Ladies and gentlemen, good day, and welcome to Ultratec Cement Limited Q2 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 risk that the company faces. The company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent development, information or events or otherwise. As a reminder, all participant lines will be in a 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 Daga, Executive Director and CFO of the company. Thank you, and over to you, Mr. Daga.
Thank you so much. Very good evening to all of you, and a warm welcome to this conversation on Alphatex results for the quarter ended September 18. Before you jump to conclusions and give clearance to what others talk about, let me tell you about Cement prices. Prices have seen improvement in the regions where there is demand still. However, the improvement in the margins is not visible since the costs have also been rising.
We have seen improvement in prices in Southern states, in Gujarat, Central India, East has been marginal, and North India has also shown some increase. We are focusing on reducing the current gap between retail and institutional team that is becoming a prime focus area. At Algertech specifically, we saw improvement of about 3% in North, South and Central markets, a small drop in West and a small increase in the Eastern markets. Let me now jump to the section on costs. The concern still remains on the rising cost, as you're already aware of crude and dollar.
Almost 30% of costs in cement industry are linked to dollar, and this will result in some kind of cost pressure in future as well. On twenty third August twenty eighteen, China had imposed additional 25% antidumping duty on U. S. Pepco. This is clearly helping Saudi Arabian Pepco to shift its customer base.
However, there will be a favorable impact on Pepco prices. Reduction in Pepco prices will help reduce the impact of rising crude and dollar. We have seen some softening in prices from peak of around 122 to around 108 as of now. But the benefit of this reduction will flow into the October, December quarter only. During this quarter, we have taken shutdowns for annual maintenance in 17 of the 32 kilns that we operate, resulting in higher operating costs to the extent of INR100 per tonne.
We expect the manufacturing cost to go up by INR 1 or 2 per bag on the current exchange rate and fuel prices. Talking about costs, one of the recent favorable developments in the country is on account of changing the rules around axle loads. State governments have implemented the changes in the axle load allowance at different points in time since the since the announcement by the center. Benefits are currently flowing in our logistics cost. States like Tamil Nadu, Karnataka have not yet notified the revised launch.
We are expecting full benefits of the revised active load to reflect in Q4 this fiscal year. Let me now talk about demand. Demand has been growing steadily and as we have mentioned in the past that this year and the following few years, we'll see a strong upside for our industry. Last four quarters, Cement has been talking a growth about GDP. Demand from rural segment is consistently picking up and likely to strengthen further with the recent six to 33% MSP increase for Africa.
Monsoon has been erratic for the country this season, which could have some impact on regional regional spends. It will vary from region to region. With our continued efforts to increase regional presence during this quarter, our sales volume in Google area grew about 15%. Infrastructure development program initiated by the government continues to boost demand. Work on airports like Mumbai, Jawad, that is Delhi, Bangalore, Bangalore application, Goa, Chandigarh application, Bikan Air Military Airport will pick up in the next twelve months.
Surat, Kunvator, Guwahati, Kansur, Bhopal are the next cities going in for metro development. First on some ports like Bhopal Fort, Jakabad, Kala, JNPT, Virginia Dam in Kerala will continue to keep the demand going strong. Structurally, in the long run, we foresee the customer profile will shift towards institutional customers and OPC. This will remove the vagaries in demand, helping the industry with steady performance. We have launched new products during this quarter.
Corporate Survival was launched in the month of September in Asian markets, and another special grade cement has been launched recently in Andhra and in the Western markets. These products are picking up momentum in the market and we hope will generate higher returns. We will continue to focus on value added products and you will see a plurry of plurry of launches of new products as we go forward. On our retail segment, in UBS, we have added another 120 stores during the second quarter, taking the total stores to around seventeen sixty. Number of stores has increased 25% in the last two years.
UBS is a fantastic platform, helping us increase our reach in micro markets with about 46% of previous sales coming from the rural areas. On our sustainability initiative, we are reducing our fossil fuel based power consumption. During this year, we have invested and commissioned two WSRS projects of 30 megawatt capacity each in the face of Madhya Pradesh and Chattingarh, taking our total capacity of WSRS to 85 megawatts. This will definitely support the reduction in usage of high power high cost power and will ease the energy cost for these plants. We are also implementing solar and wind power plants at various locations.
Till date, we have commissioned 55 megawatts of solar wind power. And together with our WATRS plants, renewable energy is contributing nearly 8% of our overall power requirement. We at Altotec are very serious on energy conservation and target to increase the share of renewable energy to about 20% of our power requirement of current capacity by the end of fiscal twenty twenty two. With continued efforts on increasing the usage of alternate fuel, we have made investments in feeding systems in almost all our plants to use alternate fuel. Environment environment friendly solutions now contribute 3% of total fuel consumption and fuel.
Our efforts are to increase alternate fuel to around 10% by FY 'twenty two. In our commitment for increasing energy productivity, Altuchek has signed up for EC100 and has voluntarily committed to double the energy productivity in twenty five years. In the EC100 membership reaffirms the commitment by the company to have a low carbon business growth. In the earlier quarters, we have discussed about the operations and improvements or the acquisition that we have done in 2017. The assets are now operating smoothly in line with our existing assets.
Cost gap in comparison to Altotec existing assets have reduced to $135 per tonne versus $160 per tonne in Q1. This cost gap includes impact of structural cost differences and regional disparities. Now the next phase of improvement involves investment in WHR at two of the five integrated plants, which we will undertake during the course of next fiscal year. This will be an investment of approximately INR200 crores to INR300 crores. Construction work at Bara grinding unit with four MPPA capacity is slightly delayed and expected to commission by June 2020.
Clinkerization plant at Dalla is expected to be available for operation in time for the Bada grinding unit. A bit about a short read about Girani cement asset. As you were all mostly aware, the hearings were completed, and the order is now reserved. The is is on vacation. I believe the courts will resume functioning from next week.
And in the next ten or fifteen days, the order should be pronounced. The other transaction that we are doing is about Century fixed asset and assets. The shareholders and creditors meeting for voting on the transaction is scheduled on October 24. Let me take this opportunity to brief you on the transaction since there were some concerns that we have heard about. Firstly, on value sheet.
Fengi Cement plants have a clinker capacity of 9.17 MTPA, effectively giving a cement capacity of 12.1 Mtpa. EV of INR 8,620 crores, INR 6,021 crores, effectively worth up to INR 7,124 per ton. In comparison, in 2017, when we acquired 21,200,000 tonnes of capacity for INR 16,189 crores, it had a surplus clinker capacity of 1,600,000 tonnes. Effective PV for that transaction was to around $7,211 per tonne. There are additional investments acquired in Century East Cement assets.
One of the plants acquired additional investment in land for securing mine rights. We are also taking over contingent liabilities attached to these assets, unlike the other transactions that we have done so far. Given the size of the balance sheet, there is hardly any player which could have offered an equity of INR 5,000 crores. It would be a valuation for them in the range of 15% to 30%, 35%. Giving the equity of INR 5,600 crores offers an opportunity to the shareholders of Century to stay invested in pure placement and have the advantage of higher value appreciation with Ultratech as compared to their investment in a multi business Century XL.
This is a large transaction, and Altuchat has a track record of completing the transaction and turning the assets around. This transaction, as I understand from Centuri's point of view, helps them deleverage and focus on their future plans. Essentially, we have sold these assets to any other entity, it will result into a value loss for the shareholders due to a high capital gains tax and dividend distribution tax. Hence, we believe that we offer dramas if it is beneficial to the shareholder centric clients.
Leverage is
something of concern for us, and we are very focused on reducing our leverage as fast as possible. You might recall that as of March 2017, we have net cash on the balance sheet, after which we took on a debt for acquisition of 21,200,000 tonnes of cement capacity. Peak debt EBITDA had gone up to 2.3x. We are down to 2x as of September 18. Our leverage is set to go up further with the INR 3,000 crores that's been taken over for Sensi Cement business acquisition and if you win the Vinari Cement asset, a further debt of INR 7,700 crores.
I don't see the relevance of the leverage position at the March since the balance sheet will have accounted for these two acquisitions without accrual of any of their earnings. The leverage will start coming down from Q1 FY twenty twenty with cash generation from increased capacity and no major capital outlay in the offering. Before I end my commentary, I would want to clarify on a small change in accounting from this quarter. As per the amendment in the accounting standards for revenue recognition, fiscal incentives are now to be treated as other incomes instead of other operating incomes. And sales promotion expenses are adjusted for certain sales promotion expenses are to be adjusted from sales instead of being part of expenses.
The accounting standard change is effective on first April twenty eighteen, and we have reported the prior period numbers accordingly. With that, I end this my commentary on the results and open for questions. Thank you so much.
Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. 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 will wait for a moment while the question queue assembles.
The first question is from the line of Kumikanaya from IDFC. Please go ahead.
Yeah. Good evening, sir. So just on, you know, two aspects on the cost structure that you spoke about. If I just wanted to clarify, it is for the manufacturing cost, which has gone up by one to two rupees per bag from current to 11. To this, like, we hired rupee depreciation at Coke prices, diesel, etcetera.
Is that is that what I understood? Correct?
No. No. What I was saying, Bumika, was that there could be a possible further increase in cost because everybody's aware the depreciation hit in the month of September only. Okay. This will be depreciation within the month of September, and who had shot up $2.85, $86, cool off a bit, but there is always a chance of it going up.
The anyway, the higher levels of crew will impact the cost in this quarter.
Okay. Okay. So in in terms of, you know, what would have been the average Pecco price that we've seen in 2Q? And, you know, what would be the current level? So if you can just give some
$114 is the average consumption dry consumption cost in q two, and costs are down to less than $108. As we speak, I I feel I get to cost it down to a $102,103 dollars also.
Okay. Okay. And, you know, in terms of freight, you know, you mentioned that there has been a lot of benefits which has come through on the lower axle, on the higher axle norm. And the entire benefit will be able to we will be able to see in q four. So broadly, you know, overall in the second half or in the through the year, what has been the benefit on the actual
You know, the road freight comes down by about seven, seven and a half percent. Road freight, today, we are our road will reach at thirty five, thirty five.
Yes. So will this be able to partially offset or, you know, the diesel prices, which is why we've not seen a q o q increase with the
Yes. Yes. Absolutely.
Okay. Okay. Okay. And so just lastly, if you can just comment on, you know, how is the pricing trend in October versus average of q two?
October, I think the prices have been steady. There's no dramatic movement from the changes that we saw this quarter. Right? I think the October or the July, September pricing was pretty good from the perspective of it being monsoon period, and we are effectively being able to see an improvement in realizations. Otherwise, historically, if you track the performance, prices generally drop significantly in module period.
Okay. Okay. I'll I'll come back in
the queue and wish you all. Thanks, Monika. Thank
you. The next question is from the line of Raj Gandhi from State Bank of India. Please go ahead. Hi. Thanks for the taking the question.
Just here, you know, you clarified in the call. So you're saying despite of this XL or XL XL load norms, which I think the benefit should be there for the next full quarter, still the cost will overall cost will inch marginally up.
So actually, freight cost is not not part of part of manufacturing cost. Okay. Okay. So the cost is separate.
Okay. Okay. Sure. Got it. Got it.
And just on expansion, if you could, you mentioned the grinding unit will come in July 2 June 2020.
Sorry. June 19.
Okay. It
says q one FY twenty. June 19.
Okay. Okay. Great. And any and any update on the other plans? Pali?
So Pali, actually, are waiting we haven't started work as yet. We are waiting for the decision on Birani asset, and then we will take a call.
Okay. Sure. Thanks a lot. Thanks, Raj. Thank you.
The next question is from the line of Rashi Chopra from Citigroup. Please go ahead.
Thank you. So just to clarify on the cost again.
Yeah. So
manufacturing costs should go up and then, you know, we've seen a softening in the Petco prices. And I assume that this, you know, the shutdown costs will go away in the next quarter. So effectively, we should have likely seen the peak of the costs now.
Yes. July July, September will be the highest cost possible.
So and then you're saying that the prices at the moment are stable or in line with what we saw in this last quarter for this?
Yes.
Right? But is there an the EBITDA per ton has come
So next next, a EBITDA per ton profile improvement will take place. If that's what you are
No. I was actually coming to the fact that at what like, when do we start, like, with demand being strong and we've seen double digit growth in the last few quarters, like, when do we see an improvement enough in pricing to actually have more than cover the cost inflation?
The trillion dollar question, I would say, very well, you know, within micro market and we have seen opportunities wherever the demand has been going robust, we have taken price improvement. Then I gave you example of our north, central, and south. So all three put together. Right? Yes.
All three put together, we have seen about 3% improvement average. There are pockets within that, which have seen a higher amount of improvement, more than 5% improvement in prices. So we are seeing now it's a demand based price improvement are becoming visible, rapidly. And my sense, post Diwali, I think, know, post what happens post monsoon is Shinar and Rasira and the holidays these times when labor is not available, construction work slows down, volume pickup is slower. Trade especially is lower because nobody wants to initiate, you know, the individual home builder segment does not initiate any construction work.
Right? Difficult to raise prices. It's only post the value of in the month of November, we start seeing improvement in pricing trends. How much is anybody's guess?
So even in the western markets, which were weak, also the western markets that were weak in the last quarter, that hasn't seen any improvement as of now?
No. No. So Western markets continue to be strong, and there's a marginal drop from their highs.
And just one last question. What was what was regional utilization level for you, and what was GPA's utilization?
Regional utilization is not around 75, 77%. Central around 60%. 55 to 60%. East around 80 to 85%, West around 65 to 65 to 70%, south 65 to 70%. And the acquired so this acquired assets or GP assets were trending more or less the same because central assets is essentially the acquired assets and not as hovering around 75 to 80%.
Got it. Okay. Thank you.
Thanks, Ashi. Thank you. The next question is from the line of Madhur Madhur from Fidelity Investments. Please go ahead.
Sir, sir, you've mentioned that the clinker utilization levels for the industry are higher than the cement utilization. Correct. Could you just help us out with how much is the differential? Because this is one place where the data is not very clear for the industry. If you could give it reason wise or overall, just to give a broad color.
Yeah. So I don't have it a reason wise model. Perhaps I could collate that and share with you offline. Sure. But overall, as in as a at at the overall country level, how much would it be higher compared to cement?
Like you mentioned, it's about 70%, but how much would the clinker be? 8% higher than cement. 78%. Okay. Right.
Right. Okay. So that's the only question. Thank you so much. Thanks, madam.
Thank you. The next question is from the line of Swadhatra Ghosh from Franklin Templeton. Please go ahead. Yeah. Hi, sir.
Good afternoon. Hi. Yeah. So I had a a maybe a subjective question. So on prices, you said that, obviously, most in quarter was good, and, October thus far has been stable.
But I want to understand what's happening on the ground. Is it the case that companies are actually trying to take price hikes? It's not going through, hence, stable, or are companies, like, playing the wait and watch game? Because you said that now there are few festivals which are, like, on and off in various regions. So it's like companies are actually not attending price hikes, like, price hikes.
I'm not talking about $2.03 rupees. So I think industry needs a major price hike. So are we actually waiting out this period and waiting for the real strong demand period? And then we will see companies like yourself and the others actually take that concerted effect to take the price hike?
To some extent, yes. And I also agree with your first comment that companies will take take the opportunity. Wherever there is a slight shortage, people take opportunity opportunities to increase prices. And it's a it's like it's a euro. Today, the prices are higher, tomorrow also, if there's one one more rate which comes in the market, prices have to be corrected.
Right. So I I think it's if the market is evolving now and it is becoming far more demand driven pricing as compared to supply driven pricing.
Mhmm. Okay. Okay. And and on the other side of the equation, like you mentioned, the trade and the non trade gap, there's a focus from your side to reduce that gap. But on the industry overall yeah.
On the industry overall, is there a similar effect from everyone else? Because I think q one, there was a sharp decline in the non trade prices, which was the overall realization. So can you give us the overall picture of what's happening in
the industry? So for the industry, other guys, you'll have to talk to them. We have consciously taken private eye to our institutional clients also. Okay. Because the demand is coming from that segment.
And that segment is demanding OTG, which is a costlier product. Actually and a a customer who wants consistency of quality and consistency, continuity of supply will definitely be willing to pay a premium. So there were, you know, large clients, small clients, we have taken, price improvements in our institutional, segment.
Right. So so you have taken that increase in q two?
Yes.
Yeah. Okay. Okay. Got it. Got it, sir.
Okay. I'll come back to
the queue from now. Sure. Thank you. Thank
you. Next question is from the line of Naveen Sahade from Edelweiss. Please go ahead. Hello?
Hi. Hi. How are you?
Yeah. Good evening, sir. So just a couple of questions. Sir, you mentioned some regions are operating at the peak Tinker utilizations. Yes.
So so just wanted to understand which according to you are these reasons and Not why? Okay. So so if if then even then, why are we still seeing, like, in past couple of quarters, very, very muted price hikes? I mean, I'm not saying that their prices are not improving at all. Your presentation per se, there is a muted hike.
But if they are running at peak clinker utilization, is it fair to say that peak utilization for clinker per se does not really matter because there is always a blending ratio which can always be improved or what is a mix?
So, East market, of course, the blending ratio are the highest because that's where the slag market is.
And Then the utilizations for Tinker are are you saying at the peak. Right? Yes. Yes. Absolutely.
So so my question basically is if at least, let's forget
other reasons, but what happens is that the attraction that the eastern markets are presenting today, there is a lot of material which is coming in from south Asian markets. And East markets are such that they are absorbing the flow which is happening. I think East markets have been consistently growing at close to 20%. Today, Eastern markets for your reference, I believe the capacity of the industry is about 89,000,000 tons, and it is set to cross 300,000,000 ton in the Eastern market in the next two years. And that also will remain supply deficit, I would say.
Sure.
So there there are opportunities which exist with good good amount of profitability that people would want to see, you know, take take advantage of and move material towards selling. So from Andhra moving up to Orissa, it's hardly any issues.
Sir, no. I was also asking that since demand is good, utilizations for are at peak and, slag, I believe, would have almost doubled in the past one year or so. Yeah. Despite that, why why prices, are still muted? As in you saying, it's only because of competition from South?
No. It's it's competition. As I said, the material is completely flowing in. So if if it were to look at stand alone, it would have been a totally different picture if there was no inflow from South or Central for that matter.
So so what about North? In that case, why North then? What is disturbing the price hikes in North?
As of now, you know, we have we have taken small price improvements wherever possible in hypermarket, as I mentioned. And as of now, market, I I believe, post Diwali. In the month of November, you should see further improvements.
Okay. Okay. So usually, I think that's the most important figure to be watched
as well. I guess so. I guess so.
Okay. My second question was that, as you said, Barra grinding unit and the Concept Clinker are now by June 2019. Yeah. So I think there has been a a delay here. Correct.
And since we acquired I mean, if I remember correctly, since the time we acquired these units over a year, there has been, I think, couple of now, at least two to three. So is there any specific issue for the delay? Or is it more to be able to, like, you know, push that much volume in the market? How are we how should one look at it?
It's contractual delay. You know, the JP as part of our overall deal, the JP infra, that is the company that is executing the project. And there are you know, they have their hands tied and because of it, there are some delays. That's all.
Sorry. I didn't get you. You're saying delays because of their contractual obligation to be at five g
You know, the process has taken some time. Maybe because there was I remember there was a labor site in between which which brought work to a halt or then mobilization label label takes time or replacement might have gone delayed. That's all. These are routine project related delays. Nothing else.
Not. We are waiting for the time.
Because I I our view was also similar because it required an additional investment of just around 500 odd crores, and the benefits were far higher to be reached.
$404.70 crores is a total investment. Benefits are much larger. Yeah. So we are meeting we are in continuous follow-up with the J and P infra team for execution of the project at the fastest pace.
Okay. And just one last question, if I may fit in. What are the current I mean, for the quarter, what were the revenues from RMC and white cement business? RMC is about $4.80 crores, and white cement is about $4.50 crores. $4.50 crores.
Okay. Thank you. Thank you very much, sir.
Thank you.
Thank you. The next question is from the line of Abhijit K from BNP Paribas. Please go ahead. Yeah. I
have the opportunity. Sir, given that, you know, we are facing in terms of clinical utilization levels in North upwards of 80% and eventually will be maxed out. Is there a time line to Pali in the worst case if some of this litigation in Denali get extended for I think beyond the point, we did not wait for Denali and looking at the lucrative opportunity that the market are offering. I can't see. I think it will be taken to press the federal on the party execution.
So if this because everything is in place, land is in place, approval is in place, orders already committed. You know, we have issued LOI to our suppliers. So everything is fixed. It's it's about to get the engineering contractor on the ground. Even if we take a decision in January, March, that is Jan March 19, March 20, and September 20, we could see anyone?
Eighteen to twenty one months max. So September 20 or December 20. That is where we could see the commissioning, but the decision to the starting point will be lower in the remarks period. And is there a possibility of how much faster because, you
know, of of our record timing of commissioning within twelve months? Can Pali do the
same or that's We not can. But, you know, I am I am keeping a standard project timeline of, you know, let's say, fifteen, sorry, eighteen months.
Okay. Okay.
Now that the team has delivered, twelve months execution, the board expectation will be to deliver it in twelve months. Exactly. Exactly. Thank you so much, and all the best.
Thank you. Thank you. The next question is from the line of Jipen John from CRSA. Please go ahead.
Hi, Atul. This is Vivek. Hi, Jipen. Hi, sir. My first question is on the basic recovery bit.
So let's say you have mentioned your presentation that's what, you know, you wanna focus on. So current capacity, 85 megawatts, where does it reach? You know, have you done a math in terms of, you know, where can it reach, you know, once you Next next hold is one twenty one one twenty one megawatts. Okay. And the time line would be?
Just one second. Nineteen twenty. That is f I twenty.
F I twenty. Okay. Got it.
Yeah. F I twenty. Yeah. Okay. Sure.
Second, you know, your commentary for the last few quarters has been consistently very positive on demand, and indeed, the outcome has been similar. You have mentioned in your, you know, presentation industry
take that offline, but I'm seeing industry
weakness. To witness new capacity addition at 15,000,000 to 17,000,000 ton. Is there a risk to that number if demand growth is so strong? No. It's not possible.
Because one more fine point which was mentioned in that slide is this is coming on the basis of Old Limestone, existing Limestone Mine. And as time passes, New Limestone Mine will have to be used, which will be far more costlier. People who have bid 300 to 400 rupees a ton on limestone, that limestone mine land, I know it is costing now that we have one mine for which we are buying land. Century Tech guys, and they have informed us the mines that they have another auction in buying land. Land is becoming expensive.
People are asking for a much higher price than than which could have been bought earlier. And also the operating cost will become more challenging because the royalties on the, mined and adoption will come into play. I don't, hence, see the capacity enhancement going beyond fifteen, twenty million tons per year for the next two, three years. Okay. Okay.
Two more questions. One on Binami. What where exactly are we in terms of, you know are there any set of timeline by which the resolution will happen? The hearings are done. The judge went on fifteen.
And is also on vacation, and I think started something from Monday, if I'm right. And once resumes the office, we will wait for the order to be passed. I'm sure that you would have to get it. I have no idea, actually. So we are just waiting for the order to be passed.
It could get passed in the next week or fifteen days. And there's an option for the for the party using to go to supreme court, which means can it get delayed, you know, for a few more month by a few more months? Oh, no. I don't think so. The ruling party, I'm sure, will go to the supreme court, but that does not because it is not so the market subsidies, I I can explain it to you offline because I'm not.
Okay. Okay. Last question. I know this has been asked so many times
on the call, but on the pricing,
because, again, costs are moving up, demand is so strong. Long For time, industry has been waiting for demand pickup. But is there a structural change in the industry structure or anything which is making it making prices go up so difficult? Anything that worries you or we should be aware of? No.
I am happy on the contrary that the demand is becoming institutional because that that helps consistently in, volumes. Alright? So that is one plus point. Second second thing is that the the the demand pickup is taking place. I think we had to wait wait and watch the monsoons go by, which I have mentioned in the past also.
And there's no reason why we will not see stronger price movements November onwards. I maintain that today as well. Okay. Alright. On this quality note, wish
you all the best, sir.
Thank you, sir.
Thank you. The next question is from the line of Indeljeet Agarwal from Goldman Sachs. Please go ahead. Good afternoon, sir. Thank you for the
Hi, Indeljeet. Hello, sir. Sir, I
have two questions. First, on demand. Now if I look at slide five of your presentation, what you see is a strong base starts to catch up from the third quarter of this year. Then we head into general elections, and then we are hearing all sorts of liquidity concerns. Do you see downside risk to demand growth numbers from these levels?
The liquidity concerns that we are hearing in the markets, now that you mentioned, yes, it could have some impact. Because today, as we hear housing there is some concern on liquidity in the housing finance companies. If that happens, I see market comes to a slowdown. However, this leg of demand growth, this cycle of some upside less demand is being driven by infrastructure. And infrastructure will lead to housing growth.
I think the this time will also pass for the financial market, and I'm sure Indian economy is far more robust than other any other economy, and it will be out of business.
Sure. That answers. And so secondly, again, you know, on pricing, if I, like, break the market into institutional and non institutional and and the trade, so is it like the reported pricing looks weak because the mix is changing more towards institutional, the prices is a little bit lower or the underlying pricing is actually weak in both the market?
No. So if I look at my paid ratio, it's not gone down dramatically in this quarter over the previous quarter. Reduction is all on account of monsoon period. Yes, institutional prices are lower than the trade prices. However, as I have mentioned in the past also and today as well that we have been taking improvement in prices in institute for institutional play as well.
Sure. And last, actually a follow-up to the second question only. How do you see the competitive intensity varying in these two markets? Is it similar or is it institutional far more competitive than the trade or the other way around?
Again, market to market depending upon the number of players able to meet the requirements of a particular project. To give you a simplest simplistic example, the bullet train project. Today, there are seven segments of bullet train which are under execution now. It'd be and with that period already begun. So there are plans of Algertech and there are there's competition plan.
There are two companies which are most suitably placed to capture the benefit of that project. So it ultimately creates which boils down to the profitability and the competitive advantage, which each player would bring to the table.
Yes. Alright, sir. Then I'll answer now, Krishna. Thanks so much. Thank you.
Thank you. The next question is from the line of Gunjan Prathyani from JPMorgan. Please go ahead.
Yeah. Hi, sir. Thanks for taking my questions. I basically have a follow-up on this trade and non trade. How has your trade and non trade mix changed over the last maybe last twelve, eighteen months?
And the another point on it is, do you think this market is lesser brand conscious and to that extent you see far more competitiveness? No.
No. No. No. No. No.
Large projects are very brand conscious because they they require very consistent quality and specific quality. So we have seen our trade mix at 66% in this quarter over 68% last quarter, which I think is insignificant because the ISB segment is generally very slow in terms of the launch period.
Sir, how would this compare with last year's same quarter? Or maybe last year, if you can give us some sense, how how is the
impact Last year last year trade segment was about 71%. Okay. I think we are inching back towards that by March. So March 19 or q four, this financial year, we should be about 70.
But if I just step back few years back, this number used to be for industry and for everyone more upwards of 75 or maybe for you guys, it was closer to 80 75, 80% range. So this has structurally changed now. Right? Yeah. Because given
infrastructure demand is institutional, that is coming in a big way. Yes. As compared to the earlier time where we were maybe at 75% plus minus 75% on trade, it was largely ISB of the retail market which was driving demand. Today, rural is demanding demand. Rural is driving growth and infrastructure is driving growth.
Okay. And with the number of 10 to 11% growth that you mentioned or double digit growth for the last few quarters. Do you look at how what has been the growth of the trade segment and growth of the non trade segment? Is is there a number, ballpark number that you can share or give us a sense of?
I don't have it immediately, but, yes, the monitor segment is growing at a faster pace than state segment.
But any I mean, the state growing with rural and Right now, it's
growing because the volume, you know, 20% growth cannot all be delivered by a small base of infrastructure. Yeah. So in fact, if if you will look at my commentary and presentation, we have grown 15% in our own Google markets.
Okay. Okay. And I just noticed that your net debt on a sequential basis is going up. Has it gotten anything to do with the working capital related
Working capital advantage, essentially. So, you know, you pile up clinker pile up clinker pile up during months and periods.
No. Nothing to do with the mix because it is more noncreating. No. No.
No. Nothing. Because the cement shop cannot be more than three to four days in any case. It's always at the same level, the finished cement stock.
Okay. And on the cost side, the onetime link, the annual shutdown, there were also one. There was a large shutdown for the JPA assets, which, of course, you had not taken after the acquisition happened. Would you be possible to quantify what is the one time higher I don't
have option. Let me dig it out and give it to you offline.
Okay. Just last follow-up on this cost difference. Now you mentioned $1.35 rupees cost difference between the the new the acquired assets and your old assets, and you're looking at some investments going into next year. So where do you think the cost difference cost savings additional cost savings comes from
certain There or plans which have, I think, there are structural differences and regional disparities. Regional disparities would be because of the quality of limestone that exists in some key market versus North market. Legal disparity because of operating in a hilly area in the market where cost of moving material becomes higher. So these kind of differences will remain. One thirty five, the differential which is there could have to come down to about 100 rupees, out of which 64, 70 rupees in royalty, 70 rupees in royalty and 30 rupees will be towards you know, think 30 rupees will be towards freight related and other local, you know, regional costs.
Okay. And we're sticking to the cash breakeven now. Yes. If I want Absolutely.
All signs are falling in that direction. And if you look at one of the slides in our presentation where we've seen large improvements, which have been done in the acquired plant. Slide 10, heat consumption is has already been achieved to a level lower than our existing capacity. That's good usage has gone higher, and blended production is also higher than in our existing capacity. Power consumption is something that is still not there.
I think both the shutdown when does Dila shutdown come to me? Oh, so it's post in January, March, I think we will see power consumption also be in line or better.
Okay. I think the issue is more from the pricing perspective. Right now, the cost efficiencies are fully exploited for you to read the cash breakeven. You need additional pricing delta to kick in for for to meet that cash breakeven. Right?
Correct. Because now the gap in cost no longer exists. It leaves us just two weeks ago. Yeah.
Even we already did cash due to in January, March. Now we are looking at PVD breakeven. I'm covering my depreciation.
Sorry. PVD. Sorry. As I meant, PVD breakeven.
Yeah. Yeah. So we are looking at doing a PVD breakeven in May through June. There'll be a small rule by cost improvement and bigger rule by pricing.
Okay. Got it. Thank you so much. Thank
you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the queue, You are requested to limit your question to two per participant. If time permits, you may join the question queue for any follow-up. Thank you. We have the next question from the line of Jailaman Radhakrishnan from IIFL.
Please go ahead.
Sir, just one question from my side. In the slide number 21, the presentation you have given seven years net of taxes for current year and last year. So is it possible for you to give for one for one q also? What is this number? +1 590?
Yeah. 218354.
8354. Yeah. Just if I can squeeze for one more question, sir. So this trade mix declining 66% for this quarter. Sir, you took 71%.
Is it for full year last year or it is for
I was getting to q two last year.
Okay. So if I'm just putting that math, it is looking like non trade sales is up some 40% and trade sales is up some 11%. Is that somewhat
the right kind of number or that is wrong?
Sorry. I didn't get you. What?
So if I'm just applying that number for volumes, so I am getting a 40% growth in non trade volumes with, in non trade segment and 11% growth in trade segment.
You're doing math, and I'm sure your math will be right. I'm not in the bank.
So just trying to understand, is that to some extent right or it's maybe because I
could be some rounding up with that. Sure. Alright. Thanks.
Yeah. Thank you.
Thank you. The next question is from the line of Dinesh Patak from Goldman Sachs. Please go ahead.
Yeah. Thank you. Can you share your region wise clinker utilization, please? No. I don't have it.
Okay. Second question is this fiscal incentives from q one to q two sequentially. Why is there such a sharp decline from $1.40 crores to 85? Last quarter, we had a new permitted speaking in, and then there is a regional mix because depending upon where the growth is and where the discount is. Accordingly, this mix will keep changing.
Okay. But there is a sharp correction. So how how is it? Can you just give more color? Like, which region were you not enjoying in the other group?
We had kick started a recent center in central market last last quarter, which helped which gave us a bigger benefit in that one forty or one fifty nine core. And now that the regional mix, I'll have to do a comparison of the regional capacity evaluation of q one versus q two. That will only tell me the answer, which I don't have it immediately. Okay. Alright.
Thank you.
Thank you. The next question is from the line of Madhav Madhav from Fidelity Investments. Please go ahead.
Sir, just a couple of follow-up questions on the supply. You mentioned fifteen, seventeen million tons additional. Is that all clinker backed? No. But it is and unfortunately, it is not clinker backed.
Okay. How much of it is clinker versus gym training? I I will get that information about you tomorrow. Okay. I said the second question on the demand, I think it was asked by a previous participant as well, but demand has been strong because I mean, people have mentioned this over and over again, but it's basically infra, affordable housing by the government and, the base, which is helping.
But, you know, I just wonder with this, the HFC challenge which is going on across the country, Plus, I think the government spent on infra heavily when they had the crude, windfall, which is sort of going to go away now. So all these factors, do you think the government can continue to spend on infra the way that they have with pre elections spending coming to an end? Such certain Southern states are having, you know, sort of debt hidden balance sheets. Can they spend as much? So can we continue to see such thoughts on states having debt hidden balance sheets are doing wonderful work.
One should travel to Amarati and see how the recession is happening. That is why. Second, the HST issue, I think, should be short lived. I'm not the expert. But government spending on infrastructure and housing, the low income housing will continue.
The housing housing is already not yet out of its surplus inventory and slower growth phase. It's still in the slower growth phase. Okay. Okay. Alright, sir.
Thank you so much. Thank you.
The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, my first question is what is the clinker factor for composite cement? And you indicated another special grade of cement. And what's the reasoning for the launch of composite cement and another special grade of cement?
Sorry. What is your first question, Yudesh? Sir, you indicated we have launched two products. One was composite cement, and you indicated we have launched some another special grade of cement. Yes.
So if you could please highlight, basically, what is the clinical factor in each of this and economic rationale? Is it, like, to beat flat inflation or it's something else? No. It's product differentiation, and, unfortunately, I won't be able to give you the the breakup for confidentiality. The other product which has been launched, unfortunately, there is no name for this product.
That's why I'm not able to tell you the name, but there is a specialty grade cement which was launched. Both are profitable because the costs become lower than existing costs. Okay. And, sir, is it like you're trying to reduce the clinker factor with this another special grade of cement? Is that the idea, or is it just getting a new brand into the market?
Brand is the same, but if you can bring a product with better features or with better quality and giving construction, you know, what should I say, something better to deal with, then it's always advantages. Sir, have you already seen a plan in the launch for this new product? No. Not yet. So it's a soft launch done in East, and then we are gradually increasing.
Okay. Sir, my second question is, why is it that you are not expanding at and that we are looking at? Mine? Hello? I mean, a sufficient mind.
So we don't want to expand compromising on the existing mind because you can expand and reduce the life of mind, which might be, like, a thirty year to fifteen years. That is not what we want to do. Okay. And, sir, last question, you indicated reducing differential between trade and non trade. Sir, can you please give some color region wise over here?
It will be quite useful. I don't have it. Okay. No worries. I'll I'll get back to you, sir.
Thank you so much. Thank
you. The next question is from the line of Kamlesh Chef from Kabutas, sir. Please go ahead. Yeah. Thanks for the opportunity, sir.
So just one question on the on our current utilization, like, say, if this is central plants, they are operating at roughly around 70%. I just found that seasonal seasonal lower inflation and with the Punani coming in, which is currently operating at hardly around 40% units. So don't you think that the intensity of for us to keep the client lower to continue to be there even
going forward? No. Because, you know, in the North American market, we sell nearly 2,000,000 tons every month. And Binani, which is operating, let's say, around two lakhs tons a month today at its lowest capacity utilization. That material is already selling.
In addition to that, we might have to sell one, one and a half lakh times more. The market is growing at that pace to easily absorb that capacity. As I've mentioned, we are fully if we are natural or not clinker, and we we need additional capacity. Demand exists to absorb it.
But, sir, given the the price which we are going to pay for the Denali and the and the and the capital cost at the Bali plant, don't you think that Bali makes much more sense as compared to the Denali? Even if you see the nearby plants, like, say, they cannot we all are making hardly an EBITDA of minimum, like, hardly around $5.50 to 600 rupees, which vis a vis, like, the Pali or, like, say, nearby plants, all are making, like, roughly around 800 to 900 to be EBITDA part of in addition to the incentives which the state government is offering.
We will want to look at the incremental capital cost, and I believe doing a brownfield that Denali will be far lower in terms of incremental capital likely than at Poly. And Denali certainly offers us advantages to access the Western market, which is having to grow as compared to Pali, which would be focusing on more on the Northern Rajasthan markets.
Sir, lastly, like, there are some fears on the doubts in the market that you are incurring incurring some additional cost because of this delay in on on this order related to the Bidani cement. So can you highlight some facts that whether we are incurring any additional cost? I'm not incurring any cost at
the moment. So what about additional cost? Actually, terms of dues or interest No, no, there's nothing like that. Nothing like that.
Okay. Great. Thanks a lot, sir.
Thank you. Thank you.
The next question is from the line of Muntuza Arciwala from Kotak Securities. Please go ahead.
Hi, sir. Just given the, you know, the movement in trade versus non trade sales and the demand from the infrastructure segment, can you give us the, you know, the mix between OPC, PCC, Slack or OPC versus other blended similar?
The blended blended ratio is roughly around 65%.
Blended is 65% in the current quarter. And how would that have been in the
same time last year?
57%.
57. And how much of the cost increase, you know, would you attribute to the fact that you moved up your sort of or
I'll have to do that math because I don't have it offline.
But part of the cost would have been because of higher OPC?
There will be some cost difference between and OPC. And does
it still dilute, sir, while OPC may have you know, there is a
What happens is OPC gives a higher price?
Yes. So does it offset or is selling a higher quantum of OPC still sort of dilutive in terms of overall profit?
No. No. No. So the only concern one would have is that OPG consumed MindTru at a much faster pace. It earns more for sure.
It earns more for sure. Despite the higher cost.
Alright. Sure. Sure. Thank you.
Thank you. Thank you so much.
Thank you. Ladies and gentlemen, that was your last question. On behalf of Ultra Tech Cement, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.