Ladies and gentlemen, good day and welcome to the Shree Cement Q3 FY 2023 earnings conference call hosted by ICICI Securities. 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 a touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Harsh Mittal from ICICI Securities. Thank you, and over to you, sir.
Thank you, Tikku. Good afternoon and warm welcome to everyone. On behalf of ICICI Securities, we welcome you to the third quarter FY 2023 earnings call of Shree Cement Limited. On the call we have with us Mr. Neeraj Akhoury, our Managing Director, and Mr. Subhash Jajoo, Chief Financial Officer of the company. At this point of time, I will hand over the floor to Mr. Subhash Jajoo for his opening remarks, which will be followed by an interactive Q&A session. Thank you. Over to you, sir.
Thank you, Harsh. Good evening, ladies and gentlemen. I welcome you to the earnings call of Shree Cement for the quarter ending December 2022. I have along with me our Managing Director, Mr. Neeraj Akhoury, who has recently joined us. He, Mr. Akhoury, you know, needs no introduction. He is a veteran of the industry. I know all of you have interacted with him several times and most of you would like to hear from him. Without wasting much time, I am handing over to him to give his opening remarks.
Thank you, Subhash, good evening, ladies and gentlemen. An extreme honor to be here and to be able to discuss and talk to you today evening on our quarter three results for 2022-2023. I'll just make some of the opening comments. I would say that it was a good quarter. We achieved our cement and clinker sale of roughly about 8.03 million tons. This is showing a growth of about 23% up from 6.55 million tons last year same quarter.
Even on realizations we have inched up by about 2%, from INR 4,739- INR 4,854 in the current quarter. Based on this, the total EBITDA excluding other income was down by about 14%, to INR 708 crores and against INR 826 crores in December 2021. EBITDA per ton also stood at about INR 881 per ton against INR 1,260 of last year. Sequentially, volumes were up by about 8%, from 7.46 million ton in September 2022 quarter to about 8.03 million tons in last quarter. The realization was up by 1% from last quarter, from INR 4,805- INR 4,854.
We've shown a healthy increase in total EBITDA, increasing by about 35%, from INR 523 crore, INR 5.3 crore last quarter to INR 708 crore in December 2022. Whereas EBITDA per tonne also showed an increase from 701 of last quarter to 881 in December 2022, INR 881 per tonne. Overall, we are seeing a sequential improvement in our performance. We hope that this trend will continue of showing better numbers than what we have been able to show in the last year, calendar year 2022. Largely the reduction has been based on fuel prices.
Yes.
Very, as you know, this has impacted many parts of the economy, including cement industry. As the fuel prices continue to soften, we believe that we will be able to repeat these kind of numbers in the next quarter as well.
Fact, there-
Okay.
Yeah. There has been a huge increase in fuel price as compared to last year. In December 2021, the cost per calorific value was INR 1.69, whereas in the last quarter it shot up to INR 2.53. However, despite the nominal increase in cement prices during the quarter did little to negate the impact of the sharp rise in the fuel prices. However, on a sequential basis, as Neeraj said that the cost is coming down for fuel. On a sequential basis it has come down from INR 2.83 registered in Q2 to INR 2.53. On a capacity, since the sales were good this time, the capacity utilization during the quarter improved on a year-on-year basis from 61% to 72%.
The strong volume growth is due to rise in construction activities which we are witnessing across all regions. Government-led infrastructure spending has increased significantly. Urban housing is also seeing number of new projects being launched across all metros and other top tier cities. Even corporate India is doing lot of CapEx nowadays.
We expect to end this year. Already the sale is, our total sale for the nine months is around up by 17%, and we expect to close this year at somewhere close to 32 million tons. The company has been actively working on achieving its goal of having 80 million tons capacity by 2030. We have also shared this vision with you earlier. In fact, it was there in our annual report also. The status of the project under implementation is as follows.
As you all know, right now, we are working on three projects. The 3 million West Bengal is nearing completion. We expect that in another quarter, maybe by June quarter, it should get commissioned. Apart from this, the work on integrated cement unit at Nawalgarh, Rajasthan is on full swing and progressing well. It is likely to be completed by Q3 of financial year 2023-2024, which is one quarter ahead of our earlier scheduled completion of earlier given of Q4 in 2023-2024.
Our third unit, which is an integrated cement unit of 3 million ton in Guntur, Andhra Pradesh, is also progressing well. We expect completion of the project also to be advanced by one quarter to Q2 financial year 2024-2025. No discussion would be complete today without talking about ESG. Now I would request Neeraj to share his views on the same and what we have done.
As you know, ladies and gentlemen, ESG remains one of the top priorities for the group. We are absolutely determined that we would like to make Shree one of the greenest cement company in the country. One of the big focus for us has been renewable energy and to increase the share of the green power. The share of green power consumption to total power consumption during the quarter increased up to 53% against 47% in the corresponding period last year. We have also added about 84 MW of solar power plants in different states during the current financial year. Another 42 MW would be added in the next few months.
In addition, the company is working in a very focused way to in terms of increasing the use of agriculture and industrial waste to improve our thermal substitution rate and replacement of fossil fuels. State-of-the-art technologies facilities are being installed in most of the plants to strengthen the waste utilization capabilities of the company. We are also very mindful of the management of water for our operations while being cognizant of the needs of the community by adopting the best available technologies in the plant as well as implementing an appropriate rainwater harvesting and recharging structures. We have become very proud to say we are now five times water positive in our operations.
We're also very proud to share that we achieved a score of A minus as part of the Carbon Disclosure Project, the CDP for climate change-related disclosures in 2022, which, to our view, is one of the best in the industry, both in domestic levels as well as global levels. I would like to complete by sharing our outlook for the next fiscal. With several state elections due shortly at the general elections next year, we expect cement demand momentum to continue.
The Honorable Finance Minister in the Union Budget has given a major relief to the infrastructure growth by providing the highest ever allocation of almost INR 10 lakh crore to the sector. The allocation to railways, road construction, Pradhan Mantri Awas Yojana have also been increased significantly. We believe cement sector is poised for a robust demand growth in the coming years, and we at Shree Cement are perfectly positioned to perform in this very exciting times in India. With this, I would now open the floor for Q&A. Over to you. Thank you very much, ladies and gentlemen, again.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question.
In order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Shravan Shah with Dolat Capital. Please go ahead.
Hi, sir. Couple of data points first before asking the questions. First, could you again repeat in terms of the price increase at 2% when we say is it a QoQ? The number what you mentioned, so can you again repeat the number, the realization because we have a power revenue. The 2% increase, just wanted to understand that. Also the trade share, lead distance, fuel mix for this quarter. Also the CapEx in the nine month, how much we did, and what's the remaining for this fourth quarter and for next year, and the our net and the gross debt?
Yes, Shravan. You have asked quite a lot of data points. Let me just start one by one.
Yeah.
On the real we are up by 2% on year-over-year basis. In sequentially basis, the realization is up by 1%. On the fuel mix, in this last quarter, almost 58% was the use of pet coke and 28% was use of coal. Balance was alternative fuel. On trade mix, since last two, three quarters, we are having almost 78%-80% of trade sales. We believe the same trend is going to continue in future also. The average lead distance for this quarter was 450 km as compared to 99, on, in second quarter, and 455 km was there last year. Lead distance has slightly increased by 5 km on a year basis, and nine on a sequential basis. Average fuel cost, I believe we have already said, but I just repeat it.
It is 2.53, the fuel cost for the last quarter, as compared to 1.69 a year back and 2.83, September 2022. Coming to CapEx, in the first nine months, we have spent close to INR 2,200 crore. This is including the CapEx done at Shree Cement as well as the subsidiaries. Because now some of our grinding units are coming up in subsidiary. Total INR 2,200 crore is what we have spent. In the balance three months we expect to spend close to INR 700-INR 800 crore more, taking the total CapEx to around INR 2,900 crore. Yes, please.
Yeah. the for the next year, how much are we looking at in terms of the CapEx and, current, what's the gross and, gross date and the net date?
Okay. next year we expect total CapEx to be in the range of INR 3,300 to between anything between INR 3,300- INR 3,500 crore. As on gross debt is around INR 8,300 crore and the net debt is INR 5,700 crore. Net cash, sorry, not debt.
Yeah, yeah. Okay. Got it. Now, post January, post December in terms of this January and till now, have we seen any increase or decrease in the prices in the regions where we are operating? This is first part. Second, in terms of the fuel cost, how much more reduction are we looking at in this quarter?
First of all, in terms of pricing, as compared to December prices, we have not seen any change till now. The pricing is more or less flat, the December and, till now in February. On the pet coke prices, yes, obviously, as and when the high cost inventory is coming down, so the consumption cost will come down. We expect the current cost of pet coke is around like, December quarter it was 2.53, and currently it is around 2.35. So we expect the cost to come down in Q4 also.
Great.
Shravan?
Okay. Thank you. Thank you.
May we request that you return to the question queue for follow-up questions as there are several participants waiting for their turn. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address all questions for all participants in the conference, please limit your questions to one or two per participant.
Okay.
If you have a follow-up question, we would request you to rejoin the queue. Our next question is from the line of Navin Sahadeo with Nuvama Institutional Equities. Please go ahead.
Okay.
Right. Thank you. Thank you for the opportunity and pleasure to interact with Akhoury. Sir, I have a slightly big picture question to understand as to, like, you know, over a five-year period, what kind of change is it possible to bring in Shree Cement from an organization perspective? Are you focusing on market share gain? Are you focusing on improving the overall brand perception of the company? Or because from a cost perspective, I believe it was always a fairly low cost producer. And of course, there are more levers and companies pursuing that. But my question was, what Akhoury brings to Shree in a course of a medium term, three to five years?
You know, I would hesitate to say what Akhoury brings to Shree. I think Shree is a very strong company with a very well laid out goals and priorities. As management team, our task will be to strengthen those goals and priorities and push the agenda, which has been very well laid out even in the past years. There are three or four big topics on which we are working today. One topic, as I have very just covered with you all, is how do we improve our scores on impact on environment?
Yeah.
There you are, there I would assure you that this is the guidance from the board that we should do everything possible to make ourselves the greenest cement company in the country. Be it in renewables, be it in alternate fuels, be it also using, finding out some other ways to and other innovations to improve our carbon footprint is something that we are trying to work on. You will see in the coming years that Shree will make significant advances in some of these topics. The second area which we believe, and at least this is what as a newcomer, I believe, that there are very strong performances by Shree in terms of what we have done.
For example, just now I disclosed that we are 5x water positive, but we will now like to build our brand in a way that the market recognizes the strengths of Shree. Market sees Shree as a brand to purchase. That would be a second area where we are going to work on. We will continue with our work on remaining the cost leader in the industry. A lot of new ideas and new investments and new initiatives are under evaluation today. This will be one of our effort that how do we make Shree continue to become, remain a player with most of the most optimized cost. That's something that.
On the other hand, we are also working on our teams, and you will see now Shree has, we have introduced a new performance levers. For example, we have a very strong team now headed by a very senior person on digital and IT intervention. We are investing a good amount of money to make ourselves modern in terms of technology adoption, be it in terms of CRM, be it in terms of our own internal IT systems like SAP. Significant investments are in process to make our Shree a very modern company in terms of technology.
These are some of the big ticket items on which we are which we have prioritized as in terms of our next few years. In addition, as Mr. Jajoo said, we are working very hard to reach our goal of 80 million tons of cement capacity. We are making sure that we do all the right things to be able to reach 80 million tons as fast as possible to achieve our objectives. These are some of the big top big priorities that we have laid out for ourselves. Assuring our investors and our shareholders that Shree will continue to invest in the right priority topics. We'll continue to bring the right management skills. We'll continue to bring the right initiatives to make Shree stronger than what it is today.
Thank you so much for the detailed answer. My second question is about how do you then, like, you know, do the balancing act in the sense. Shree historically, what we have seen is, volumes have been superior to the industry growth. Even then, now the utilization is more like 72%, as Jajoo said initially. Relative to other players, it's still on the lower side.
At the same time, if you're saying you're planning to build a brand which is far more superior and like, you know, overall, like, you know, matching the, maybe the super premium brands in the industry, how does the balancing act go? Will now the volume growth be at par with the industry, little lower end of the industry to focus on the branding and overall realization maximizing perspective? Will there be a separate.
As I said, on most of these topics, it is not right for me to give a forward-looking statement. What our attempt is to develop a very strong brand. Shree already is a very strong brand, incidentally. I mean, I can say more from being inside Shree and as well as outside Shree. It's already a very strong brand. We were trying to now make it stronger with new investments in the brand area. Which segment we will play, which segment we will focus on are topics that will evolve as we go on, as we move in the future. Therefore, a very definite answer to this is not right at this point of time.
Appreciate. Thank you. Thank you so much.
Thank you.
Thank you. Our next question is from the line of Indrajit with CLSA. Please go ahead.
Hi. Thank you for the opportunity. Thank you for hosting the call. I have two questions. First on the industry, right? We talked about how demand growth is likely to be very strong, but what we see in the same time is capacity increase is unrelenting and utilizations for the industry is not really going up. With that backdrop, how do you see the industry shaping up? Do you think that we will continue to see these low utilizations and hence pricing power for the industry will remain lower for much, much longer than what we have seen in the past?
You know, there have been several studies on this, and what we know for sure is, if the demand growth is in the range of 6%-8%, the supply growth is in the range of 3%-4%. Therefore, as we move forward, we will see a better demand supply equations emerging. That is how I see this industry, and that is how we see this industry, that demand growth in India, at 6%-8% is something one can assume very safely. It's little less some years and little more some years, but 6%-8%. That is not going to be the supply growth in the income.
Over the long term, I believe 68% is a fair number for demand. Most of the research houses like Crisil and all, they have predicted the same number.
Sure. This is helpful. My second question is specific to Shree. When we look at the roadmap from 55 to 80, so how do you think the split will be between organic, inorganic? Shree doesn't have a history of inorganic expansion. Is it something that we are considering now? What kind of return ratios or regions we are looking at if we consider any inorganic expansion?
This is not a fair comment that Shree has never been serious about non-organic, inorganic growth. We, even if, we have been showing interest, but M&A growth has to be value accretive, it has to add value to our shareholders, and it has to be profitable. We would not like to make a move which is not favorable to our shareholders. That is the spirit which we would like to continue. It is not that it is wrong to assume that we are not interested in M&A activities. It's just that the opportunity should be should add value to our shareholders.
What kind of IRR or return ratios you'll be looking at if you are considering any?
Hello?
Yeah. I'm saying, what kind of return ratios or valuations would you be comfortable with in terms of either EV per tonne or.
It will be very difficult to give what sort of valuation we will be comfortable with. It all depends on the type of asset. We have already seen, like in last one, two year, whatever M&As which has happened, some have happened at a. Now people are saying high value, some are saying it is low value. It will not be correct for me to give a valuation benchmark. It totally depends on region-wise. If we get, we are not present in central. If we get something in a central region, we may be willing to pay high, but if there is something which is available in south, then we may not be willing to pay that much. It totally depends on what asset, what region, what size, how much potential is there.
Coming to your question about reaching 80 million tons. Right now there are, obviously there are no inorganic opportunities which I can talk about. Our growth potential is largely the 80 million tons is on the basis of organic. Yes, if any opportunity comes up, it will be additional to it. Right now this 80 million tons roadmap is a 100% plan on organic.
Sure.
We, like 55 million ton, you already know we are reaching there. for, we have the necessary limestone reserves and for taking us up to 80 million ton, certain sites have also been identified. We are awaiting statutory approvals. Once the same come, then probably we will start the work.
Thank you so much, Jajoo and Neeraj.
Thank you. Our next question is from the line of Sumangal Nevatia with Kotak Securities. Please go ahead.
Good evening, and thanks for the opportunity. My first question is on capital allocation strategy. We've been sitting on very strong cash balance since our QIP, and which is earning a very low yield and also return dilutive. Just want to understand, given our focus is largely on organic growth, and we also enjoy good cash flows to support organic opportunities, what is our capital allocation strategy and having a strong cash balance on the books?
The cash balance is, there is lot of cash in the book. That was because during the it's around INR 2,500 crore. However, immediately after that, we were not able to start our CapEx program because for two full years, because of COVID, we were not sure about it. That is why all the plants were put on hold. However, the pandemic behind us, we have again started our journey. As we told you earlier that it will be a very aggressive capital expenditure program. We are looking at 80 million ton. We believe most of this cash will be utilized in our journey to 80 million ton.
Okay. Got it. I mean, if you look at this 80 million ton from 55 million ton in six years, it looks like more like 6%-6.5% CAGR, which is much-
This is a conservative target which we have given. We will obviously try to do better.
Okay. Okay. It was appearing that we are, I mean, ambitions are much lower than what we've grown historically. Just want to understand, is it a deliberate move to focus more on utilization or is it some limestone limitations which is slowing our growth ambitions?
No, no, there is no limestone limitation as such. We have the necessary resources. Right now we will stay committed to first our 80 million ton plan before looking further. Obviously, we are working on other things also, right now it will not be correct for me to comment on anything more beyond that.
Got it. Thank you and all the best, sir.
Thank you. Our next question is from the line of Pinakin Parekh with J.P. Morgan. Please go ahead.
Thank you very much, sir, for this opportunity and doing a call. My first question is on cement pricing. You did mention that in the medium term, India's capacity addition should lag demand growth. If you look for the next 12 to 18 months, every single cement company which has reported earnings so far has talked about commissioning new capacity. I think this is one of the first years where we have widespread capacity addition in the next 12 to 18 months. In that environment, how do we look at prices, especially given the fuel costs seem to have peaked out and is falling. Is it fair to say that prices, there is downside to cement prices from here, given the incremental capacity addition in the next 12-18 months?
No, I would not go to that extent to say there is a downside risk to the prices. What you can argue, as I said, these are things which is very difficult to state with any amount of certainty of what, how it will evolve. I mean, you are aware there have been times when capacity was much higher than demand. Yet through innovative means, we have been able to stabilize the prices. Yeah. Some segments have grown, some new segments have emerged. India still is very low, for example, on concrete roads.
Sure.
Newer segments emerge. There are ways, there have been initiatives and ways to do it. I would not say there is a downward downside risk to the prices just as yet. Even though you're right, some new capacities will be coming up. In the kind of demand, which we'll see if this, the once the budget allocations are implemented, executed, I believe it will be sufficient to take care of the new capacities as well.
I would also like to add one more point over here, Pinakin. If you look at the per capita cement consumption of India, which is around 250, which is very low as compared to other countries or maybe the world average. We have a lot of space to cover in this, and we believe demand is going to be, remain fairly strong over the next couple of years. Thank you.
Sure, sir. Sure. My second question, sir, is on the 80 million ton number in 2030. Over the last one year, some of your peers, pan-India peers and regional peers have come out with a very aggressive capacity roadmap, have announced large projects. Today, in fact, one of the companies remains committed to doubling capacity over the next five years. In that context, sir, A, is there a possibility that the 80 million ton number is brought forward from 2030? B, is management open to maintain the capacity share over the next five years, actually increasing this capacity number that it has in mind?
We would like to not comment on what others are doing or how fast others are running. We will like to maintain at our own pace. We would like to grow at our own pace. Just because others are doing fast does not mean that we also start running faster. We believe we have given you a guidance, 80 million ton in 2030, we would like to stick to it. Just because the industry is adding up fast, we will not. We will maintain our own pace.
Understood. Thank you very much, sir.
Thank you. Our next question is from the line of Sanjeev Kumar Singh with Motilal Oswal Financial Services. Please go ahead.
Good evening, sir. Thanks for the opportunity. My first question is that in the last few years, we have been talking about increasing trade sales and share of premium products. It looks like given the trade number which you have given, that there has been an increase in trade sales. I want to know how has been the sale of premium products and what is our target sale. How has been the pickup there?
Our sale of premium product is around 7%. It has been at these levels only since last few quarters. With the changes which Neeraj has been telling about in the, which we are doing in our marketing team, we believe we should be able to scale this up to at least 15% over a period of next three to four quarters.
Okay. Second, sir, can you share about the clinker utilization for the company in different regions? Where I'm coming from is that, is it fair to assume that in the north region, especially in the peak season, we are running at optimum clinker utilization?
I don't have the clinker utilization right now. Yes, on the cement realization, on region-wise utilization levels, I can give you. In north and east we are at around 73%. In east, in south we are close to 62%.
Okay, sir. Thanks a lot. Thank you.
Thank you. Our next question is from the line of Amit Murarka with Axis Capital. Please go ahead.
Hi. Hi. Thanks for the opportunity. Just, first question would be on costs. Like you mentioned that you would like to maintain the cost advantage for Shree, but, what we've seen generally in the industry is that everyone is catching up largely through waste heat plants and grinding units, a lot of things that Shree has done in the past. What are the new levers you think you can exercise to maintain the cost advantage? That will be the first question.
Yes. We are working on two, three things. Yes, what you have pointed out rightly is correct, like others are also catching up. We are trying to work on two, three things. First of all, as Neeraj said, building on a brand equity, if we increase our realization, we can add some bit of a margin over there. We are working very hard on that, and the entire sales team has been reorganized. We have focused. In fact, we have divided the post into two. A person is looking after sales, and there has been a new vertical for marketing which has been created. Secondly, on the cost side, we have taken two, three initiatives. First of all, we are trying to increase our rail dispatches.
Our current rail dispatches is only 12%, and the primary reason is that we don't have railway sidings across some of our plants. In next two years we are adding up, setting up railway siding across all our units so as to get the benefit of railway freight, which is presently cheaper than road freight. Secondly, we are working very hard and, trying to increase the use of agricultural and industrial waste in our plant. Our thermal substitution rate for last year was 3%, and we are trying to increase it further. We are targeting a rate of 15% over next one year. This will add up to some of our savings. Thirdly, we are working on digitalization.
As we have stated earlier, a lot of efficiency may come up once this digitalization process and the app which we are working on will go live. These are three, four initiatives where we are working on in order to improve our realization. One more reason is on the renewable energy side. Right now, our, as Neeraj pointed out, almost 52% of our energy comes from green, which is the highest in the industry.
I don't think anybody has reached close to this. We are adding up quite a lot on our new solar units. In next two, three months, sorry, 88 MW not, 43 MW of new solar units will get commissioned. Even after that, we are looking to add this number further. Some delta is going to come from all this. This is how we are trying to maintain our lead.
Okay. Got it. Just on realization, like, while obviously it'll be great to see better realizations and close the gap versus industry, but, is it only through brands like Roofon and all, or are you also trying to kind of increase the realization for the core brands like Shree, Bangur and all?
As we start doing several activities around brand building, which not, doesn't only mean advertising, it means a lot of other activities, including giving strong support to your to the influencers, to the IHB users, to to non-trade customers, also work on some of the specialist product, new product formulations. I believe we will be deploying a mix of several tools, including strengthening our position in the existing brand portfolio, but also trying to introduce some new brands in the market.
Got it. Got it. My next question would be on capital allocation and dividends. Like, generally, while you've laid out the target of 80 million ton, generally, the dividend payouts have also been on the lower side. Like, now that the cash is quite big in the books, the deployment will be gradual, like, is there a thought around raising the dividend payout as well?
The dividend will progressively go on increasing. Maybe after we foresee a very aggressive capital expenditure program over next two, three years. After three, four years, if we find that still the cash is, there is a lot of cash surplus, then maybe we will think about giving some additional dividend. We have about three, four years back, we have already given an additional dividend once earlier. Right now, at least next two, three years, looking at our expenditure program, I don't think we'll be giving it.
Okay. Understood. Sure. Thank you. That's all from my side.
Thank you. Our next question is from the line of Prateek Kumar with Jefferies. Please go ahead.
Hello. Good evening, sir, and thanks for the opportunity. My first question is on this WeLead initiative, which we have talked about in our press release. Are there any quantifiable targets under this WeLead initiative in terms of improvement and profitability or cost savings? I mean, you have mentioned several initiatives which we are undertaking on brand equity and cost. Are there any quantifiable targets in terms of piece growth or certain basis over next two years or three years?
Look, we would like to avoid giving any numbers today, yeah. WeLead is a journey. It's a journey that we are taking on to ensure that Shree's position as in terms of co-optimal cost is maintained. We are able to protect our, both our cost reputation, but also the numbers. It's a continuous journey. What it really does is, across the business functions from manufacturing to sales, we come up with several high impact initiatives that have that influence the business outcomes. It will be a continuous process, so at this moment, giving a quantifiable number to my mind will be unfair. Thank you.
Sir, a related question to management. Bangur has talked about like doing like going back to INR 1,200-INR 1,500 kind of EBITDA per ton for the company. I mean, when do you see that number coming back for the business for yourself in current pricing environment?
Prateek, what number you are saying? EBITDA per ton
INR 1,200.
How much you said?
INR 1,200-INR 1,500 .
See, in a commodity business it is very difficult to give you a take or call on our cement prices. It totally depend on the cement prices. Yes. Fuel prices. There are two things which we cannot comment upon. It's, it may be very difficult when we are going to. If what I can say is that maybe in the coming in the current quarter, we should be close to a fourth four-digit figure. That much I can say. Yeah, I will not be able to comment when we are going to reach INR 1,200 or INR 1,500. It totally depends on the input prices as well as the cement prices, which cannot be ascertained as of now, both being commodities.
Sure. Thanks, Jajoo. These are my questions.
Thank you. Our next question is from the line of Satyadeep Jain with Ambit Capital. Please go ahead.
Hi, thank you. Just a couple of follow-up questions to some of the questions that have already been asked. One on the brand positioning. Shree already has three brands. In addition to introduction of new brands, would there be a thought on maybe maintaining or shutting down one of the brands? Mr. Akhoury, given your own background, can you talk about the idea of introducing a new brand in a market in category A, where there are already many players, kind of overcrowded? Just the challenges and opportunities around introduction of a new brand, given Shree the sizable player in the market. That's the first question.
Sure, Jain. In my view, in any market or any category, there are always opportunities to launch products with unique value propositions, yeah. In cement also there are a history of those brands that have unique value propositions, sometimes more emotional than really tangible. Our effort is in, you know, in last few months, what we have done is also to start what I would call a Shree's R&D function. The objective and intent is that we should be able to study the consumer behavior, the market behavior, see the opportunities and then design a product that meets their expectation in terms of a precise and sharp value proposition.
This is ongoing task, clearly, the pricing of that product, or that value proposition will be dependent on how critical that product is to the customer, expectations, yeah. This is an ongoing process which I see. I know there is a fascination for the A+ or A category, my view is that Shree has the necessary fundamentals to be an active player across segments in the market. That's something that we are evaluating of how do we, how do we introduce brands which bring a more sharper value proposition to our consumers.
Okay, sir. Thank you for this. Secondly, on the growth map, for capacity expansion to 80 million tons after the current expansion plan. We understand Shree already has some other projects in pipeline, possibly in future, whether it is Jaisalmer, whether it is Kutch. Could we, I know it is maybe too early, but as we look at different projects that you have in pipeline in the next stage, could we possibly look at some of these new locations in your capacity as you look at 80 million tons?
Yes. Obviously the names you mentioned, like in Kutch, we have got limestone mine. We have applied for statutory clearances. Once the clearances are received, then only we will be starting the work over there. Right now it will not be possible for me to comment or give you the timelines when we have. Yes, in 80 million tons, these new locations are there.
Okay.
Apart from this, for our existing limestone reserves which we have in our existing mines, be it North, East and as well as South, there also we have the potential to add on ground free units. Together with the new locations as well as existing, we should easily be able to reach 80 million tons.
Okay. Thank you, sir. Thank you. Bye.
Thank you. Our next question is from the line of Rajesh Kumar Ravi with HDFC Securities. Please go ahead.
Hi. Good evening. My question pertains to, what's the WHR capacity, and how much more capacities are getting added over the next one, two years?
Sorry.
What you said? WHR capacity.
Yeah. What is the installed waste heat recovery capacity and how incremental are getting added?
The new WHR capacity which we are adding is around 45 MW. One is there in Nawalgarh and another is Guntur. These two units are going to commission, WHR will also be commissioned once the clinkerization starts over there. The existing WHR capacity is around 242 MW.
Okay, 242 MW. Have you added anything in this financial year?
No.
2.23?
45 MW is going to clear 2023-2024. One is going to come up in 2024-2025, the Andhra one.
Okay. This 245 MW you are saying is on a including the Union Cement?
No, no. This is only in India. I'm talking about the Indian capacity.
Okay. Okay. Second, could you know, also, share the Union Cement performance incrementally because you would be adding the grinding unit as you said through the subsidiary. So, it's better to look at the consolidated numbers rather than standalone basis.
It will not be possible to give individually the performance of our subsidiaries. Overall, yes, the performance is, quarter-on-quarter, I can give you the trend. Quarterly basis, it is, very slowly improving, I can say. That's actually evident from the control numbers also.
Okay. No, I'm saying from the volume profile, you're sharing the balance sheet.
Actually, it was a lot of material used to get exported from the UAE market. Bangladesh and Sri Lanka were two prime markets, we all know like the Bangladesh and Sri Lanka, both the markets have gone bad. We are looking at, different markets where we can get to replace the materials which we used to send to these markets.
Okay. Coming back again to the cash deployment, because you yourself mentioned that you would not be running after capacities, you know, unlike competitors. We see that your million ton capacity target also to around 7% or CAGR, which is quite, you know, stable number. In this context, the cash requirement can largely be funded through your internal accruals, you know, because you are already generating more than INR 3,000 crores annual cash flows. Why do you still believe that your CapEx would be too aggressive for your current cash, you know, surplus, to stay put?
What we have said is 2030 is obviously what we believe we will be able to do. Obviously, we would like to do it much faster, but right now it will not be fair to me to give you the sense that I will be able to complete it in 2028 or so. As per our internal targets, we believe this cash should be utilized over there. If at all any surplus will be there, maybe after a period of two to three years, then we will think about giving any special dividend or something like that.
Okay, sir. That's all. Lastly, on the, you know, what led to a sharp increase in the depreciation, quarter-on-quarter?
No depreciation has been increased because in, on a sequential basis the depreciation has increased because in Q2 end, some solar units were get commissioned. That is why the full depreciation for those units has been charged in Q3. Q2, very little depreciation was there. If you look at it from year-to-year basis- There are two reasons. First of all, our Raipur plant, which got commissioned in March 2022. obviously the depreciation for that plant was not there in Q3 last year, whereas. The full depreciation there in this year. Similarly solar was also not there last year. That is the reason for increase in depreciation.
Sir, one last question on this Maharashtra capacity Patas plant. How is the situation, you know, in terms of ramp up and given that there are two other companies also ramping up capacities in similar same time, Birla Corp and Dalmia?
I think the ramp up is good over there. We are already working at around 70%, sorry. 70% utilization is already there.
Okay. Sir, thank you. All the best.
May we ask you to return to the question queue for follow-up questions as there are several participants waiting for their turn. Thank you.
Our next question is from the line of Mahek Talati with Yellow Jersey Investment Advisors. Please go ahead.
Yeah.
Thank you for the opportunity. I had two questions basically. One was, in terms of the CapEx plan, which we have announced of 25 million tons additional, which are the areas which we are targeting because we have low capacity in Central and South India, West India. Are we focusing these areas?
Central right now we don't have the capacity. We'll not be able to. Right now it is difficult to say. Central is not there. Yes, both in East, South and North, we would be adding capacities. Along with West, where we have got limestone mines in Gujarat. These four regions. Central right now we don't have mines, so that is not there. If we are able to get mines, then obviously that is a very lucrative area for us.
Which means we are consolidating our position in the already existing markets which we are present, correct? That's the correct understanding?
Correct.
Okay. Second was a bookkeeping question. You said that our realization has increased by 2% on a year-on-year basis. If I do the calculations, my an average realization per ton is decreasing by 7%. I did net revenue divide by the number of sales volume. That's coming around INR 5,100 versus INR 5,400 previous year. Am I missing?
Yes. You are missing one point. We have two segments, cement as well as power. Maybe in some last quarter, there has been more of power sale that is why distorted. Power forms a very small part of our segment. That is why we are not giving the numbers separately. Once as you exclude the power numbers, then you will come to this number.
What was the revenue in this, two, three quarters, which you have mentioned?
Revenue for, from power?
For Q3 current quarter.
Power, unfortunately, we will not be able to share the power numbers because we have about two to three years back, we have discontinued the giving the power numbers separately. If you want the realization number, that I can share.
Yes, please share that.
We have Even in the beginning only we have told, like, the net realization was up by 2%. It was INR 4,739, and it increased to INR 4,854. On a sequential basis, it was INR 4,805 last quarter.
Okay, understood. Thank you. That's it from my side.
Thank you. Our last question is from Vishal Periwal with IDBI Capital. Please go ahead.
Yeah, sir. Thanks a lot for the opportunity. On the costing front, I think if you look at nine-month basis, above EBITDA, we have done costing of around INR 4,300-INR 4,400 a ton. A couple of initiatives that you have in the charts that will happen over the next 12-18 odd months, rail sidings or maybe TSR increase and the coal mix increase. On a like-to-like basis, what could be a reduction in the costing, keeping like this, the power and fuel cost where exactly it is?
It will be difficult to quantify the number right now because this TSR is a new thing which we have started hardly two, three quarters back. How it's going to scale up? Our target is from 3%-15%. Giving you a number will not be possible right now. Yes, on a Kcal basis, as compared to pet coke, which is something like INR 2.35, the cost of agriculture will be close to INR 1.50. That sort of a gain may be there.
Now, how much quantity we will be able to increase, that is to be seen. We have invested into some certain technologies in order to increase its usage. These plant and machinery has been imported from Europe, and these we get them installed maybe by March end this year. Next year, we believe our throughput for this agricultural waste and industrial waste will increase significantly. That is why we are targeting, 15% over there.
Okay.
The TSR.
Sure. Yeah. Okay. One data point on the raw material cost, which has been quite volatile, I mean, historically and again in this year again.
Yes.
For the full year basis, how exactly we see this? What is the reason of this volatility? For the full year basis, how we see these numbers on per ton basis?
The raw material price is not that volatile. Yes, the reason why the raw material price you are seeing has come down slightly, if you would recall in Q3 last year, there was certain disturbance in East India, where because of transport strike, we are unable to move clinker. We have to buy lot of clinker from outside in order to feed our grinding unit. That is why the cost is high last year. Whereas, another thing is that the fly ash prices also increased. These are two reasons which because of which there is volatility in raw material prices.
Okay. On, will it be possible to give a probably like sort of full year basis how things would, probably could pan out or maybe fourth quarter?
Full year basis, it will be difficult to give on the pricing front.
Okay. Okay, sure. Yeah, that's all from my side. Thank you so much.
Thank you.
Thank you.
That was the end of our question- and answer session. I would now like to hand the conference over to the management for closing comments.
Thank you very much, ladies and gentlemen, for attending this call, absolute pleasure to be able to answer to some of your questions. We did try to be as accurate as possible. I hope, if there are some remaining questions, you can always, you know, feel free to connect with us again. Anything to do with the results, if you want to ask, you can always, I would reiterate that Shree is a strong company and most of the steps that now we are taking is with the sole objective of how do we further strengthen it. We have a reputation to protect.
We have a reputation to protect as the fastest growing company, as the greenest company, as the lowest cost company, as a company that goes on for innovations in core manufacturing to core supply chain in a very strong way. These are some reputations that this company has achieved over the last several decades, last two decades. That's something that the current team would continue to work very hard to protect and to further strengthen. Again, thank you very much. Have a good evening, everybody. Thanks again. Bye-bye.
Thank you.
Thank you. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.