathematics will certainly reduce to where you're going. That's how the market has been.
Right. Also, just to understand, when you say that you are choosing to do profitable volumes and all that, are you then focusing on EBITDA maximization at the cost of maybe market share loss, or how do we understand that?
It's really, there's no one correct answer on it. One of the biggest agenda for the organization which I have been consistently mentioning is we had made a commitment post listing in the first earnings call and then on, one of the key endeavors for our company is to pare down the debt so that we are fit to grow for the next, we feel fit to get into the next growth plan for the company. Certain decisions one has to make, and our making those decisions mean that we don't walk away from markets where we can sell. If the market is in such a place where growth doesn't happen, then our priority is to get value over volume. Very clear. That's the plan we have been doing in the last couple of quarters.
Certainly, one of the principal agenda for the company is to bring the debt levels to a sizable number, anywhere between INR 3,500 crore to INR 4,000 crore, and we are fit to grow. In the journey, we had a number of agenda which we have been running, which my colleague spoke about. Project Sprint in the first year of listing, and then once we kind of accomplished Project Sprint, of course, Project Sprint got kind of diluted by the fuel price increase. Net-net, we couldn't get everything out of Project Sprint. Now that the fuel price is under control, we are embarked on the second agenda of Project Bridge, where we're looking at INR 30 to INR 50 improvement in EBITDA along the various lines of the index.
Our focus will be to improve our EBITDA margins, sell sensibly so that, for the sake of selling, we don't spoil our bottom line. In doing all these things, the end objective is to pare the debt to about INR 3,500, INR 4,000 levels, and then on, get the growth engine going for the company in the medium term.
Understood. Also, actually, I was just looking at a bit longer-term numbers actually for you, in both in volume and EBITDA. I'm just trying to see how our numbers have been since you acquired Emami. To me, it seems like actually both your volume and EBITDA is actually down in the last three years actually. If I look at the Q3 FY 2021 numbers, it's actually 10% lower on EBITDA as well. In this meantime, in these three years, I believe we have unlocked some synergies as well from the acquisition. I'm just trying to understand where has this decline come from in terms of, given that synergy has also been unlocked.
I will throw some numbers to you, one or two numbers. I think detailed explanation will be very difficult to tell on investors call. We can engage with you. If you can reach out, we can have a detailed conversation. Above the line, since you asked the question, I need to give a right answer to you. Around the acquisition times of Emami, we are very clear that we acquired Emami for capacity. That brand was not in the same league as Concreto and Duraguard. Hence, the per ton realization of Emami was always lower than. Our main aim at the time was to acquire capacity, which we accomplished at that time. We got 8 million tons of cement and multiple grinding units in various states. That was objective of acquisition.
Nuvoco became a 23.8 million ton, becoming the fifth largest player and one of the leading players in East India. That was the key objective in acquiring Emami. Around that time, once we combined both the companies, our EBITDA levels did touch INR 100 per ton in Q4 FY 2021. Then on, the entire fuel crisis happened, and when we delivered EBITDA of excess of INR 1,227 precise was the EBITDA per ton, our power and fuel cost was the best in the industry at that time at INR 785 per ton. We were the best in the industry at that time, very close to only one other player. Then on, the power and fuel cost of the company went from INR 785 per ton all the way to INR 1,500 per ton. It happened to the industry, it happened for us also.
When this escalation in fuel costs and power costs happened, that kind of washed away all the Project Sprint savings. As mentioned by my colleague in the introductory speech, in the last 10 quarters, if you look at Nuvoco's EBITDA per ton number, quarter-on-quarter, we have improved EBITDA per ton, and we have more or less reinstated our EBITDA in quarter three at INR 1,048 per ton, which is only a little bit lower than what it was at the time of listing. We have made concerted efforts to improve cost efficiency, get the Project Sprint levers and the Project Bridge levers going, implement various initiatives within the company, and take the company from where we were 10 quarters ago to all the way now to INR 1,048 per ton. Give or take, we can be around this number for going forward as well.
Thanks for the explanation. My question was more around the performance, like before the Project Sprint synergy benefits were unlocked. The numbers, I think that's not being visible in the final EBITDA is what I was wondering.
In terms of the call explained, may I request you to reach out to us? Our team will explain with you through all the facts, and we'll clarify all your queries, please.
Sure. Yeah. Thank you very much.
We have all data, so I think you can also get to see all the information so that we can in a transparent manner explain to you.
We'll reach out and connect with you on it. Thank you.
Okay. Sure. Thank you.
Thank you. The next question is from the line of Prateek Kumar from Jefferies. Please go ahead.
Yeah. Good evening, everyone. I have just a couple of clarifications. You said pricing in fourth quarter is lower by INR 30 to INR 40 per ton versus December exit or December quarter average. Of course, those numbers.
Prateek, there's a disturbance in your line.
Yeah, hello. Yeah. Can you hear me?
Yeah. Please carry on.
Yeah, I was just saying that there was this mention of pricing realization drop of INR 30-INR 40 per ton. Was this against December exit or December quarter average, comparatively?
December quarter, a lot of things happened in September, a lot of things changed in November and December. One way to look at start and end date of 1st October to 31st December, those are 90 days of pricing fluctuations continuously. The number which I mentioned was, as we stand on 13th of January, I am looking at a close to about INR 40 per ton reduction in prices from where we were end of December.
Okay, versus average, it will be much more lower. Versus exit, it is INR 40 lower. Okay.
But it's stable for the last 30 days. It will continue to be around this number going forward is what is my read.
Okay, got it. Sir, secondly, on this INR 1.67 of fuel cost on a kcal basis, obviously, it's a combination of various fuel mix which you have. Given pet coke is 56% and current import pet coke price are around $110-$112, is it reflecting that spot number, or there are more savings which can come in FY 2025?
These numbers are all based on past procurement not at $118, but at $135. Currently, we are booking at $115, $118, impact of the reduced cost of pet coke will be felt end of Q4 and Q1. You would know we have North and the East plant. East operates with only 35% pet coke and North has got almost everything is pet coke. East will have a big bearing in the overall foreign fuel cost of the company because bulk of the cement is made and the cost of fuel is also a little bit lower there. As I said a little while ago, with the levers of reduced pet coke and increased AFR and maximizing our linkage coal, I see a potential of some more reduction in the overall foreign fuel cost, and 1.67 can be maybe INR 1.60-INR 1.63.
Beyond that, at current levels, it will not go down.
Last question. On your CapEx, have you quantified the amount of CapEx which you're looking at in North for next round of expansion? Is it to the tune of INR 2,000 crores?
Not yet. I guess I will get back to you in the subsequent calls. Right now, we are still working at the background on the technical design, whether it be a 6,000 TPD line, 7,000 TPD line, 8,000 TPD line, whether we have split GU, VRM or all this. Those work is currently happening.
Understood. We will regain the lost market share there in the coming quarters, correct?
We will certainly participate in the market with full vigor when the market opens up.
Understood. Thank you. Thank you so much.
Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to Ms. Madhumita Basu for closing comments. Over to you, ma'am.
Thank you, everybody, for your participation. Very good questions and some good overall on the time as a result of these questions. To summarize, we remain positive on the demand outlook and significant portion of infrastructure programs are under execution by the government. We shall continue to focus on operational efficiencies and remain committed to our growth projects. We will remain available for any further clarifications that you might require. Please do connect with us. Thanking you for joining us today once again.
Thank you. On behalf of Nuvoco Vistas Corporation Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.