Ladies and gentlemen, good day, and welcome to Ultratech Cement Limited Q3 FY 'nineteen 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 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 developments, 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. Please note that this conference is being recorded.
I now hand the conference over to Mr. Atul Dagha, Executive Director and CFO of the company. Thank you, and over to you, Mr. Dagha.
Thank you, Oman. Good evening, good afternoon to everybody, and welcome to this call to discuss Ultratex Q3 results. Let me straight get into the burning point, and
that is on pricing.
I think cement prices have not risen as expected during the quarter, and I really don't have the magic wand to tell you when the prices will move. It is for me, it is similar to stargazing or you forecasting the level five or six days from now. Pricing ultimately is a pure demand and supply game. As you know, there are more than 60 named players in the country. And look up any micro market, there is aggressive competition since supply is in excess of demand.
Average capacity in the country capacity utilization in the country is hovering around 70%, which is definitely a significant and meaningful improvement over the last two years since from the bottom of about 65% that we have seen. But is this 70% capacity utilization good enough for natural pricing? I don't think so. We have seen in Indian markets companies generating very high margins when national capacity utilizations were upwards of 85%. This was seen last in 2012, 2010, 2008 as well as 02/2003.
Markets like Central India, where the demand is very robust, capacity utilization is hitting all time high, we are seeing significant improvement in profitability and pricing. To refer to the exact numbers for this quarter, prices have corrected on an average 1% or lesser in Central, East and West. South saw the maximum amount of correction, which was about 3%, and North markets have registered around 1% increase in prices. Talking about new capacity additions. As it stands today, 17,300,000 tonnes of capacity would get added in this financial year, taking the industry total to about four seventy eight million tonnes.
Demand has been growing at much more than this new capacity, which will thus reduce the surplus capacity as compared to previous years. Similarly, we expect another 18,000,000 tonnes to be added in FY 'twenty and perhaps 16,000,000 tonnes in FY 'twenty one. Two points to note over here. These capacities will never have a full run-in their first year of operations. And secondly, it takes time to ramp up these capacities, any new capacity.
Hence, the annual increase in demand, which is expected to be in excess of 25 metric tons year on year, should be good for improving the capacity utilization in the country and thus profitability for the cement sector. At UlcerTech, we have led from the front in our attempt at consolidating the industry. You all know the way we have been acquiring assets. Yes, this is also and will lead to an increase in supply in terms of overall capacity. But obviously, we are not acquiring an asset to run it at substandard or suboptimal capacities.
In fact, nobody would do that. Next, let me touch about demand. As we have told you in the past and we have observed everybody has observed, demand has been strong. It has come back with a very strong rust off. It's only the headwinds of high growth last year, which is reflected in the reported quarter's performance.
Otherwise, you could be seeing higher numbers. This is obviously on the back of nearly 15% growth every quarter that we saw in the last few quarters, except this quarter, where we expect the demand growth to be somewhere around 9% to 10%. One important point to note is that infrastructure and low income housing segment has eating into the share of rural and urban housing. Clearly, cement industry in India is institutionalizing. We now see the housing segment share at 53% to 55% as compared to what we used to record it at 65%.
But of course, this is splitting the segment into two parts, looking at rural and urban housing at around 5553%, 55% and the remaining 18% being brought up by low income housing program, which is growing at a very rapid pace. Bear in mind, with improvement in infrastructure quality, distances become shorter and housing demand is bound to spring back in the next three to four years. During this quarter, there was a minor setback in demand due to fifteen days construction ban in the MCR region besides the usual phenomena of slow pace of construction activity during the festive period. Elections in big states like Rajasthan, MP and Chhattisgarh obviously had an impact on slowing down the demand. Despite this, the overall demand growth in the for the industry for this quarter is expected around 9% to 10%.
Let me now talk about costs. I think there is some relief. Diesel prices have not been going up so sharply. Although comparing crude and diesel prices in India from first April twenty eighteen, crude has corrected nearly 25% and diesel has not moved down in parallel till the December 2018. Though in the past crude and diesel prices in India have mirrored each other with a lag of fifteen days.
Q3 FY twenty nineteen average diesel prices increased around 3% over Q2. Y o Y also, diesel prices are up 21%, which impact logistics costs. Secondly, the busy season surcharge of railways resulted an increase in cost in Q3 as compared to Q2, nearly 3.5% amounting to an increase in cost for us to the extent of $40 per tonne over the previous quarter. Actually, we should call this not as a busy season surcharge, but it was an off season discount, which was given which the rail authorities give in the period of July to September. And through the nine months, this busy season surcharge is applicable.
It is worth mentioning about our logistics efficiency, which where we have been continuously digging down our lead distance, which would be down about 6% Y o Y and 2% quarter on quarter at the December 2018, resulting in overall impact on logistics costs. Non availability of rail network is also a concern in the country and is adversely impacting our logistics costs since road movement is nearly 1.7 times the debt as compared to the cost of rail movement. Next important element is pet coke. Imported pet coke costs increased by around 8%. 35% of requirements of pet coke are from imports.
Today, is a 15% to 20% reduction in international pet coke prices from its peak. Coupled with rupee depreciation of five to 6%, we are still giving a 10% to 12% reduction in international pet coke prices. There is always a lead time of two months to roughly give or take two months for imported pet coke and hence whatever orders are being placed during this quarter will benefit the next quarter. Domestic supplies of pet coke has started shrinking. 65% of our requirements are met through domestic markets, which in fact still saw a 4% reduction in costs.
Considering all implications, the fuel costs have risen during the quarter, resulting in an extra cost quarter on quarter of $6 per tonne or Y o Y about $156 per tonne. In our mix kilns kilns fuel mix, pet coke is nearly 70% and thus should have a favorable impact in Q4 with the falling prices of pet coke. Another aspect which may be a onetime cost, and that's why I should highlight it, is about maintenance. In the quarter October, December, we had nearly 11 kilns under maintenance, out of which one kiln stand alone accounted for nearly INR 26 crores of maintenance expense. This was one of the plants, one of the last plants that we acquired in the JP network, which required major overhauling and major maintenance.
I'm glad to inform you that the kiln was let up somewhere around seventeenth of this month. After all the major overhauling expenditure has been incurred and completed and expiring full cylinders, we expect the costs to normalize going forward in the next quarter. Let me now brief you on our acquisitions. The 2017 acquisition of 21,200,000 tonnes is now tracking at par with our existing operations in terms of quality and efficiency. One of the plants that I just mentioned, Bela in MP was under a long shutdown in Central India, and we expect its costs also to normalize from Q4 and boost the profitability in Central Markets further.
Post shutdown, the costs have reduced significantly, and we should start seeing the benefits from next quarter itself. That is from Jan March twenty nineteen. There's one more small shutdown planned for this plant in February 2019, after which the cost will be 100% aligned with our older operations. This acquisition is now operating at about 75% capacity utilization. The next one, which was in 2018, Nath Dwara Cement, which was formerly called Binari Cement.
We have completed the quality improvement work at the plant and launched Ultratech brand in the markets. We're now busy integrating the acquired dealers network with our network. The plant was operating at about 50% at the time of acquisition and generating an EBITDA of $100 per tonne. It's just forty days of operation in our hands, and I'm sure the capacity utilization and EBITDA profile of this plant will improve significantly. This is our brand premium as well as synergies with our existing network.
The acquisition has been funded 40% with internal accruals and 60% with debt. This being a 100% subsidiary of Ultratech, let me explain the financials and the operating model going forward. Ultratech has infused an equity of INR3400 crores and borrowings of INR4500 crores for this acquisition. UMCL manufacture UMCL as in Ultratech Nardwara Cement. Birani Cement has been renamed Ultratech Nardwara Cement.
Ultratech will market all the products manufactured by Ultratec Nadwara, I. E. Ultratec Nadwara will have just one single customer that is Ultratec. Depreciation in the books of UNCL will continue on its book value of assets will be around INR75 crores, whereas depreciation on consolidated books will be on the revalued assets. We are in the process of revaluing the assets.
And it however, you might want to note that depreciation will be significantly higher. Out of the debt of INR 4,500 crores, 1,800 crores of debt is in UTCL books and INR 2,700 crores is in the books of UNCL. The interest accounting will be accordingly. Altertec stand alone results that have been declared today include the UNCL cement purchase cost as part of our credit purchase with a contribution to EBITDA. And so on a stand alone sales volume of UTCL, it includes the sales from UNCL to UTCL also with effect from tenth December eighteen when that is the date of migration to Altertec brand.
Century Cement. As you know that the shareholders' and creditors' approval process has already been completed. We have filed a petition with MCLT Mumbai and got a date of thirteenth February twenty nineteen for the hearing of our petition for admission of the petition. After the petition gets admitted, it takes roughly a month for the hearing to take place, and we would expect the NCLT order somewhere closer to the March. It all depends upon the backlog of cases in NCLT.
In parallel, we are working towards the mine transfers of these entry acquired plants, which are located in the states of Chhattisgarh, MP, and Maharashtra. Chhattisgarh and MP were going through elections and a bit slow, but we are hopeful to coincide the mine transfer process with the NCLT order. And we'll see the closure of transaction in Q1 FY twenty twenty. Very difficult to come at an exact date at this point in time. We have already started working on our transition plans for integrating this acquisition.
The plants are currently operating at capacity utilization of 75%. There is no more acquisition, hence there is nothing to talk about. With that, I would like to end this commentary and happy to take on any questions. Thank you.
Thank you very much. Questions. 1.42. Thank you. First question is from the line of Gunjan Prathyani from JPMorgan.
Please go ahead.
Yeah. Hi, sir. Thanks for taking my questions. Two questions. Firstly, on the industry, you spoke about the utilization levels being still at 70%.
But if I just look at xSouth, I would think that most of the markets are in the range of 75 to 80% utilization. Correct. Then what so just taking that forward, what is the issue on pricing? Do you think it's the demand profile of the industry, or is it just way too high competitive intensity? What is really holding back the pricing in the market?
I think it's both the points put together. More important is the the as I mentioned, the structure of demand is changing. It is institutionalizing, which has caused a bit of resistance and taking price increases are taking time, though we have seen price increases being done in the institutional or the non trade segment also. Second point always remains that any regional market you go, there is a minimum five or you go up to 10 players also in the market. So competition intensity is always there.
In these two scenarios, it has been slow going on price improvement. However, you know, if you were to look at a longer period of time, the prices have not gone down. They have remained stable, and it's now time that the prices should go up. It's anybody's guess. You know, I I was very strongly hopeful that October, December was all logical conclusions, all fingers pointing towards price hike.
But because, you know, post festive season, the demand starts picking up, but you got hit with elections and then that MCR ban on construction. So there was some bit of pull down on the demand also. We've seen price increases. We've seen price increases happening in Jan in the northern markets, in the southern markets as well. So let's I think the price price increases are now happening.
Just just just a follow on on this. Now that the commodity or the pet coke prices are easing, there can always be an argument that, you know, we have the cost which is coming down. Is there a need to take price increases? Do you do you think that that can be a risk to pricing action? No.
No. No, Punjin, because, you know, prices and costs have never moved in tandem for the for in for cement industry in India or for any industry where there is a supply demand mismatch. When costs were going up, and that is one reason why it has become it becomes difficult for the industry to pass on the impact of cost increases. Now is the opportunity for the industry to take the benefit of cost reduction. Having said that, when the capacity utilizations are going up, and as you mentioned rightly, that excluding South, the capacity utilizations are significantly higher, there is no reason why price increases should not happen.
As I mentioned, January is we have already seen price hikes to increase.
And this low cost housing, which you mentioned in your slide of about 11 to 12%, does this pertain just to the prime minister of our program?
I thought it was important for everybody to know that it's a significant it's a good effort that the government has been doing, and it's gaining strength.
And, I mean, almost 28 to 50,000,000 ton of demand coming from this segment is is fairly high. I mean, is this just the this program, or you are including some other low costing also? Because I would have thought it would be in the range of about 15,000,000 ton odd from this program. But So
this is the PMA low low cost housing program. The affordable housing program is still not meaningful, and that's why it continues to be part of the housing demand in our analysis.
Okay. Got it. And now just moving to the the
transaction. Question that is.
Just last. Alright. On the on the transaction, you mentioned that the the cement will essentially be sold from UNCL to UTCL.
Correct.
Does that mean the EBITDA that we capture on the sales that we do on Vinani will be captured in the stand alone financials? Yes. And the fixed cost expenses pertaining to the revalued assets of the depreciation and the debt taken on the subsidiary will be captured on the Consol?
The revalued depreciation will appear on Consol only, not on a not not on stand alone UTCL or stand alone UNCL.
Thank you. Mr. Prathyani, maybe request you to join back to the question queue for any follow ups. Thank you. The next question from the line of Amit Murarka from Deutsche Bank.
Please go ahead.
Yeah. Hi. Good afternoon.
Good afternoon.
A couple of questions on the Binaani kind of arrangement first. So you said it is cost plus margin. So what is the margin kind of that will be built in over here?
We we are taking a transfer pricing opinion, and so it should be at announcement basis. Not yet from the just started off the transaction. The accounting firms are examining the norms to be laid down.
Okay. So, basically, the sales volumes will be reflected in the stand alone sales volumes or, basically, BINANI volumes will be reflected in stand alone sales volumes.
Yes.
But the margin that will be coming into the stand alone books will be lower than, let's say, for our own production. Right?
Very insignificant.
So, you know,
for all intents purposes, we should look at domestic market for a from architect's point of view, a consolidated picture. That only will make sense.
Got it. And the BINNANI will have a PPT loss, right, which which means that console tax rate will be higher. So how kind of what how how can
I expect by end of q four, f y twenty for the quarter f y twenty, we should be PVD breakeven? So this first nine months of operations could see a PVD loss.
Oh, okay. And this time around, the stand alone tax rate has come down by about 300 basis points. Any specific reason for that?
Only the we have we have reduced our projection of profitability a little bit. That is the only point.
Okay. But okay. Got it. And lastly, what is the status of Pali now and the the Binaani plant expansion?
No. No decision taken yet. I think we are stabilizing and ramping up the Nathwara
plant,
which is Binani plant in your balance.
We
will take a decision, I think, by the next Board meeting. Hopefully, we should have a decision on Bali expansion.
Okay. So by the next board meeting, we get
Board meeting. I think so. Yeah. Yeah. We should be
Actually, what is the trade non trade share this time around in Volley?
65. 64% is trade and remaining being non trade.
Okay. Great. That's all from
me. Thanks. Thank you. The next question is from the line of Rajesh Lachhani from HSBC. Please go ahead.
Yeah. Many thanks for the opportunity. Sir, I just want to ask what would be your estimate of return on capital employed on the BINNANI as well as the Century SSH one we are integrated in the next one or two years. So I assume it will take time to ramp up and bring it to the target.
So I wouldn't want to look at the next one year or two year returns and depress myself. I would look at a a third year position from now where we will be inching towards 14% to 15% mark.
Alright. And sir, other question is what would be the volume from Denali that you have recognized in the stand alone?
One lakh, sir. One lakh, sir. Okay.
That's it from my side.
Thanks. Thank you. The next question is from the line of Jatin John from CLSA. Please go ahead.
Hi, good evening. This is Vivek. Sir, two questions. First, on the non trade segment, your comment about demand profile shifting. I mean, I would imagine that the non trade portion or, let's say, infrastructure demand can grow faster.
Does that, in any way, impact the branding going ahead?
No, it doesn't because there is especially for the big players, big customers, there is very significant importance of the brand. Let's say, the metro network, which is happening in Mumbai, maximum will be Alsatec or any major project. So these are project specific, location specific, you know, preferences. So quality and strength which a particular company delivers becomes very important. And and hence brand stickiness prevails.
Okay. I see. Yeah. I Actually,
we have now been, you know, seeing improvement in pricing from the, what we call, key accounts or non trade segment also?
So non trade price differentiation is possible. It's not that every brand will be procured at the same price then?
Within non trade, yes, absolutely.
Okay. Basically, it doesn't impact the branding structurally if
you It
does not. It does not. It does not.
Okay. Second, couple of things on Binani. One is sorry. I'm not fully don't fully understand this depreciation bit. So the the balancing figure will be intangible?
Let me explain that. The existing depreciation on on the existing asset is somewhere around 75 crores. 75 crores? 75. Yeah.
Somewhere around 75 crores. Accounting standards required to revalue the assets. And the valuation since we have paid INR8000 crores, the asset value will stand at INR8000 crores. Within that INR8000 crores, whatever is attributable to land or mining rights, to that extent that the depreciation rates will change. So the overall value of the asset, let's say INR 8,000 crores only for a split second, then INR 8,000 crores needs to be depreciated.
And hence, the depreciation charge on a consolidated basis only. When I am doing my accounting in Altertec standalone books, there is no depreciation, of course, on account of UNCL. When UNCL is accounting, there's a 75 crore charge. And then the third set of books will get created, which is consult consolidated books, which will have a higher depreciation. Our gut fee
But if you are revaluing, sir, that will be intangible?
No. Not net debt. No. No. Not intangible.
Because Is it? Okay.
No. It will not be intangible because it will be linked to the valuation model that we have looked at, what we'll be able to realize from noncore assets taking that off, and then how we, you know, allocate the value. That value will be depreciated.
Okay. Okay. Okay. And two small bits, if I may, on Binani itself. First is when you said cost plus, would you include the interest charge also or it is just the operational cost?
No. No. Interest cost also. Because we have funded the acquisition 4016. That's a that's a norm if you would follow in a commodity sector for any new project, and it has to be able to get its interest cost also.
So believe it, transfer pricing will be their variable fixed cost plus interest cost? Yes. Okay. Okay. And lastly, noncore asset, could you give some Wait.
My colleague just clarified. Limestone reserve, in any case, is an intangible asset. Yeah.
Okay. Okay. Okay. Yeah. Yeah.
Sure. And noncore asset, can you give any idea about the the foreign assets? Does that include glass fiber unit also? Yes. We will get rid of
the glass fiber unit within hopefully, this FY 2020.
Thank you, Mr. Vivek. May be a request to join the question queue for any follow ups. Also ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your question to two per participant. The next question is from the line of Bumika Nayal from IDFC Securities.
Please go ahead.
Yes, sir. So I just wanted some more color on this banana plane. So what you're saying is the volumes will get reflected in stand alone. These the the but the EBITDA in the stand alone will really be very marginal because the UNC will actually have to cover the variable cost plus the interest cost of 2,700 cost.
Yeah. Yeah. Yeah.
Okay. So it will cover all its cost, and then there'll be a small margin on on which it will sell to Artatec India.
Right. So from our perspective, the actually, the EBITDA from that volumes will be actually very low on a stand alone basis. So on a consolidated basis, it will add up.
Yes. In UTCL books, the EBITDA from those volumes will be insignificant.
Understood. And, sir, if you can just explain how you will bridge the gap between 100 rupees and, you know, on a higher end, you know, take it closer to what other takes while EBITDA per target?
Within forty days, we have already gone up significantly. I don't want to still comment on the number individually. But you see, one big driver, of course, is pricing power. There used to be a gap of anywhere between INR 25 to 30 a bag between our brand and the Ersteweil brand. Manufacturing costs, where we are seeing our efforts we are putting in for reduction in costs, that will also bring a significant amount of savings.
And then there are synergies, logistics synergies. I don't know whether I'd explain to you in our one on one conversation. There are two plants which are located 600 kilometers away from each other. Well, you know, earlier they were transporting clinker from the mother unit to the grinding unit. Now we have our own unit located less than 75 kilometers from that grinding unit as compared to 600 kilometers.
So it saves on significant amount of logistics cost. Procurement synergies. They were so there are huge amount of procurement synergies that, I mean, there's a no brainer. It's buying efficiency and economies of scale. Third one is they were not using any pet coke.
We are beginning to use pet coke, which, of course, will get built into my manufacturing cost reduction. Manufacturing cost, yes, manufacturing cost reduction. So it's a multipronged attack. There is benefit because of price premium, cost reduction, which are directly linked to the plant and logistics synergies or synergies due to combining hands with a 50 plant network, you get synergy gains, and we should be able to see a significant improvement in costs.
So by when do we see the As
we were
saying, by q four f y twenty, we should become EPS accretive for this stand alone asset.
Understood. And just lastly, if I can just squeeze in in terms of, you know, some color on the international cement assets. So, you know, what are the utilization, like, profits, like, what is our outlook on that asset? And lastly, the status.
Yeah. So China was under shutdown in the in the this quarter because of peak winters. The UAE plant is operating full capacity. It is very well located in the Jabali export zone. The advantage that we are deriving is k.
Its customer base is 15 within 15 kilometers. So that is the lead distance that this plant has. It has got a huge potential. We are evaluating what we would want to do with these plants. As you know, we have a significant presence in The UAE already, and it is easy to manage that UAE plant.
China plant, lesser keen to keep it. It's not our core market, and we might give it up. Our first focus right now is to consummate the Century deal, focus on integrating those assets and synergies from there. And then in parallel, we might start thinking about what is to be done with the China asset and The UAE asset. Sorry, you had also asked about capacity utilization.
Forty day capacity utilization is meaningless to talk about. That's why I'm not commenting.
Sure, sure. And sir, lastly on the Bara asset, what is it? Yes.
Bara line is delayed because as per contract, Jetpack associates, their engineering firm was executing the contract for us. Have been challenges for them to complete it. As of now, we expect commissioning by June 20 only, not before that.
Okay, sir. Thanks, Anish. All the best. I'll come back in the queue.
Thank you. The next question is from the line of Pulkit Patni from Goldman Sachs. Please go ahead.
So thanks a lot for taking my question. My question is on demand. Since you break down the low cost housing and infrastructure, which together is contributing to a significant portion of the demand. And now as we head into election, clearly, these are two government funded and government driven drivers. What would be your outlook for demand, say, for the next six to nine months, keeping in mind that we've got election and keeping in mind that the three states which underwent election this quarter all saw demand slowdown since you mentioned about it in your opening remarks.
Pulsat, we are expecting an impact on demand, and obviously, election court kicks in maybe February or mid Feb or March, I don't depending upon the election dates. And again, it has to happen by May. So April, June quarter will be subdued, which is supposed to be the peak period I mean, a good period for demand. And not committing about nine months, but if I were to look at the FY 2020, we are still looking at our demand forecast of about 7% to 8%.
Fair point, sir. Thanks a lot.
Thanks, Puskar. Thank
you. The next question is from the line of Santamachi from Credit Suisse. Please go ahead.
Yeah. Hi. This is Anubhav here.
Hi, Anubhav.
Thanks. Sir, just one clarity on this, Bhani. I have not understood this. When you say breakeven, do you mean to say at UNCL or you mean to say, like, total assets when you take a total loan of 4,500 crore? That's what you mean the breakeven?
No. UNCL.
So 2,700 crore of debt and depreciation, 75 crore. Yes. Okay. That's clear. And then just couple of more questions.
One of maintenance expense, you mentioned 26 crore as one number, but when you look at the other than the central plant, everything as a maintenance cost, how much was this in the other expense this quarter?
Sorry?
How much is the total maintenance cost in this quarter? You just mentioned about 26 crore just for the central plant.
Roughly INR80 a tonne is the maintenance cost. Crores. Per Just speak loudly. One second, the relation is qualifying.
INR100 crores per was in last month and INR 80, let's say, last quarter and INR 80 ton in this quarter.
Yes. But Denis, what is the tonnage there? Are you talking only about the 11? Are you talking about total capacity here then?
Yes. Total capacity not INR 11 crores.
Could you ask him now?
It's he's talking about total capacity only.
Okay. Understood. But just the last question. At the spot prices of pet coke and diesel, cost in the next quarter should be lower. If you just assume that, you know, if you're buying everything at spot, how much the cost could come down by as part of diesel and pet coke?
On account of diesel, which prices have not yet come off significantly, and as I mentioned, Q3 saw, in fact, increase in diesel prices, average diesel prices. So diesel
price 6% lower. What is about 6% lower than q three average?
No. So it's if that 6% lower give me a calendar. Just one second, Anurag. Anurag, sorry. 5% into 0.7 So percent into 0.4 it would impact roughly 1.5% of costs.
And Petco, as I mentioned, costs have dropped about net of exchange impact anywhere between 10% to 12%. 10%
to 12%, right? Yes.
10% to 12% Petco costs have dropped into 0.3%. So we could have and what is the percentage impact? Just one second. In the 16%. So
about 2%.
Roughly in total cost, we could see an impact of 2% on account of pet coke and one to 1.5% on account of freight.
The
next question is from the line of Jaspreet Arora from Systematic Shares. Please go ahead.
Yes. Hi. Good evening. Thanks for the opportunity. Just continuing with the Binani acquisition, I understand you don't comment on the last quarter performance.
Can you leave us with some guidance for the next financial year in terms of both EBITDA per ton and volumes or the utilization level?
Normally, don't want to give guidance numbers, and I don't want to comment on this quarter because it was not even a quarter. It was just forty days of operation in our hands.
But as I
mentioned that we are targeting our EPS accretive performance in January, March 20.
Sure.
Alright. Capacity utilization, I can say, we will go up to about 80%.
Okay. Okay. Interesting. And on the cement prices, as it prevails, you mentioned there was some uptick, but what we hear from the channel is that except North, all other regions, it was kind of rolled back. So can you just clarify?
I did not talk about other regions. I talked about North and South only where improvements have happened.
In the month of January?
In the month of January.
Okay. And just lastly on what was the the fiscal incentive that was, you know, kind of booked in the revenue, which was part of the other income in last quarter versus INR85 crores in last quarter?
Was it just one second. Was it INR85 crores, anybody, guys?
INR 97 crores.
INR 97 crores.
Sure. Thank you so much, and all the best.
Thank you.
Thank you. The next question is from the line of Raj Gandhi from SBI Mutual Fund. Please go ahead.
Hi. Thanks for the opportunity. Just on Binaani and Century, both not for the previous quarter, but let's say, as we speak, you know, we are in the peak demand quarter. So what would be the utilizations currently, if you could?
Mention? Currently,
I mean, it's first month of the quarter.
Yep.
Really, it's upwards of 76%. That's all I can say. 76. So it's at your annual target. You mentioned 75% to reach your target utilization in that sense.
Yeah. Sorry. I missed your question, Raj.
Can you repeat? So, you know you know, I'm not asking for the previous quarter. As you mentioned, it was just forty days. But as we speak, you know, current month is a peak. One month per So, obviously,
UNCLA, so it's it's somewhere around 60% as of now.
If I
were to analyze my Jan number, it's around 60%.
Okay. Sixty and Century
Is already operating at 75% in the whole in the hands of the earlier management.
Okay. Okay. Okay. And just on the CapEx, know, while acquisition of Century, you were mentioning that few of the plants require some bit of overall CapEx. And also in light of that, what would be the overall CapEx over next two, three years as a company?
So we have an average CapEx of 1,000 crores to INR 1,200 crores on an annual basis, which includes Nagwara cement also. And when Century comes into fold, there'll be an initial CapEx of maybe INR 500 crores, which will take time because there are structural changes that have to be carried out at the right foot plant, that final growth will get committed but gets spent over a couple of years. The annual maintenance CapEx, which I would look at, will rise to maybe INR 1,300 crores or INR 1,400 crores per annum.
Okay. Okay. Okay. Sure. Thanks a lot.
All right.
You. The next question is from the line of Madhu Martha from Fidelity Investments. Please go ahead.
Hi, sir. Thanks for taking the questions. Just wanted to understand your outlook on the total housing demand ex of the PMAY scheme Because we keep reading about, you know, monsoons not doing too well in some parts of the country. Joe, just how has it been so far? And, you know, in your sort of understanding, how
do you The markets have been buoyant till now. And, you're right. Monsoons have been impacting negatively, again, back into the Karnataka, Maharashtra market. However, in the northern markets, with the rains happening right now are sounding good fortunes for the crop this season. So as of now, the rural demand has not seen a setback yet.
And the big things which had happened, the farm loan waivers, the MSPs, small MSP hike that was given is holding good for overall rural demand.
Okay. And on the urban housing side, your outlook, because all of us are aware of the high end rent situation, etcetera, but the tier two, tier three cities, how are you seeing demand there for where data is not
really available? In tier two, tier three. On the contrary, the tier ones, Mumbai, Bangalore, Gurgaon, these kind of places have started seeing significant improvement in demand for new constructions. The new constructions in the price bracket of one to 1.5 doors are seeing big positive movement. New projects are getting launched.
The luxury segment is not seeing pickup of demand. That's the surplus inventory. There's a huge surplus inventory in the luxury sec luxury segment. And anywhere where you are launching a product for 1 to 1 and a half crores, it's selling like hotcakes.
Okay. So just just just summing it up, 8% demand growth on the base that we've seen with, you know, affordable housing execution at such a high pace, roads at, like, probably the best India has seen. Affordable housing is the best
that India has seen in history that
I get available to us. You think on that base, you can still grow 8%
given Yes. The confidence level is very high because, you know, the roads, the kind of work that is happening, and we've looked at projects in pipeline, projects being announced and under execution or to be announced, there is massive amount of work in the country which is unfolding. The big challenge, yes, the big risk is general elections, what happens if there is a change of card.
Right. Right.
Okay. Thank you so much, sir. Thank you.
Thank you. The next question is from the line of Ashish Jeng from Morgan Stanley. Please go ahead.
Hi. Good evening, sir. Sir, I have just one question. The point that you made that Benani will be PVD positive by q four, so that implies if I add the 75 crores depreciation and interest cost on 2,700 crores
Yes.
Comes to roughly $808.50 kind of a bit per ton for Pinaray. So is is is that the right number?
I don't want to do a forward looking number, Ashish. You can do your math.
Okay. No.
But but is there is there a number kind of we
Yeah. Yeah. My it will be a high delivery number.
Oh, yeah. That's a problem.
We are aiming towards that side only, and it is possible in those markets. Oh, Thanks. Thank you.
Thank you. The next question is from the line of Abhinav Pandali from Reliance Mutual Fund. Please go ahead.
Yeah. Good evening, sir. Just a couple of questions. One is on both Binani and Century. On the overall EV, could you help us understand the breakup in terms of tangible, intangible and working capital takeover?
Right. It's very difficult to split that offhand. But if you are to look at EV per ton, all the acquisitions, and I'm looking at the EV per ton for the Pirani acquisition net of the realization that we expect from noncore assets and the potential expansion benefit, the EV per ton would range between 7,000 to 7,500 rupees, either for Century or for Binary
Okay. If that helps.
Okay. Okay. The other question was, sir, on so on Nadwara Cement, you explained in terms of positioning. But on Century, how would be the positioning of products? Would the existing brands and existing products continue?
Or is there a change there as well once we take off?
It will get rebranded to Altertec. And the That's the strategy as of now. And we are as I mentioned, we have started working on the integration program. As it evolves, you know, we'll figure out what to do. But, I mean, there's there's no logic of having a new separate brand.
Sure. And the structuring would be similar to what you have done in case of Belani?
No. No. So we will be acquiring because we're not acquiring Century as a company.
Correct.
The assets are being acquired from there, and it will be folded in folded up into Ultratech only. Sure. Different because we had to acquire the company.
Yes. Yes. On the synergy and savings part, explained on, you know, the procurement and the freight side. Any savings, strokes, rationalization can we expect on the employee cost and the other expenses once both these No.
No. No. No. No impact on employee costs because we need the employees. The the plant level employees are definitely required.
The marketing network as we expand the market, we because we're not going to sell in the same limited market only. As we acquire capacity, we expand our markets also. So marketing people are equally required.
Sure. Got it. Just one last bookkeeping number, sir. On the console side, if you could understand the volumes, UltraTech console entity, including the, overseas cement business as well as the usual white cement revenue volume and RMC revenues that you see?
Sure. All in, the volumes are at about 19,300,000 tonnes, an increase of 15%. White cement revenues would be somewhere around INR 500 crores. RMC would be about INR $5.21 crores.
And white cement volumes would be? Mine, three, seven. Sure. Thanks a lot, sir. Thank you.
Thank you. The next question is from the line of Naveen Sahade from Edelweiss Securities. Please go ahead. Hello? Alright, sir.
We can hear you.
Yeah. Yeah. So thanks for the opportunity. Just two questions. One, so I'm looking at your investor presentation in this quarter and just also recollecting the previous two quarters.
Keeping the view positive on demand. But on the industry outlook, are we a little more cautious now incrementally, especially mentions of surplus capacity and uncertainty around prices?
No. The reason I mentioned specifically about surplus capacity because I keep hearing comments and, you know, that there's 25,000,000 tons coming or 50,000,000 tons coming in one year or two years. Where where is that 50,000,000 tons or 25,000,000 tons? There's a 17,000,000 tons. I was expecting 16,000,000 tons for this year.
It is actually 17,000,000 tons. And that is why it was important to clarify that the new addition, when it is announced, you have to peg it in a particular period. Quite often, people miss timing of the new capacity.
Fair. Fair.
So I'm looking at 16,000,000 tons now, 16,000,000 tons two years down the road. Next year might be slightly higher. But bigger point is that the demand growth is in excess of 25,000,000 tons every year, which will absorb the new capacity which is coming in and keep on inching up the capacity utilization. Capacity utilization, I mean, mind you, is not behaving in arithmetic progression when the demand surge happens. We are today looking at excluding South, we're looking at 75% capacity utilization or even more than 75%.
In my arithmetic progression, 75% would have been achieved much later on. So demand surge is all, you know, defining how the capacity utilization is gonna behave.
And and no.
Because I was just looking at it from an incremental, like, you know, conviction from the management Because past few quarters on con calls, the commentary was far too positive. Now it sounds a little too, like, you know, cautious, especially from prices given your term elections. So I was just trying to say that pricing perspective, we are getting into a zone of muted price hike kind of an expectation. Is that fair to expect?
Difficult for me to say. I think January price hikes have happened in some parts of the country. And it's a matter of it's like a plague. A region sees price hikes happening in one area, the other regions might follow suit. So we it's a game of wait and watch.
Okay. My second question is on the cost. So in in that, you said this quarter particularly had this maintenance cost related to bailout facilities of around 26 crore. Yes. I'm looking at the total other expenses which come in about, like, you know, about 1,200 plus crore in the quarter with a maintenance cost that you said is about 80 rupees per ton.
I'm comparing it with the previous quarter, which is about thousand 58 or even lower $9.80 in q one. So I'm saying this this component of other expenses seems to be sharply moving up. So what else is impacting this cost besides this maintenance?
No. It's only maintenance cost, which other maintenance costs, as I would have mentioned, there are 11 kilns, which were under shutdown. So beside that, there would be maintenance on account of those plants. Packing cost has gone up a bit, that's because of absolute volumes. And one more thing, which is I'm forgetting to add is like for like, Dhar plant was nonexistent last year.
Now we've had the Dhar plant fully operational into the stream, which will increase the absolute quantum of expenditure.
I'm referring to let's say, q one, we did about 17 plus total volumes. And in q three, also, we have done 17 plus 17 and a half, little higher kind of volumes. This cost from $9.80 crore in q one is shooting up to almost 1,211. So I'm just trying to understand. Besides, there seems to be more cost than the besides maintaining cost, the trough cut number which you mentioned of 80 or
Naveen, as we mentioned, that maintenance cost in this quarter is about 80 rupees a ton, which is not there in Q1 at all. So if you take with the volume of 18,000,000 ton, $8.80 rupees a ton, it is about $1.45 crores. And as we discussed earlier also, the other cost includes some variable component also. Like, we mentioned that taking, so it's more in tender with the volume.
And so okay. Fine. And last one is just on this purchase of finished goods, which is also sequentially up about 100 crore. So even if Vinani volumes of a lakh ton come into this, it will cost not more than, I think, $35.40 crore. So what explains the further increase there?
Okay. So this is linked to the additional volume because, sequentially, our volume is up. So this has also increased.
Purchase of traded goods. Yes. Yes.
Yes. Okay.
Thank you.
Thanks. Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Yeah. Hi, sir.
Thanks for the opportunity. Sir, my first question, it's it's more philosophical. Sir, how do you see Ultratec in the current environment? Like, is it something market share is more dear to us, or is it profitability? Because in the prior questions, you emphasized a lot on utilization levels, be it Century, Binani at 80%, say, in, FY '20.
So how should one look at this?
So one is we can't be operating, as I had mentioned in my commentary also, we do consolidation, but not for operating at suboptimal capacity. There's no point in operating Binaani plant at 40% only. It was because of working capital tranche that
the Ursula owners were not able to
operate or JP assets, which are operating at 18%. So an optimal capacity utilization has to be achieved to absorb your fixed overheads and deliver profitability. Century assets, that's why it was important to specify that it is already operating It's almost optimal. There's nothing much to do on fixed cost absorption.
It is more to what we'll have to do work in Century Assets is improve costs and take up our pricing. Pricing, wherever we have gone into, whether it was JP or the Benani acquisition or Century, we will peg the output from these plants at the prices at which Ultratech sells. There is no way, no chance that it will get discounted.
Okay. Sir, let me put this other way around. When we look at the regional profitability at Ultratech, is it like one region would subsidize the other when we acquire a new asset? So I don't know at what level is that operating right now. Benani utilization levels will increase.
Or let me put it the other way around. If you had the optionality to utilize Benani at 90% utilization at four fifty kilometers of lead distance, would you prefer that, or would you operate it at 70% utilization levels with 250 kilometers of lead distance?
Firstly, you know, the lead distance is the sorry, logistics is the biggest cost and four fifty kilometers is something that we wouldn't want to do. As I mentioned in my address also that we have been reducing our lead distance. So we would look at operating closer to the plant and selling the output closer to the plant, not sending out further.
Okay. That helps. Sir, second question is trade versus nontrade profitability.
How has it changed, let's say, a year back, and
how does it stack up right now, specifically non trade prices have been pretty depressed?
Non trade prices have been improving, in fact, at least in the markets that we have seen. And the, you know, the margin difference, if I were to look at, would continue to be somewhere around $30.40 $30.40 rupees a ton.
Okay. That's that's not much. Sir, last two questions. One is any update on the Dalak Crenker unit? It has been like quite some time you haven't commissioned.
No.
So no. They were the entity process, which is on just to explain, the land, which has to be handed over to the forest department has been identified. We keep testing the plant, you know, firing it up and testing all the growers and stuff. So my expectation is in the next two or three months, that clinker plant should be available. And March, maybe a a quarter or six months of tidying it up and sprucing it up to start operations.
Thank you. Ladies and gentlemen, due to positive time, we will take our last question from the line of Swagatu Ghosh from Franklin Templeton. Please go ahead.
Thank you. Sir, quickly, clarification, the cost saving numbers that you gave, I just want to confirm, 1.5% due to diesel and 2% due to pet coke, those are 2% of total cost and 1.5% of total cost. Total cost. Yes.
Okay. Okay. And, sir, axle load norms, whatever had to come in
has already come in. There is nothing incremental there?
No. There are still negotiations going on, and I would expect January, March to you know, internally, we have seen month on month improvements, and we would see January, March showing maximum benefit.
Okay. Okay. Okay. Okay. Thank you, sir.
Thank you.
Thank you. Ladies and gentlemen, that
was the last
question. On behalf of UltraTrek Summit Limited, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.
Thank you.