Good day. Welcome to UltraTech Cement Limited Q1 FY 2022 Earnings Conference Call. 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 risk 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, 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 0 on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Atul Daga, Executive Director and CFO of the company. Thank you. Over to you, Mr. Daga.
Thank you. Good evening, everybody, and thank you for joining this call to discuss our earnings for Q1 FY 2022. First and foremost, I wish and pray that all of you are safe and vaccinated. Global economies, after reaching a vaccination status in excess of 70%, are shrugging the burden of COVID and making it a part of life. We should also commit ourselves to the cause and get ourselves vaccinations, get our vaccinations completed at the earliest, whoever has not done it yet. With wave two of COVID reasonably under control, we have seen revival of demand as the statewide lockdowns have been gradually been coming off. Demand saw resurgence from almost all fronts, i.e., trade and non-trade. This quarter, we have achieved a growth of 48% YOY.
An interesting point to emphasize upon is the growth trajectory that we have demonstrated quarter after quarter since Q1 FY 2021, growing faster and rapidly as compared to rest of the industry. All the growth has been without new capacity addition, organic or inorganic. We achieved a capacity utilization of 73% this quarter, with South going above 50%, North being above 75%, East more than 95%, and Central and West doing 70%+ . This needs to be looked at in light of the previous quarter, where UltraTech operated at 93% capacity utilization, ending March with 99% capacity utilization. We grew 30% YOY last quarter and 17% QoQ as compared to rest of the industry, growing 22% and 13%. This I'm referring to, ladies and gentlemen, for the January-March quarter. It is important to keep this factor in mind.
Our growth was mostly organic as compared to the industry having added nearly 3% additional capacity. All of you know that UltraTech is a growth-hungry company, and the country's cement consumption is expected to keep on growing. This is what propelled our expansion plans, which are more or less on schedule. You will recall our expansion plans of 19.5 million tons, which we started towards the end of last calendar. We expect the next quarter to come in at 3.2 million tons, which will be in East and Central. Q1 FY 2023, about 3.5 million tons, which will be again East and Central. The next three quarters would see the balance, about 12 [inaudible] million tons of commissioning happening in the remaining three quarters. We are on course to complete all our expansions by the end of FY 2023.
Our cash flows continue to grow stronger with every incremental capacity going on stream. We have reached net debt EBITDA of less than 0.5% already. Going to net cash on the balance sheet is within sight after absorbing all the cash flows for our growth CapEx this year. Talking about cash flows, COVID had an impact on our cash flows this quarter. Although we saw a reduction of INR 733 crore in net debt this quarter, we could have done better because a lot of working capital requirements came up in this quarter suddenly due to the surge in COVID cases. Our confidence on the cash flows has helped us increase our dividend payouts to the shareholders, and we will meet our ongoing CapEx out of internal approvals, and yet be net cash on the balance sheet as committed in FY 2024 for sure.
Happy to share with you that today we have prepaid another INR 5,000 crore of long-term loans. Today, to be precise, 22nd of this month. We have doubled our ROEs to around 16.5% from the abyss of around 8% in 2018. We'll continue this trajectory as we keep improving our earnings, supported by low-cost expansions and asset sweating. RMC and white cement both were impacted due to COVID lockdowns this quarter. In spite of that, we have added four new RMC plants this quarter, taking the tally to about 136 and achieving a growth of more than 300% in RMC YoY. White cement volumes were a bit slow, now they have started catching up. Work has commenced on the Putty expansion plant in Rajasthan as well, which should get commissioned in Q2 FY 2023. Happy to tell you about Dalla super unit.
We have received the stage one approval from MOEF for the plant. For refreshing your memory, it is a 2.3 million tons clinker facility which we had acquired from Jaypee. Stage two approval is in process, and we expect to start work on the plant and commission it by March 2022. Let's now talk about the brass tacks, namely demand, supply, prices, costs. Our views have one big assumption that wave three will not impact the business. Demand has started picking up on all fronts. Against the earlier fears of rural slump, we have seen the rural cement consumption also increasing in almost all the corridors, in particular central and east, followed by other parts of the country. It is clearly reflected in our trade sales, jumping to about 70%.
Urban real estate continues being pulled up by the current situation of lower interest rates, government subsidies, the need for space being felt due to COVID. Large infrastructure projects continue to generate increase in demand across the country. Infrastructure projects, if you were to talk about a bit, roads, there's a big emphasis on road infrastructure, both by way of speed of construction as well as awarding new projects. As on June end, the daily road length completion has reached 37 km per day versus a target of 40 km a day. I remember talking about these numbers way back in 2014, 2015, when the speed of execution was 3 km or 4 km a day, this number was unbelievable, the government has actually achieved and delivered it. Greater emphasis is given on the completion of expressways between Mumbai-Delhi, Nagpur-Mumbai, Bangalore-Chennai, Delhi-Varanasi, all of which are cemented roads.
Just to refresh again, one lane kilometer of cement concrete road takes about 600 tons of cement. Metros, all the metro rail projects which were announced in the last budget are going on. In addition, the first RRTS connecting eight satellite towns to NCR, Ghaziabad, Meerut, Alwar, Panipat, et cetera, is all going on full swing. The other major new development which is taking place in the space of infrastructure is health infrastructure. To tackle the potential challenge of COVID wave three, recently, the government has allocated as much as INR 21,000 crore from the PM Relief Fund to develop public health centers. Oxygen plants are coming up in all district hospitals, 15 All India Institute of Medical Sciences, vaccine manufacturing facilities, all of them will, of course, consume cement, and UltraTech is present everywhere.
To talk about airports, the work on all regional airports has started as part of UDAN scheme to connect lot of districts of commercial and tourist importance. Smart Cities, worth mentioning about that. [inaudibl is going on to build sustainable, connected infrastructure in these places to improve the urban infrastructure to address the rapid urbanization of the country. High-speed train, which is a bullet train project, work on the first Mumbai-Ahmedabad section has started in Q1, and will pick up pace in the remaining part of the year. Clearly, infrastructure will lead from the front. Another interesting phenomena worth sharing with you is changing landscape of logistics for cement. The painting is still on the canvas. We have seen a few brush strokes only. I am referring to DFC. DFC started emerging as a game changer for logistics. Few patches have already been implemented.
The total program as of now is for around 2,800 km, out of which nearly 435 km is in operation. It is important to note that the rake speed has doubled. The rake size will become 4x the current capacity. You can visualize the impact it will have on the cost of rail movement and shift from road to rail. Nathdwara Cement, which we acquired recently, of 2018, is already connected to DFC. Axle load of these rakes will also increase, max speeds off will increase 33%, I am told. Rake packing capacity will increase more than 50%. This is going to be a game changer for logistics, and I think we are very well connected.
To talk about input costs, both coal and petcoke have been threatening to break all the chains around them and continue to surge. Demand from China, as usual, is one big lever driving up prices. Coal has gone up from $60 in Q1 to around $100+ or $120 in June. Petcoke is hovering around $150. July loading U.S. petcoke cargoes have been offered somewhere around $160-$163 per ton, but without any buying interest. Saudi origin cargoes are being offered around $140 per ton. However, the industry so far has shown resilience against these cost pressures with price improvements. i.e., cost pressures are being passed on in prices thus protecting the margins. Talking about prices have generally been stable to strong in most regions. We have noticed an average of 6%-8% increase in prices in regional markets.
East and South growing somewhere around 10%, West growing 7%-10%, North and Central growing 3%-6%. In the end, I will only say, don't worry about these line items, let the operating teams manage that. We have this quarter delivered an EBITDA per metric ton of around INR 1,600 per ton, which is the highest so far and will go higher further. Growth of 17% from less than 10% till four years ago. A growth faster than the industry. Fastest deleveraging program from a 3.4x in December 2018 to 0.4x in June 2021. All growth financed through internal accruals. We deliver what we commit. Thank you, ladies and gentlemen, for your time, and over to you for questions.
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 touch-tone 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. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Sumangal from Kotak Securities. Please go ahead.
Thanks for the opportunity, sir, and many congratulations for the results. First question is on the realization. You touched a little bit on the opening remarks, but we've seen a healthy increase even in this quarter sequentially and a bit more than what we were anticipating. Is it possible to share some more regional colors for us to better understand this? Also, [inaudible] trade, non-trade moved during the quarter? Lastly, some color in how prices are shaping up in July.
July typically slows down a bit, and you are seeing heavy rains across the country, and it is premature for me to talk about the ongoing quarter in detail. For regional prices, I had already given a breakup in my commentary. East and South, around 10%, West, 7%-10%, North is 3%-6%. The price hike which we saw in the last quarter.
Okay. The trade and the non-trade also moved in line? Sir, next question is on the cost. We've been keeping costs impressively under control, as you said, the recent cost numbers for petcoke. What sort of cost inflation is expected on that front in the coming one to two quarters, if you can give some directional sense? Also any line item under fixed cost is something which was lower because of COVID-led restriction, and that is somewhere where we see increase in coming quarters as we return to normalcy?
On your first question, we have not seen any respite in the prices of coal and petcoke, fuel prices, essentially. We don't have any signals or indications whether production of oil increasing and thus petcoke increasing, or coal mining output going up or China demand coming down. Nothing is visible. What is happening is petcoke, as I was mentioning, cargoes are being quoted, but there is no offtake. There will be a tipping point after which either the prices reduce the speed of increase or slow down or stop, or you see some correction. It's very difficult as of now to give any trend on which side the wind is blowing as far as fuel prices is concerned. The second point you were asking about overheads.
COVID related overheads or impact due to COVID is mostly on travel, I would say, because the travel costs have gone down dramatically. Plants are running as usual. Maintenance costs, we have preponed some maintenance costs this quarter, which will benefit in the subsequent quarters. I don't foresee any spike in fixed costs from where we are right now.
Understood. Just last follow-up on this petcoke topic. Is it possible to share what would be a consumption cost in 1Q versus the current procurement? Procurement you already shared, but consumption cost in 1Q.
I'll just double-check and give the number during the call. Can we move to the next question, please?
Thank you.
Thank you. A request to all the participants. Please restrict to two questions per participant. If time permits, please come back in the question queue for a follow-up question.
Last [inaudible].
The next question is from the line of Menakan from JP Morgan. Please go ahead.
Yeah. Thank you very much, sir. Just following up on the previous question. In terms of, you said July is seasonally a weak month. Is it fair to say that the prices which we saw in the first quarter have broadly held up in the month of July across the key markets, or July we have seen a correction versus the June quarter averages?
I wouldn't be tracking day-to-day prices. Generally, prices don't go up. At times there might be some pressure. I have our Managing Director, Mr. Jhanwar, also on the call. Perhaps he can give a better color.
Very good afternoon to you. [inaudible] at the moment, the prices are in the range, but as you know, the last one week, 10 days, the monsoon has picked up across the country. Ultimately, there generally used to be some dilution in the prices. It will be very difficult to judge at this point of time whether it could continue or whether it will stay at this stage. Yes, once there is a demand pressure, you understand well there used to be some pricing pressure here and there. Some additional logistic cost and the godown cost, et cetera. That also impacts the realization.
Understood. That is very helpful, sir. My second question is on energy cost. As you mentioned, there is relentless cost surge, and what we understand is that Newcastle high-grade coal prices have actually crossed $150 a ton. As the company would be maintaining a certain amount of inventory, has the policy changed? Are you buying less coal at this point of time and petcoke in the expectations of price fall, or broadly, you're maintaining the same inventory?
No. We can't take that risk. We are not speculative in nature. We have to protect the operation. At any point in time, we would carry 45 days of inventories.
Understood. That broadly stays the same?
Yeah.
Understood. Thank you very much.
Thanks.
Thank you. The next question is from the line of Indrajit from CLSA. Please go ahead.
Hi. Thank you for the opportunity, sir. Two questions. First is more on the medium term. Thank you for the detailed explanation of demand drivers. What we are seeing on the supply side is some of the limestone mines which have been auctioned are struggling to pick up given the new mine setup. Over a five-seven-year period, how do you see the demand-supply dynamic changing? Do you think that utilization could tighten meaningfully more than probably what the street is expecting or what we are working on?
I have always been of the firm view that utilization will tighten over a longer period of time. Obtaining a limestone mine in auction is one aspect, or first aspect. The next on line is land acquisition and various approvals, which is a time-consuming process. It becomes expensive because the operating cost for the new plant will go up because of the royalties. The premium that is attached to it. Cost of land goes up because it's all in public domain, which company has acquired the limestone mine. It becomes difficult to compete.
Yeah. Just to further add upon what Atul said, because there are lots of regulatory requirements, the overall gestation period of the project gets enhanced. Generally, if you have a direct allotted mine, you can put a plant in 2-3 years' time, depending on the location and the issues there. Now 5-6 years is the general time. Auction, then finally concluding the auction formalities and land acquisition, et cetera. That's the reason things are going to be a little difficult.
Thank you for the detailed explanation. A follow-up to that is in the last annual report, you had mentioned that we have reserves to expand capacity by up to 50 million tons. None of our mines get impacted by this. Is that correct?
Sorry?
In the last annual report, you had mentioned that we have reserves to go up to 50 million ton additional capacity organically.
Yeah.
None of our mines or our reserves get impacted.
No.
No.
Whatever we said, it is fully protected.
Okay. One last question, if I may? Are you sharing the working capital and the CapEx numbers for this quarter? What was the working capital also?
CapEx spend was about INR 1,000 crore cash out. Working capital went up. INR 600 or INR 700 crore.
This is a very normal feature because Q4 versus Q1 always.
Always spikes.
High one. Number two, the monsoon buildup also takes place for inventory.
I'm not particularly disturbed about spike in working capital in this quarter. As Jhanwar ji also just now mentioned, Q1 it will always spike up. Historically, you can check any number of quarters, it always spikes up. It'll start tapering down, and it'll release more working capital.
Yes. Thank you so much for the answer. All the best.
Just to complete to the previous question, the consumption cost was $123 per ton of fuel in this quarter as compared to $ 109 in the previous quarter.
Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead. Ashish Jain, may I request you to unmute your line from your side and go ahead with your question.
He's dropped out. Take the next person, please.
The next question is from the line of Amit Murarka from Motilal Oswal. Please go ahead.
Hi, good evening, Mr. Daga. Just first question is around the capacity. While you mentioned that about 3.5 million tons will be commissioned in 2Q. That includes the Dalla, sorry, the Bara phase II, right?
Yeah, Bara phase II.
Okay. Also, just in terms of the cash flows and you're generating exceedingly strong cash flows, I believe for the full year, looks like we should be generating INR 12,000+ crore . Now that the leverage is coming down substantially, what is the thought around the utilization of this cash flow? Will it go towards further organic growth, or will inorganic be also on the table? How will it be?
It will go towards growth and shareholder returns.
Okay. Got it. On trade, I missed the trade mix number. What was the trade mix in this quarter?
70%.
Sorry?
70%.
Blended cement would be how much?
72%.
Okay, got it. Also during the quarter, my understanding was that generally the larger projects did not get impacted as much because the on-site workers were there.
There was a bit of a slowdown, Amit, in whatever we understood, and things have started picking up.
Okay. Why I ask that is in the last quarter, the trade mix was 67%, and this quarter it is 70%. Do we think that the non-trade activity slowed down more than trade in this quarter, or was it just because, maybe last quarter, you could capture a bigger share of the non-trade market?
What was happening is the impression being built or the assumption being made in this quarter was that rural markets have slowed down, urban markets have slowed down. Rural markets did not slow down actually, and we saw a good amount of demand surfacing from rural areas. My absolute quantity of cement consumption in non-trade is continuously going up also.
Okay, sure.
You know, [inaudible] , it's too difficult to dissect.
Okay.
Whether it's a slowdown. I know some real estate projects where they were having 500 laborers on the site, and now they have 350 laborers. The entire team of 350 laborers does not work on cement only. In the sense cement related, there might be some other stuff also involved in the project. Very difficult. If you have been traveling to Worli, the Coastal Road project has been on throughout.
Right. Yeah.
Some projects could have got stalled, whichever area was badly hit. I'm just assuming, I don't know any project in Kerala, but Kerala is so badly impacted with COVID, it must have been Yeah, Jhanwar ji.
Yeah. Just to add upon, I think there are some disruptions from site to site actually.
Yes.
Temporarily, because somewhere the impact of COVID was severe than the labor gangs must have left, actually. To the best of our understanding, the work is on on the most of the sites. Nowhere practically the zero kind of activity happened, actually. The work is going on, but maybe at reduced rate at certain sites.
Okay, understood. Just lastly, on Century, what percentage of the brand transition has already happened?
Everything completed. The Chhattisgarh plant we are not doing, so that continues to operate on the old brand.
Okay. When will the work be started on Chhattisgarh? I believe you'll have to do some CapEx also there.
Yeah. Decision has not been taken on that as yet because we are having a lot of other expansions happening. A plant within 100 km, less than 100 km, which is Hirmi, is undergoing expansion. We have not taken a decision on that yet.
Okay. That would be roughly 15% of volume, if I'm not wrong, Amit, of the Century volume.
Right.
The Baikunth capacity would be 15% of the total Century capacity, if I'm not wrong.
2 million tons, or Baikunth was how much? 2 million.
Two point.
2.4 million tons out of 14.6 million.
Okay, got it. Okay, thank you very much. That's all, yeah.
Thank you. I request all the participants, please restrict to two questions per participant. The next question is from the line of Lokesh Garg from Credit Suisse. Please go ahead.
Hi, sir. Good evening. Yes. Basically, just want to ask you in terms of quarterly volumes, you have ended up the quarter, let's say comparing to 1Q 2020 base, almost unimpacted, while obviously the nation went through a massive COVID wave with all the destruction that it caused. Could you also give a sense, although it's backward-looking, I understand there is a lot of excitement going forward, could you also help us understand how did April, May, and June individually pan out? The June momentum could at least help us get insight into what we can look forward to.
June capacity utilization was obviously the highest, way above 70%. Sorry, 74% was June.
77%.
Could you sort of share this commentary in form of YOY volume movement?
Monthly numbers I don't want to talk about, actually.
Okay. Any other way you can give this perspective on how things have panned out as we moved from-
I can always share with you directionally, June had improved much better than what April was doing.
Okay, sure. Thank you.
Thank you. The next question is from the line of Satyadeep Jain from Ambit Capital. Please go ahead.
Hi. Thank you. Most of my questions have been answered. Just one quick question. After the expansion, you mentioned Hirmi clinker and grinding unit expansion, all the other expansion in east. By FY 2023, would you have clinker shortage at least?
No. See, other thing that is happening is Dalla clinker is coming up, which was stuck for a long time, which is in central, but in close proximity to serve the eastern markets. Hirmi is expanding with clinker, so we will not have clinker shortage.
Okay. Thank you.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi, sir. Thanks for the opportunity.
Ritesh, ask me an easy question, please.
Yes, sir. Sir, for this quarter, did we have full benefit of the MMDR amendment, which I think was March end? Is it possible to quantify the amount?
I will get the quantification done and shared with you, but it's fairly simple, 64 [inaudible] ton.
Limestone.
Limestone.
Okay, fine. Sir, second question is.
30.5 million tons. You can take the same ratio, 20 million tons of limestone we received.
Okay, great. Sir, my second question is, we have stayed away from commenting much on construction chemicals and white cement and wall putty. In the initial remarks you did indicate about wall putty expansion. These are easy wins for the company. Grasim has got into paints. I think investors would love to hear specifically on construction chemicals wherein the company has a right to win. Sir, any incremental color, targets, expansion plans would be very useful.
I think you should reserve that question for the AGM and ask the board, because I am discussing quarterly results. That was on a lighter vein, Ritesh. Construction chemicals, we have started work, and we are building scale. There's a lot of work, but it's too small in the overall P&L and balance sheet of UltraTech. Maybe Jhanwar can add to that.
Yeah. No, what Atul said, I would like to just build upon. Sir, the construction chemical, as you all know, it's a very specialized subject, actually. We started building up some skills about it, and we are looking for something. If something we find interesting, then obviously we will think. We are not at the stage, I would say we have not zeroed on anything. We are just trying to build up our skill, actually.
Okay. sir, is it possible to quantify how much will be the white cement and wall putty capacity post-expansion?
We are 0.6 right now. How much is the expansion?
Putty.
Putty. Ritesh, I'll let you know.
Sure. Okay. Thank you so much for the answers.
No problem.
Thank you. The next question is from the line of Girish Choudhary from Spark Capital Advisors. Please go ahead.
Hi. Good evening, sir. Thanks for taking my question. A couple of questions. In your earlier comments, you did indicate trade sales is [inaudible]. Similarly, what is the rural-urban split? If you could also guide us the volume mix from the urban real estate, if you have it handy.
Urban real estate, I don't have a split like that. I'll just give you the rural. I will give you the numbers separately.
Sure. Secondly, if you can also split the net debt between gross debt and cash.
One second. I'll just tell you, rural sales were about 65% of our trade sales. 70% was trade sales. Yeah.
Okay.
What are you asking?
Yeah, my second question was the gross debt and cash flow.
Our INR 18,000 crore gross debt as of 30th June.
INR 19,000.
INR 19,000 crore gross debt and INR 13,000 crore of treasury.
Sure. Sir, I have one more last question.
Sure.
You did give a very good slide on the UltraTech Smart Factory, which talks about various initiatives using tech.
Yeah.
If you could sort of elaborate this more in terms of ramping this up across plants. If this is already implemented at any specific plants, what are the benefits you are seeing?
I cannot disclose the plant at which it has already been implemented. There are various schemes which are under implementation at different levels and different things at different plants.
Jhanwar here. I would add what Atul said. Yes, because this digital age, there are number of areas where our plant teams are working, and it is in the cement plant area, it is in the power plant area and the [inaudible] area. The entire idea is how we can improve the reliability of our operations, how we can have our operations with the minimized cost and reduce the variance actually. If you are able to reduce the variance, obviously the cost and reliability gets improved. Some pilot projects have succeeded and now we are moving forward across UltraTech.
Will this involve any sizable CapEx or?
No, I would say it is not sizable CapEx. It is more of a sort of software sitting on our existing systems, actually. There is not much hardware gets involved in this direction.
Yeah. For example, a lot of artificial intelligence, IoT is being done. To give you one example, classic example, when the heat temperature varies in the kiln from one end to the other, and the team is trying to stabilize it through the kiln.
Narrowing.
Narrowing it, which reduces the overall heat consumption. This is being done through digital interventions.
Got it. Thank you, sir. That was very useful.
Yeah.
Thank you. The next question is from the line of Navin Sahadeo from Edelweiss Financial Services. Please go ahead.
Good evening, sir. Can you hear me?
Yes, please.
Great. Thank you for the opportunity, congratulations on good set of numbers. Two questions. One is, you said your capacity utilization for the quarter was about 73%, June was also around 74%.
Yeah. That's correct.
Okay. Which means.
April was much lower, yeah.
Okay, 73% and 74%.
The real impact of lockdown, shutdown, COVID wave two was in April.
May part.
Okay. What I was trying to really understand is in July, as in since Q1 has already seen the impact of wave two, and so in July, are you seeing a sense of pent-up demand or in general, are we operating at, let's say, the June utilization levels directionally or higher or lower than that? If you can give some color will help us understand.
Navin, July is all about rains. July, you will expect a lower capacity utilization. It should not be new to you guys because every July, the capacity utilization goes down.
Fair. I was just talking that in some regions, the monsoon seemed a little delayed, so I was just thinking, is there any pent-up factor, so to say, in Bombay?
We expect pent-up demand to kick in big time, yes. I don't want to comment, as I mentioned earlier, I don't want to comment specifically on the month of July on what's happening on the 22nd of July at 4:00 P.M. There is a huge expectation of pent-up demand coming back. As monsoon recedes, you will start seeing demand picking up.
Okay. My second question was on your fuel mix.
Yeah.
In the last call, you said petcoke has come down to almost about 28%, which is.
It's gone lower further.
Yes. Just wanted to understand what is the current fuel mix?
Yeah, petcoke is around 17%, 2%, 3% would be other, and the balance would be coal.
In coal, I just wanted to understand if, because prices of both imported coal as well as petcoke have been going up on a landed [inaudible] basis. I believe the Indian coal turns out economical. Just trying to understand how much can it go? As in, can Indian coal be 20%? It used to be 10% in FY 2021. Just trying to understand where is that as a percentage in overall mix come up to.
Okay. I would respond, Jhanwar, here. Fundamentally, it's a function of your plant location, actually. If you have your plants located in central and eastern part of the country, obviously you have linkage or you are near to the coal mine. Then you can get the local coal. If you are located, as you know, in the west or north, no way you can transport coal, despite the imported coal prices have gone up. Number two, there is also linkages of the coal with the limestone quality and so on. The people, even if the local coal prices go quite low, but switching over to the highest coal would be very difficult for the industry. If we talk about UltraTech, we have plants in east, central, north, west. It's a combination of fuel mix, actually.
We have, in our basket, the indigenous coal, we have the imported coal, plants located on the west coast and the north part of the country.
Fair. Understood.
Navin, the advantage of our diversity is that we can use the most optimal fuel at a particular location.
Fair. I'm just trying to request a number to be the last year if Indian coal was 10%, will it be broadly there, not likely to change, or there can be some scope of 10% going to 15%?
No. You can take a range of 10%-20%. I also don't have a number, but I'm just guessing it will not go beyond that.
Understood. Fair point. Thank you. Thank you very much.
Thank you. The next question is from the line of Rajesh Ravi from HDFC Securities. Please go ahead.
Hi, sir. Good evening. Congratulations on great set of numbers. My query is with regard to the fuel energy cost. You mentioned during the call that our consumption cost is up by almost 12% QonQ. However, in the presentation that you shared, your energy cost per ton is up around 5% QonQ. What is explaining this massive difference?
I'm sorry, I missed your question.
Sir, in the presentation that you shared, there the per ton cost, energy cost, fuel energy cost.
Yeah.
Is up by around 5% QoQ.
Yeah.
During the call, you answered to one of the participants that your fuel cost, consumption cost for the fuel has increased from $109 to $123.
Yeah.
Okay. That is close to around 12%-13%.
Yeah. It's a combination of.
That was petcoke is what he was talking about, yeah.
This is particular to petcoke, we are seeing that this cost is $109-$123.
That was petcoke.
My question, where I was coming in from is that because petcoke and coal, both have surged over the last six months. How is that impacting your captive power generation also? Are you seeing a, you know, bump up in your electricity generation cost also?
No, not really, because we are taking FSA coal, which is regulated prices.
Okay. Sir, how much would be your captive consumption for electricity?
Coal?
No, electricity, how much of it is captive?
Oh, 88% would be captive power.
Okay.
Our most of the integrated plants, we have almost 80%.
80% plants is captive power.
Okay. There, you're not seeing larger chunk of the inflation. Inflation that is largely coming up is in the kiln fuel is where you're facing.
Correct.
Okay. That is why the blended number is much lower.
Yeah.
On a power and fuel cost together. Okay.
Yeah.
Sir, secondly, on the CapEx, you have mentioned that this year around 2 million tons would be commissioning, right? Of the total 19 million tons FY 2022, how much and which place the capacities are coming up?
In 2022, we'll have 3.2 million tons getting commissioned, Patna, Dhankuni, and Bara.
Okay. The clinker also will be coming by end of March 2022.
I already have clinker. These are all grinding capacities. I already have clinker.
Yeah. These three, the phase II where your phase I you have already
Clinker. All clinker will come by the end of 2023.
2023. Okay. The Dalla in the U.P., which was where the approvals are pending, you received stage one?
Dalla will come by March 2022.
March 2022.
Pali and Hirmi by March 2023.
Okay. Great, sir. That's all from my end. Thank you. All the best.
Thank you.
Thank you. The next question is from the line of Milind Suresh Raginwar from Centrum. Please go ahead.
Hello.
Hi, Milind.
Hi, sir. Thanks for this opportunity. Sir, at the beginning of the call, you just mentioned about the regional capacity utilization. I got about 50% in South and 70% in East. Can you please, for me, repeat the numbers for the other three regions?
South was 50%, North was 75%, around 75%. East was 95%+ . Central and West was 70%+ .
Thank you, sir. The next thing is, sir, about the incentives part, how much of that should be built in the revenue number?
Roughly INR 80-INR 90 a ton, or INR 70 crore to be precise, sorry.
Okay. Sir, if I'm comparing the number of our volumes in the first quarter of 2022 over the first quarter of FY 2020, that is June 2019 quarter, we are still declining on that number despite the capacity. How should we read?
No new capacity has been added from June 2019 to June 2021. That is one. That is being ramped up right now. No new capacity has got added on our overall base of 100+ million tons. Looking at April-June 2019 and April-June 2021, there's a marginal growth, not a decline. What we are looking at is the potential, the way we saw the pent-up demand coming in and the new infra projects which I particularly enumerated in my opening remarks. We expect that the demand will continue to surge. The cement consumption will keep on going up.
Okay. Yes, sir.
Just to complete the loop, I don't think that there is stagnation, and there's no point in comparing with April, June 2019, because a lot of water has flown under the bridge. There's a lot of issues with COVID which have impacted demand. New vistas of demand have opened up. Urban real estate, tier two towns have started picking up. Tier one has started picking up. Now we are just in the midst of monsoons. You see October, December. Jhanwar, do you want to add something?
Just to add upon what Atul said, I would say it's good to note that there is a marginal increase in the overall numbers in terms of demand, despite the severe environment of COVID actually in this particular quarter. We all know, there were a number of lockdown across the country and severity rate was too high, actually. That's the positive side, that there is a good opportunity for growth going forward, actually. I would read this way.
Okay. Atul sir, lastly, our overall capacity utilization for the quarter was 74%. Is that what I heard correctly?
73%.
For June it was 74%.
Yes.
For June of the month.
Yeah.
That means our loss in the first two months was not that significant. Is that the way to look at it?
Yes, May was pretty bad. April, we had started declining.
Okay. Great. That's it from my side. Thank you.
Thank you.
Thank you. The next question is from the line of Prateek Kumar from Antique Stock Broking. Please go ahead.
Hello. Good evening, sir. My first question is on the Century plant profitability. While we have now surged to [inaudible] EBITDA per ton, so the Century where we used to target INR 900 odd, that would have been also exceeded that number now.
No. We have crossed the INR 1,000 mark there also.
INR 1,000 mark. Okay. Sir, regarding your fuel cost, is it possible to give away sort of average fuel cost including coal and petcoke combined for this quarter versus last quarter?
Just one second. If my team has it, I'll give it to you. You guys should do it, or I'll get it communicated to you separately.
Okay. Particularly last quarter results, PPT of yours said that imported coal consumption at that time was $76 per ton.
Yeah.
How much of that now moved?
Including petcoke now?
Imported coal. Prateek, I'll give these breakups to you separately.
Sure. Is it possible to quantify how much, like another INR 100, INR 150 [inaudible] we can build on, or is it too early to tell?
Million-dollar question. I also don't have the answer for that.
Sure, sir. I'll get back to you.
Yeah.
Thank you. The next question is from the line of Sanjay Nandi from Ratnabali Investments. Please go ahead. Sanjay Nandi, may I request you to go ahead with your question, please?
The next person, he must have dropped off.
Hello?
Hello?
The next question is from the line of [Ronald] from Sharekhan. Please go ahead. Ronald, may I request that unmute your line [inaudible] and go ahead with the question.
He's dropped off.
Hello?
Yes.
Hello. Yeah. Am I audible, sir?
Yes, please.
Yeah. Yes, sir, just I had one query regarding raw material cost. During this quarter, you had changes in inventory, which, if I see that, including raw material and purchase of finished stocks, it had completely absorbed the rising power and fuel and freight cost rise. This phenomenon has also been there in results of ACC and Mangalam. What we are seeing that raw material cost together on an aggregate has led to our performance on EBITDA per ton, which we should expect also. If this can be explained, what is this thing? Is it gains in the inventory? This kind of figure will not get, I think, repeated over the next coming quarters.
I haven't followed your question. One is, if I look at my raw material cost, which has gone up from INR 470 a ton to INR 510 a ton, a large impact is felt because of diesel.
Diesel.
Huge amount of consumption in the mining operations, internal movements. That is what drives cost otherwise. The second one is fly ash contracts. Fly ash is very opportunistic. The power plants also keep on changing prices depending upon demand/supply situation. Both of these are not in control.
Sir, I am referring to the INR -298 crore, the changes in inventory of finished goods which was reported during the current quarter.
P&L valuation impact inventory, that's what he's asking about because of increase.
Yeah.
That is the increase of the inventory.
That is because of increase in inventory in this year.
Yeah.
Last year, it was a decrease in inventory.
Yeah. This has bring down the overall cost of this if I include raw materials and purchase of stock into it. This frees up around INR 200 per ton in profitability.
This is off to a raw material. This is the increased decrease of finished product and work in progress inventory.
This figure won't be repeated in coming quarters, right?
It will change. It can go up or down.
Always there.
This element of the P&L is always there.
Yeah. That's true, sir. Okay, sir, I'll understand it later.
Sure.
Thank you very much, sir.
Thank you. The next question is from the line of Roshan Paunikar from JM Financial Services. Please go ahead.
Yeah. Hi, sir. Thank you for the opportunity. Sir, in your presentation, you've given that the proportion of green energy on our portfolio is at 30%, right?
Correct. Yeah.
Are there any internal targets and is there a cap up to which it can go up to?
We are now looking at going up to 34% of our existing capacities with green power. That should get completed by FY 2024 latest year.
Okay. This includes the WHR capacity?
Yes. WHR, solar, these are the two mainstays.
All right. The next question is on the lead distance, sir. What would it have been in this quarter?
Lead distance, I believe would have been higher, around 430 odd km.
432 km.
Okay. That's it from my side, sir. Thank you, sir.
Thank you.
Thank you. Ladies and gentlemen, we'll take the last question from the line of [inaudible] from Menon Holdings. Please go ahead.
Yeah. Good afternoon, sir. Thanks for taking the question and excellent set of numbers. Sir, two questions. One was, what was your white cement volume?
Yeah. Look at the presentation.
EBITDA numbers.
I'm not able to calculate EBITDA separately.
Okay. You should give a combined number of non-cement in the earlier quarters, so if you can. It normally is between INR 150-INR 160.
No, nothing like that.
Okay. Sir, what was the industry growth number in the quarter one? If you can share that number and any update on the.
If the results get declared, we will know. Only this is the second or third company declaring results. Third company, right? Yeah.
[inaudible]
[inaudible] Four companies have declared results, so we'll have to wait to know what the industry growth is like.
Okay. Thank you, sir. Yeah.
Thank you.
Thank you. The next question is from the line of Kamlesh Bagmar from Prabhudas Lilladher. Please go ahead.
Yeah. Thanks for the opportunity, sir. Sir, one question on the part of divestment of overseas operations, like say that [inaudible] asset which we got through the acquisition of Binani Cement. Any update on that, sir?
We're working on it. I am hopeful to conclude it in this financial year. We now at least have multiple dialogues going on. There are interests being generated. The confidence level is very high that by end of March 2022, we should be rid of all these pending issues.
Okay. Sir, second question on this margin. You mentioned in your opening remarks that you are very confident that margins could improve from current levels are roughly around INR 1,600 per ton which we did in this quarter. Next, given the fact that there is significant pressure on the cost side, and secondly, the way the volumes are coming up and the capacities are also coming up in the system. What drives this particular confidence on the margin?
Costs going up, they will not keep on moving in one single direction. I'll again harp on the point that there is no off-take of petcoke at $150. It's not naturally going to correct. Second point is, new capacities coming up. They need time to stabilize, time to mature, time to establish in the marketplace. Third point is from UltraTech point of view, we ourselves will begin close to 50 million tons of capacity in the next fiscal year. I can already say lots of plants are already oversold. We have our order book building up whereby we will have our utilizations going up in those new capacities as well. Next point to add here is the brand itself. UltraTech is one of the best brands of cement. Any major project, whether it is a house or an infra, UltraTech is there.
The way India is growing, there's no reason why UltraTech will not grow. Clearly, overhead absorption is where the incremental capacity utilization will help absorb overheads at a much faster pace. The operating leverage keeps on improving, thus helping me improve my margins further.
Okay. Got it, sir. Thanks a lot.
Thank you so much.
Thank you very much. Ladies and gentlemen, on behalf of UltraTech Cement, that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Thank you.