Ladies and gentlemen, good day, and welcome to the UltraTech Cement Limited Q1 FY25 Earnings Conference Call. We must remind you that the discussions on today's call may include certain forward-looking statements and must be therefore reviewed in conjunction with the risks that the company faces. The company assumes no responsibility to publicly amend, modify, or revise any forward-looking statements 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, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Atul Daga, Business Head and Chief Financial Officer of the company.
Thank you, and over to you, Mr. Daga.
Thank you so much. Good afternoon, good evening, and welcome to everybody on this call for the earnings of UltraTech Cement for Q1 FY 2025. Let me begin by talking about a bit about demand and how we perceive it. I believe that the fundamentals, the foundations of our growth story remain unchanged, because we believe that incremental supply will always chase incremental demand. In this quarter, rural demand gained significant momentum, rightly so. For UltraTech, Q1 rural grew about 9%. Infra was a bit slow, but is expected to pick up in the coming quarters. At a state level, we are seeing new or resurgence of construction activities in the states of Bihar and Andhra Pradesh. Andhra Pradesh, obviously with the Amaravati city, kicking in, coming back for its growth story.
The older projects which were halted will start, resume work. New projects are being launched. So all in all, it sounds like a good story for the future. One aspect which I want to talk about is capacity utilization in the country. This financial year, we started with - Sorry, FY 2024, we started with a capacity of 585 million tons in the country, and the country ended with an overall capacity of 626 million tons installed. The estimated demand for the last financial year was about 425 million tons. That's on an average, about 70% capacity utilization. However, we all know that there are capacities which are operational or shut down or inefficient. To my best estimate, there might be about 50 million tons of inefficient capacity in the system. Eliminating that, the capacity utilization for the country would be hovering around 76%.
The country saw a new capacity addition of 41 million tons during the last financial year. 32% of this belongs to UltraTech, and we ended last financial year with a capacity utilization of 85% on an increased base. For the current year, we shall be adding almost 16 million tons, which seems to be approximately 40% of the new capacities getting commissioned in the country this year. In spite of our hunger for growth remaining unsatiated, we continue to grow, and it's also evident from the fact that this quarter also, on a higher base, our capacity utilization is around 85%. We are big and continue to grow bigger. Let me share some other dimensions about our scale of operations.
Alternate fuel, to speak about, as a percentage for us it might look small, but last year we consumed almost 1.5 million tons of alternate fuel in 14 kilns out of the 47 kilns under operation. In some plants, AFR is all, more than 25% already. This is indeed a game changer towards reducing our carbon. The calorific value of alternate fuel would be almost 50% of the imported fuel, yet it is value accretive and reduces carbon emissions. This quarter, our alternate fuel consumption was close to 6%.
Was about 6.5% and will keep growing. 6.5% of the overall fuel. Another dimension would be fly ash and slag. We consumed 33.6 million tons of fly ash and slag, which is a common industrial waste being used by the cement industry. I don't have to mention it, but this consumption itself is significantly larger than overall capacity of some players in the country. Let's get into the brass tacks of Q1. Q1 has been eventful for us. Firstly, we concluded an open offer for RAK White Cement in the UAE, consolidating our position at 54% in the company. The UAE economy is booming and provides us an opportunity to increase our footprint in the space of white cement and putty in that area, in those markets.
Our Star Cement operations in the UAE are also continue to do very well and are the largest or the leader in gray cement in the UAE. From next quarter onwards, RAK White Cement will also become a subsidiary of UltraTech. An update on the Kesoram Cement transaction. We had received the CCI approvals. The courts have also approved the shareholders and the creditors meeting to be held in due course. After approvals from these meetings, the final scheme for amalgamation of the cement assets of Kesoram with us will be filed with the NCLT of Kolkata and Mumbai. The effective date for merger has been set as first April 2024.
Depending upon the receipt of the actual order of, for the confirmation of the scheme, the accounts of Kesoram with respect to its cement division, will be consolidated with retrospective effect with our results. Kesoram has already declared its Q1 results, and you would have noticed a significant drop in their interest burden, which they have been able to demonstrate by refinancing their high cost borrowings both and also in the scheme. During this quarter, we also received the order for amalgamation of our fully owned subsidiary, UltraTech Nathdwara Cement with UltraTech. Somebody said that we had already anticipated the T20 World Cup victory for India, which led us doing several one-time expenses during this quarter. It reflects in our higher other expenses and impacting our P&L. But this is a one-time effort, and our expenses should normalize like any other normal quarter going forward.
We had, in the last call, mentioned about efficiency improvement program in our, that we have undertaken. It is not a segment of imagination, but absolutely real, with 100% touch and feel available on what is happening on the ground. The first of the, programs to kick off is our logistics costs. Our lead distance has already shrunk from 400 km to about 385 km during this quarter. It saves almost INR 45 per ton of cement. You'll all recognize that logistics is the largest cost driver for cement, and this is an important milestone. And we expect our lead distance to go down further as the network of our plants increases from current 59 locations to more than 70 locations by the end of our current phase of growth. WHRS is worth mentioning about.
We are continuously ramping up our capacity of WHRS. This quarter, 23 MW of WHRS was commissioned, ending the quarter with 301 MW of WHRS. You're all aware that the cost of, average cost of WHRS power would be almost INR 0.85-INR 0.90 per unit, compared to our average cost of power, around INR 7 per unit. On our production of 13 million tons, average per quarter, our approximate power consumption to WHRS has been 18.2%. Balance being made up by thermal and grid power and renewable power. Talking about renewable power, we now have 650 MW of renewable power and growing. Again, the average landed cost of renewable energy is around INR 4 per unit, resulting in substantial savings in our power costs.
This year, we are witnessing good monsoons almost across most parts of the country, though, I hear that northern parts are again facing some challenges. However, given the overall sentiment, I believe that the rural markets and the overall cement demand will remain strong going forward. Q2 will be typical of monsoon quarter, not so much, growth that we could expect, but Q3 onwards, the momentum will start picking up. With that, I end my commentary for this quarter, and over to you for questions. Thank you so much.
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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to limit their questions to two per participant and use headsets 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 Amit Murarka from Axis Capital. Please go ahead.
Yeah. Hi, good afternoon, and thanks for the opportunity. So, neither the first question is around other expenses. Like, could you quantify how much was this, one-off in marketing spends? And, what would, what should be the recurring cost that we can build into our model?
Sure. So the recurring costs will come back to the normal levels. So I would imagine, so yeah, if you look at INR 755 per ton, so average should be around INR 650, INR 649 was last quarter. Yeah, INR 675 per ton is what we should go down to.
Okay, got it. And, generally, like, your capacity utilization has been 85% pan-India, but could you break it down between regions as well? Like earlier, you used to give that comment around regional utilization as well.
Yeah, you know, obviously everything is around 85% to 85%. One or two regions might be slightly higher. Where is the regional gone? One second. The, yeah. So you would have south and west almost at 85%, 86%. East was the slowest at 80%. The other regions were 82, and north and central were 82%-85%.
Got it. And on this, INR 300 cost reduction, like, with this, so this lead distance reduction journey that, that you are saying that there will be more coming, is there any target in mind as well, on that?
You know, when we, if you recall, Amit, we had mentioned we had taken a target of 25 km lead reduction, not realizing that we'd be able to achieve 15 km in the first quarter that we kicked off. So I'm raising the bar for ourselves, and I'm sure, there's, there is more to come as, as I mentioned, as our network of our plants increase, you know, intensifies. So I, I can't. I don't want to say a number and then again revise it in the next quarter, but it is definitely going beyond the 25 km that we were looking at in the previous quarter.
Sure. I'll come back later on this. Thank you.
Thanks. Thanks, Amit.
Thank you. The next question is from the line of Sumangal Nevtia from Kotak Securities. Please go ahead.
Yeah, good afternoon, sir. Thank you for the opportunity. First question is on the prices. I mean, it's been continuously weak for the last few months. Is it possible to share what sort of realization or price decline did we witness? And how are July prices versus average, and how should we expect prices to move forward? Do we expect some strength only towards the second half or, I mean-
I think you answered the question yourself, Sumangal. It's only in the second half of the year that we could see any, any possibility of price improvements, typically of monsoon quarters. We won't venture into, price, price improvements per se. What was the other point? What was the other point I told you about, Sumangal?
Yeah, yeah. First one was-
Realization. That's why you're talking about prices. Yeah, prices have been softer. We lost about 3%, 2.4% to be exact, and July has been further soft only.
July would be, versus average, would be down 4%-5%?
What, what would you mean, average?
1Q versus, say, exit of 1Q over July.
About 1.5%.
Further 1.5%. Got it. Got it. So generally, we've been growing ahead of the industry. I mean, so how should we look at this quarter, I mean, industry demand, what is your sense would have been versus our growth of 6%, 6.5%?
We would expect about 3% or thereabout, anywhere between 3%-3.5%. We need to wait for some more results to come out, but our intel tells us about 3%-3.5% growth for the industry.
Okay. Understood. Understood. So my last question, regarding the recent corporate action we saw with respect to India Cements, just want to know if you're in a position to share what is the long-term plan there, and in case we remain at current levels of stake, will we look to get involved in the operations or collaborate in any way?
No, no collaboration. It's a pure financial investment. As you mentioned, no, non-controlling financial investment.
Got it. All right. Thank you, sir, and all the best.
Thank you. Ladies and gentlemen, we request you to kindly just take, limit your questions to two per participant. The next question is from the line of Prateek Kumar from Jefferies. Please go ahead.
Yeah. Hi, good afternoon, sir. My question is on cost curve. So on variable cost, you have highlighted, like, around $149, you've, like, realized cost for the quarter and the fuel prices. How are you looking at fuel costs in near term? You have indicated earlier that will remain in, like, sort of deflation trajectory for next many quarters. So how are you looking at the variable cost ex of your own RE Power initiative?
So basically, if I refer to coal costs, essentially excluding RE power, yeah, they will go down further. So interestingly, we have not been able to increase our petcoke mix. Petcoke mix was around 37% for this quarter, but going forward, I know for sure that we are ramping up our petcoke mix, which should go upwards of 45%. For the remaining period of, for the full year purpose, not remaining period. So we will see an improvement in overall fuel prices.
Okay. And on the other expense, on the quantum, you mentioned of elevated marketing spend. So the quantum will be to the tune of, like, over INR 150 crore this quarter? Like, how much would be the-
I already answered that question. So if you look at it, I would look at it on a quarter basis. If this quarter, we were at INR 755 per ton, we should be-
Ladies and gentlemen, please stay connected. The line for management got disconnected. Ladies and gentlemen, please stay connected while we reconnect the management team. Thank you. Ladies and gentlemen, thank you for your patience. We have the management line reconnected. Over to you, sir.
Thank you so much. Sorry about this. I don't know, there was some goof up, like the Microsoft problems the world over today. Our telephone lines are also giving some trouble. Sorry about that. Can we take the next question, please?
Sure. We'll move to the next question, which is from the line of Jashandeep Singh Chadha from Nomura. Please go ahead.
Hello.
Hi, Jash.
Good afternoon, sir.
Yes, please.
Thanks for the opportunity. Sir, just wanted to understand what's the status of the 6 million greenfield projects that we are putting in under the waste. I mean, what's the stage they are at, the ones that are coming in FY 2026 and 2027?
They are on track. FY 2026 is our GU Visakhapatnam is on track. Dhule, Nathdwara, Achhupara is next year, sir. So yeah, it's on track. There's only one grinding unit of Visakhapatnam, 3.3 million.
The orders have, the equipment has been ordered, the land has been secured?
Yeah, yeah, yeah. Land already tied in long back.
Okay. And sir, just wanted to understand your view on the southern market. There are a lot of consolidation happening, a lot of expansion happening, the prices are low. So how do you see, is there enough, you know, volume and demand there to absorb the upcoming capacity in the south market?
Yeah, I guess so. You know, in fact, I alluded to how Andhra is gonna shape up. That is one of the markets, big markets. So I believe that there will be demand, enough, enough demand rather, to, to, absorb all the new capacity coming in.
Okay. Thank you, sir. I'll join the queue. Thank you.
Thank you so much.
Thank you.
The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, two questions. Sir, you did indicate a specific for India Cements. It's a non-controlling financial investment. Just wanted to understand what is the motivation behind this? Historically, I'm not sure whether we have done anything of the sort. So why right now? How should we look at it, look at this?
So this is, there's always a start to everything. So that is, having said that, we found this as a good opportunity to buy in, and we, I'm sure the way the markets are, this should prove to be a good investment.
Okay. So my second question is, how should we look at, I think JP has been put under NCLT, and one of our assets is also under arbitration. So how does the situation evolve for us?
We are waiting to hear back from the RP, but I think the arbitration will continue, and RP will step in the shoes of JP.
Okay. That's helpful. Thank you so much.
Thank you.
Thank you. The next question is from the line of Indrajit Agarwal from CLSA. Please go ahead.
Hi. Good evening, sir. A few questions. First,
Only two questions, Indrajit, not few.
Okay, yeah, INR 2, I'll get it to INR 2. So the INR 2 per kCal cost of fuel, while the industry has moved to INR 1.6, we understand there were some long-dated contracts. Can we get to that INR 1.6, INR 1.7 levels by fourth quarter, or?
I would imagine that we will see those kind of levels in the next fiscal year, and Q4 would be far better than the current quarter. Because all those long-term contracts will be over by December, Jan. So not able to put my finger on the exact number for Q4, but we will begin the April-June quarter on an absolutely clean slate, very competitive, clean slate.
Sure, that is helpful. Secondly, I just want to understand, more like a bookkeeping question, the accounting for this financial investment. So would you mark to market every quarter and whatever the gain loss, would it be marked?
No, it will not go through the P&L. It will go through OCI.
Okay, and it will be mark to market every quarter?
Yes, it will have to.
Okay, thank you. That's all for now.
Thank you. The next question is from the line of Rahul Gupta from Morgan Stanley. Please go ahead.
Yeah. Hi. Hello.
Hi, Rahul.
Hello.
Please go ahead, Mr. Rahul. You're on-
Yeah, hi. Thank you for taking my question. Sorry, Mr. Daga, to hop again on, India Cements investment. Given this is a financial investment, is there a way that you would look to increase stake from the currently stated 23%, or are you happy with, non-controlling financial investment of 23%?
It's a non-controlling financial investment. Can't go beyond that at the moment.
Okay, understood. Thank you.
Thank you. The next question is from the line of Raashi Chopra from Citigroup. Please go ahead.
Thank you. Just a question, on the last quarter, Atul, you had mentioned that you're looking to reduce your cost by about INR 200-INR 300 per ton over the next three years. And, you know, is this still intact, this INR 200-INR 300?
Yes. I would leave INR 200 behind, and I would start marching above INR 300. Because the way our lead distance has performed, I am very bullish on how things are shaping up, and we will have far higher improvements.
Okay. So INR 300 +?
Yeah, because you remember, if you remember the breakup that we had given, we had looked at only 25 km reduction and, we have already achieved 15 km in Q1. Given the network of plants that we will have, at the end of our expansion plan, by the middle of 2027, 70 locations +? More than 70 locations from a 54 or a 55 locations, 59 locations as of today. It will be a good place to operate. So you will see, further reduction in, lead distance, plus the logistics cost. All our other, parameters are working in the right direction.
Understood. And on realization, you indicated that July prices are 1.5% softer versus the average of 1Q, right?
I'm very sorry. Just one second, I'll... This is too confusing. It's over, yeah, over Q1 average.
Okay. And just last, you already mentioned this, but I missed it. The region-wide utilization levels, what did you say?
No, we, it was 82%-85% between north and central. One sec, and I have in front of me, one second. 85%-90% was west and south, and east was the lowest, at 80%.
Okay, thank you.
Thank you. Next question, please.
The next question is from the line of Pathanjali Srinivasan from Sundaram Mutual Fund. Please go ahead.
Hi, sir, thank you for the opportunity.
I'm sorry to interrupt you, we are unable to hear you. Sir, can you please speak a bit louder?
Yeah. Can you hear me now?
Yes, please go ahead.
I wanted to know what is the volume growth guidance for this quarter, I mean, for this year, sir?
We are looking at the industry growth of around 8%, 7%-8%, I would imagine, and we should be doing double digits. For the full year, yeah, for the full year.
Okay, sir. In terms of capacity, like, what would be CCI limits for capacity addition? Is there anything like, any region where-
As far as capacity is concerned, there is no restriction on capacity addition.
Sorry, could you repeat that, sir? I did not hear you.
Just one second. Yeah. As far as organic capacity is concerned, there are no restrictions.
Okay, sir. What about acquisitions, sir?
There is no number which is defined by CCI, so they examine case to case.
Okay, okay. Sure, sir. And, just one last question. What would our,
Thank you, sir. Can you please press join back to queue? We have participants waiting for their turn.
Okay.
Thank you. The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.
Hi, sir. So just couple of data points for trade share and blended cement for this quarter.
Trade was 68%, blended was 71%.
The CapEx, how much we have done? Last time we talked about INR 9,000.
Our cash outflow was about INR 2,000 crore. So we- Our INR 8,000 crore-INR 9,000 crore of CapEx in this financial year.
Okay, and for 2026, 2027, it will be INR 11,000-odd crore, the number, to-
No, no, INR 8,000 crore, INR 9,000 crore only, not more than that.
Yeah. So for this year, but overall, what we initially talked about in terms of INR 30,000-odd crore kind of CapEx.
There could be some retention money, et cetera. So cash flow might not be there, but it will get be completed.
Okay. And the green share from currently INR 29,400 crore, by end of this FY 2025 and 2026, where it will reach?
60% by end of 2026 and 40%, well, 2026, 2027, and 40%-45% by the end of this year. Exactly.
Oh, okay. Okay. Thank you.
Thank you. The next question is from the line of Sanjay Nandi from VT Capital. Please go ahead.
Hello.
Yes, please.
Yeah. Thank you for the opportunity, sir. Can you please guide us on the current clinker utilization for this quarter?
Somewhere around 85% only. 85%-86%.
Okay. What is cement to Clinker conversion ratio, sir?
1.46.
Okay. Okay, sir. That's it. Thank you for my time, sir. Wish you all the best.
Thank you.
Thank you. The next question is from the line of Amit Murarka from Axis Capital. Please go ahead.
Yeah, hi all. Thanks for the opportunity again. So, on the, like, the expansion plans, while you have given out the schedule for the expansion, is there a similar schedule for green power, like, when you said you'll reach 45% by end of next year?
As far as WHRS is concerned, yes, there will be, which I can put in our next presentation. But that's not. Okay, but this is only Q1 25. So it's not there. So I will share it with you. It's all there.
Okay, okay. You said that WHRS is defined to 0.90 , sorry, paise per unit. Currently, captive power, thermal power cost will be coming at what level?
7-ish. One second, I'll tell you that. 7 + 7. Yes, it's, it is, thermal power is about 7.3%.
Okay. And the captive group?
Hmm?
The group captive solar that you're doing, that would be what?
Renewable is 4.3%.
Okay, got it. Okay, thanks a lot.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
He's not there.
May we request you to please go ahead with the question?
Yeah. Hi, sir. Am I audible?
Yes, please.
Yeah. Sir, when we refer to the logistics cost savings, is there any change in mix, basically road, rail, and sea that we are looking at, besides the lead what you indicated?
No, road remains around 75%. Yeah, that's the range. If I'm looking at my data sheets, it's about 70%-75% is road, 23%-25% is rail, and 2% would be sea.
Right. So are you looking to increase sea, or is it more focused on road, on rail, and basically reducing the lead?
Yeah, reducing the lead and efficiency improvement. So it's not just the, you know, distance cost, but there's a lot of other costs that is there, which helps us drive efficiency, you know, improvement of turnaround time, waiting time, loading time, et c. So lots of stuff, distances, right distances, right amount of travel. Lots of areas are there to improve logistics cost.
Okay. And so second, one of the companies which has reported so far, indicated on a sequential basis, there was some weak on discounting. Is this something that we also witnessed, or is it something which was more company specific? Is it more of an industry phenomenon?
I don't know about other companies. We, we don't have such, you know, policy shifts quarter on quarter.
Sure. And the last one, sir, is there any target clinker ratio that we have in mind?
Yes.
-when we have given a number of INR 300?
1.54.
1.54. Thank you, sir. That helps. Thank you so much.
Thank you.
Thank you. The next question is from the line of Satyadeep Jain from Ambit Capital. Please go ahead.
Hi, thank you. Firstly, on the expansion, just want to understand, Mr. Daga, in the UltraTech has obviously been expanding capacity across India. In your experience in the last few years, have you seen land acquisition or regulatory approvals improve or deteriorate? And is there any state-specific or region-specific trend you've noticed where it's become more difficult or easier, compared to other regions?
No, you know, it's very difficult to point a finger, but it's not an easy process. Somewhere it could, you know, all depends on the land parcel that you own. If it's a private land available, a large parcel is available, it can be done very fast as compared to that. Otherwise, we start buying our land parcels well in advance. Before announcing of our projects, we would target completing 50, 60% or even a higher percentage of land purchases. It's a slow process in the country, yes. Other than that, environment approvals, et c, these are give or take a year window.
Okay. Secondly, on the inorganic opportunities, when you look at, and given your own experience with certain acquisitions in the past, the assets that may be out there, some may have an older footprint in terms of technology, one stage, two stage, three stage, 3 L , and maybe better. I'm not sure how many are there. Is it possible to upgrade some of these plants into standards similar to the current technology?
You know, I wasn't witness to the acquisition of L&T assets, but I have been. I have seen in my time the assets of L&T that time being upgraded. So upgrades are possible, depending upon, obviously, we would undertake upgradation, depending upon the return on investment that they generate.
Okay. Thank you.
Thank you. The next question is from the line of Milind Raginwar from BOB Capital Markets. Please go ahead. Milind, please go ahead with your question. Your line is unmuted.
I think he's not there. Take the next question, please.
Sure. We'll move to the next question from the line of Rajesh Kumar Ravi from HDFC Securities. Please go ahead.
Hello, am I audible?
Yes, please.
Hi, sir. Good evening. So my question pertains to this realization. You know, if I look at your gray cement realization trend, we see that it reached somewhere close to INR 5,390 in Q3 FY 2023, and thereafter it has been drifting lower. FY 2024, we have seen 40-odd million ton of capacity addition, as you mentioned. And incrementally, a few of the under stress capacities are also being acquired, and hence they would be ramping up, adding to the volume pressure. Incremental capacity additions are also on a rise. Third point, if I look at, you know, yours, yours, Ambuja, Dalmia, all of these are talking about INR 200-INR 300 rupees incremental cost reduction.
So are we headed towards, you know, a situation where next two to three years we may not see any price improvement at all, because, companies are, you know, benefiting from cost reduction, and they would be more than happy delivering INR 1,000-INR 1,100 EBITDA margin, I mean, the front-line companies?
I have a very standard answer to this kind of a question, but you know, it's too difficult to forecast beyond next quarter. You for prices, you are asking me to talk about 2 years and 3 years later. So it's very difficult to say how the markets pan out. If the demand is very strong, all India capacity utilizations for Yeah, all India capacity utilization start going up above 85%, you could see dramatic price improvements. It all depends upon demand and supply. And in the beginning of my commentary, I think I had started off, if you were there, when we started, the incremental supply will always be chasing incremental demand in the country. That's a very good sign.
Mm-hmm. Okay. And just last question, how much clinker capacities are getting added in this financial year and, you know, FY 2025, 2026, 2027, in line with the grinding additions that are happening? As long said, so are you? So, yeah, yeah.
If you look at the chart, page eight on our presentation, there are four IUs getting added, green or brown. Sorry, two IUs already commissioned in Q1. Each IU would be around 3.5 million tons.
Okay. So even incremental, the additions that would happen would have similar, clinker size?
Yes, please.
The IUs? Okay.
Yes. Yes, please.
Okay. Yeah. Great, then that's all from my end. Thank you. All the best.
Thank you.
Thank you. The next question is from the line of Shravan Shah from Dolat Capital. Please go ahead.