Ladies and gentlemen, good day, and welcome to the Ultratech Cement Limited Q2 FY 'twenty two 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 public amendment, 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 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 to Mr. Atupwadra, Executive Director and CFO of the company, thank you and over to you, Mr. Dawa.
Thank you, Stephen. And good evening, ladies and gentlemen. Once again, thank you for joining our earnings call for Q2 FY 'twenty two today, 18th October 2021. 1st and foremost, greetings to all of you for the festive season in India. I hope that all of you and your dependents Have already been vaccinated for COVID and are able to kill the boredom of work from home by returning back to your respective workspaces I am enjoying meeting your colleagues and associates in person.
At Architech, we believe that Works from home is here to stay, and we are enabling roster services, releasing office leases wherever possible, redesigning our larger offices To suit the new normal, to quote, new normal is never normal. Yes, that is what we are seeing in the cement industry as well. Every now and then, we are waking up with the news of a new cyclone, IDA, TOKTE, YAS and whatnot. Cyclone generally would give our shores a miss, but now are hitting our shores every now and then. Monsoons have continued in the country in the month of October as well and have only started receding in the last few days.
World is just recovering from the aftermath of COVID, and now fuel is creating roadblocks for the economic growth. Shortages in gas market is pushing demand of electricity generation from coal based power plants. The surge in demand for coal is largely from recovering economies. China first shut down its coal mines And now it's stockpiling domestic coal and gas reserves. And on the other side, Russia is curdling its supplies.
China was not importing coal from Australia, but off late, I guess that is getting resolved and they started quoting from Australia. Fuel prices have seen an unprecedented rally. Who could have forecast more than a $50 jump in less than a month? Added to that, the stock built up requirements of few West and North Asia for their winters. In India also, all the coal supplies were being diverted to the thermal power cast.
Today's newspaper was some relief that inventory at Coal India has been improving and The power rates have corrected on the exchange. With this kind of pricing in the coal market, pet coke again becomes favorable in terms of energy costs at the current levels of current price levels of coal. So I guess switching back to pet coke makes More economic sense. Using alternate sources of coal from wherever the most economic If economical, coal is available, it is the order of the day. Increasing alternate fuel is slow in India.
This quarter, we have reached 4.4 percent of our total fuel consumption as alternate fuel, However, something needs to be done to protect our margins too. Industries like coal and other commodities are making in a bit more With price increases and artificial shortages, cement cannot keep on thus improving efficiency to protect and generate margins. We have taken up coal at Ultratech to increase prices of cement to help manage the rising cost of production. Current spot prices of coal have already gone up 3x from June 'twenty one and pet coke is up nearly 2x. Sometime during the month of October, we have increased the prices in almost all the regions.
The prices are now back to where there were 3 monsoons. This is certainly not enough to cover the cost pressures. Needless to mention, you must have already got the information from your Famous channel 6. On other costs, you would have noticed an increase in asset sale, But I would urge you not to annualize these numbers. At the beginning of COVID, we had told you about a reduction in our overheads plan of About 10% over FY 'twenty, yes, we are at it.
FY 'twenty two, we'll see our overheads around the same number as FY 'twenty, thus having absorbed the inflation of 2 years. Let me now talk about the brighter side, demand. It seems to be robust as monsoon have been receding, volumes are going up. In spite of heavy rains that the country witnessed, Alsatek has recorded a domestic grade cement volume growth of 8%, 70% in White Cement. Could we have done better?
Yes, most certainly. But we were at the mercy of rainbows. In the lighter vein, a pharma company would always urge for rains, a pharma company manufacturing anti malaria drug would urge for rains And Cement Company would pray otherwise. Q2 was substantially impacted by monsoons, which was above normal in most parts of the country. And in fact, yesterday, some parts of Northern India and Kerala were facing heavy showers.
On the infrastructure side, the trust by the government continues to be very high as part of Implementation of its INR1.1 billion project under NIB to
be completed by 2025.
If you are to deep dive briefly on the various subsets of infrastructure, roads, Fastest growing sectors with a massive plan to connect the entire length and breadth of the country under the Bharat, Malaya, right, Pali Yojana project, there are 20 expressways already operational and 30 are under construction. Highway construction is almost at par with last year with 38,824 kilometers completed in September. Ordering was a tad slower, but we expect it to catch up this quarter. Railways, Q3 onwards, the speed of implementation at DFC is picking up, and most of the work is expected to be completed by the end of fiscal 'twenty two. Metro rails.
18 existing metro rail systems have already Started increasing the length of their existing metro lines and 27 new metro lines are being added in the country. Irrigation projects are also back on track. Airports, 2 major airports, which is New Bombay and JLR are likely to commence this fiscal year. Airports in the major districts are being implemented as part of Hodan's scheme to On the commercial real estate side, it's a mixed trend. The IT infrastructure space demand is again booming, giving rise to the commercial space.
And we are also seeing Good traction in the urban housing market in the Tier 2 and Tier 3 markets. Infrastructure spreads continue to lead the demand boost with the increase in execution speed across all projects. Let me touch upon our expansion plans. We have commissioned 1.2 metric tonne ground field expansion of our Bengal and Binar unit. This is part of the 3,200,000 tonnes scheduled for this financial year.
The 1,200,000 tonne is additional grinding capacity for which Flinker is sourced from our existing units in Satyagraha, East NP and East 2B. These expansions are focused on composite cement and in the overall capacity More less than 1%, but certainly a tiny contribution towards increasing the share of blended cement in our endeavor to continuously improve our The next in line for this fiscal is the 2,000,000 ton Phase 2 of our Bada grinding unit. Small delays, but it's on course now, and we expect to commission it before the end of this fiscal year. All other projects of the 19,500,000 ton expansion are on track for a small except for small delays of a month or 2 here and there. In these coal crisis times, I'm happy to share with you that our Vichapur coal block We'll also start coal mining operations from Q3 FY 'twenty two.
The coal will be used in our Suttna Cluster Plaques. During this quarter, we have also commissioned 12 megawatts of NWS capacity and added 21 megawatts of solar capacity tires. With the expansion of with these expansions, our GreenPower share has increased to 15% of our total requirements. Before I conclude, let me talk about the cash flows. Working capital has We increased in value terms due to the rising purchase price of purchase costs.
However, we continue to maintain a negative working capital of around 8 to 9 days on this quarter's sales. This negative working capital will further improve in the second half The reduction in inventories post monsoon. We generated an operating cash flow of INR 750 crores. A large part of this was used on the onboarding CapEx plans. In the first half of this year, we have spent INR 2300 crores on CapEx And should end the year with nearly INR 4,000 to INR 5,000 crores of CapEx, all being funded from internal accruals and yet deleveraging further.
During this quarter, we trimmed our treasuries up to INR7,600 crores and retired INR5,200 crores of long term debt. At the end of this quarter, we are 0.47x net debt to EBITDA at consolidated levels and will only improve Going forward, quarter on quarter. With rising sales volumes and expansions coming on stream, The reduction in net debt will certainly pick up pace as we move forward. And to conclude, I believe cement demand seems to be on a stronger path. There is a pressure on fuel supplies and costs, But rising costs will be compensated by increase in cement prices.
So ladies and gentlemen, let's sit back and enjoy the ride. Thank you. And over to you for questions. I also have with me our Managing Director, Mr. Keshi Jawah, to take on any questions.
Thank you very much. We will now begin the question and answer session. The first question is from the line of Sumangal Nivedyan from Kotak Securities. Please go ahead.
Yes, good evening and fantastic greetings to everyone. Mr. Dazhar, the first question is On the cost, if you can elaborate a little bit more on the fuel cost specifically. I mean, we currently have a very changing I mean, a very dynamic Situation for the economics of Red Oak and thermal coal and also with the inventory
in hand, I mean, how
are we looking at coal costs in coming quarters Rich, if the spot price has changed for a couple of more months. And also, there is a spike in the employee cost. Is this a new run rate to work with? So on fuel cost, your base is as good as mine. We don't know where the peak is, where, When will it start switching gears?
But the general feedback that we are getting is at least there is A few more months of pain in the cost on fuel. But more importantly, We are passing on all these cost increases in selling prices. As far as availability is concerned, I don't see a challenge as of now in availability of imported coal. We were, in any case, very Loosely dependent on domestic coal. A shade under 15% or maybe 12% Of domestic coal is our part of our fuel mix, this balance is all important.
As for employee costs, this year last year, there were no increments, Which were given, as you are all aware, as part of our COVID plan. So this year, the increments were given, which Came into effect in this quarter and will rationalize as we go forward in the future years. Understood. 2nd, Sir, with respect to the demand trend, you shared a very strong commentary in your opening remarks. Any ballpark number for second half for the industry demand growth You are working with internally or expecting any quantification or guidance on that front?
It would We very safe and estimating it anywhere between 6% to 8% in the next 6 months, which could be conservative. Would you like to add, gentlemen? Yes. So yes, as Atul said rightly because now it's a very Challenging time because there's such an increase of fuel prices, which will obviously result into increase in the cement prices. And As we know that the steel prices are have also doubled actually in last few months.
So there may be some impact on the Demand side, but yes, we can still safely assume about 6% to 8%. To our understanding, The demand should be there. And all of you know that these months are the peak months from the demand demand point of view. So as the fiscal season gets over, November, Chhat Pooja, I don't remember when is this Chhat Pooja in India. But typically from there onwards, we start falling short of capacity.
That's what we saw Last year, January, March, and I think it will repeat. Understood. And just one last thing, this Eurotun loan Akshay, have you classified that as discontinued? So any progress on the recovery of that? We are fairly advanced In our negotiation and my sense is by end of December, we would be Reporting a closure on that transaction as well.
Got it. Okay. Thank you so much. And I'll get back in the queue. Thank you and all the rest.
Thank you. The next question is from the line of Rashi Chopra from Citigroup. Please go ahead.
Thank you. So just a few questions on cost first, Adi. One is last year, I think the coal consumption cost was about $1.23 Do you have a blended effect for this quarter?
This quarter is a shade under 100 and 10.
So it's flattish, how much you are?
It's flattish, yes.
Okay. So you have yet to say because you have inventory?
So we had inventories and we have done some smart contracts, which is enabling us Which enabled us to procure fuel at lower costs.
What do we suggest to be in the 3rd quarter?
It's time to go up. I would expect with the chart, $120 could go up by $1.80. No, maybe $10, $20 more it could go up.
This $10.20 in the 3rd quarter, but are you reminding So talk about cement inventory this quarter, this is like the peak given current pricing. Will the Q4 be higher?
Rajiv, peak I cannot Guarantee, I don't know how long these prices will keep on going up. But yes, we will see an increase in our fuel costs Going forward.
Okay. Sajid, on the price increases that you're referring to, to sort of absorb the cost inflation, So let me think about that. Is it you want to kind of maintain that EBITDA level versus 1Q or versus last year? So when you say concentration of Shnevin, what kind
of what was the question? Yes. I will want to reach the best in class EBITDA margin that we would have achieved. So our endeavor will be not to be buckled under the pressure of rising fuel costs. And on a steady state, if I were to look at it, 34%, 35% is a very high number.
But on a steady state, 27% to 28% or 20% to 28% would be a good range to benchmark performance. Varies on market to market and average, I would say, RMB 10 to RMB 15 has already gone up? Yes. Yes, INR 10 to INR 15 has the price has gone up. But as you know, it varies from market to market and Sometimes the discount structures in the different markets.
So maybe, but So INR10, INR15 is actually Yes, across the country. And the good part is all the regions have absorbed these price hikes. Other thing is there is a general expectation among the intra players, among the media community that price rises are imminent. So very little resistance.
Okay. And just
Yes, yes, yes. It will be we can blend it also in the kiln as well as in the past month.
So how much and what proportion of the coal are you able to give this So
that way, Raji, it's a very small portion. I think on today's capacity, we need Plus minus 12,000,000 tonnes of fuel. And this mine coal block is annual mining plan is 750,000 Less than a 1000000 times per annum.
Sorry, your last question, what is the view between this quarter?
I'm sorry, what?
What is indeed the same? Because you made a comment that the geographical interest has also hurt the The freight cost, so just number 1, what does that mean, number 2, what is the lead distance?
Lead distance, sorry, I heard straight About 425 kilometers.
Okay. Got it. Okay. Thank you.
Thank you. The next question is from the line of Pinakin from JPMorgan. Please go ahead.
Thank you very much. So my first question is just trying to understand this energy cost trend issue better. If you look at Slide 17, where there is the green line, which is the index of petco prices versus the black line, which is the energy cost index, It's nearly half of where the spot petco prices are. Now when we look at spot prices of thermal coal petco And if there were no inventory benefits, how much would have been the energy cost Higher Buy, I mean assuming there is no change in spot prices from here, this roughly INR1100 a tonne should be at INR 1500, INR1800, INR 1300. How should we look at the total cost inflation from So, Panaghi, there's one is Carry forward inventory, the other is efficiency improvement.
We have been continuously Improving our power consumption, heat consumption. Power consumption has gone down by 4% Y o Y, that is 1. And if So that is where the big difference delta between $240,000,000 and $126,000,000 lies. Of course, this is only A schematic reference because I have taken only Petco price index. I haven't taken the coal price index.
And The lending ratios will continue to change. So To answer your question, 1100,000,000 could be 1300, but not 1500.
Hello?
Sorry, spot thermal cone and spot type coke prices?
Yes.
Understood, sir. So my second question is that if I look at the broader moving beyond energy cost, There is a cascading impact of inflation coming through in other line items also because Brent is moving higher, diesel prices are starting moving higher. You mentioned Cost is also higher. So when we are looking at total cost over the next two quarters, if we take The starting point as the 2Q realization, if we were to go back to the Q1 EBITDA margin or EBITDA per ton, what kind of price hikes Would the industry need to see would the industry be okay with a 5% price hike to absorb all the costs and revert back to margin or we are
talking 10% to 15%.
If I
were to assume C50 as a base price, 10% minimum is required? To cover all the costs, sir, and you go back to the Q1. B. Balaji:] We can go back to Q1 margin because Q1 you are referring to is a very high margin level.
Yes, sir. Yes.
Okay, understood. That is very clear. It will happen. It will happen. Understood, sir.
Thank you very much.
Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead.
Hi, Ashish. Hi, sir.
Hi, good evening. Sir, again, my question goes back The earlier questions, one is on power and fuel cost. So if I understood your comment right, if versus The $1.20 that you said was a blended consumption cost versus that if I paid $2.20 $2.30 we are seeing the energy cost go up only by INR 200, is that?
It's 0 or 8, yes.
Okay. Okay. And sir, like this $10 number that you said be the impact in Q3 on the fuel cost side, this is good for whole of Q3 based upon reasonable production
Yes.
Okay. So the 210, 220 is not going to hit us Even in Q4, you think, based upon the contracts we have?
Yes, whether Q4 ends in Q20 or higher It is yet to be seen. We will try and keep the various Expertise that the team has various levels of expertise that the team had in sourcing and Planning will come to its play, and we will try and keep our pricing Energy costs, as controlled as possible.
No, sir, my apologies, but just to persist on this, What I want to understand is that either due to our contracts or based upon some other sourcing mechanism, Is it possible for us to source coal even if the spot is 220, are we sourcing that 160, 170?
I wish I could. I wish I could.
Okay. So at some level, the market price will
It will catch up. It will catch up.
Okay. Okay. Great.
I'm not able to say, Achin, I'm not able to say what it will happen in Q4 or Q5, which is Q1 'twenty three.
Right. Right.
Okay. And so secondly, just on the CapEx plans, you said that we are seeing Some delays, I understand 1 or 2 months is what you indicated, but are we seeing these delays across locations or 1 or
No, 1 or 2 locations. Odisha, we saw some delays. That was the only delay. We think there has been a catch up, in fact. Like, Chatikar were delayed, they have caught up brilliantly.
Pali, they have caught up brilliantly. We are a larger one, rather than smaller one. So Out of the 19,500,000, 3,200,000 will get commissioned this year. And next year, every quarter, we will have That is out of the remaining 15,000,000 tons, I had given the schedule in the earlier presentation, 1 of the, I think, quarter or the CapEx plan presentation, we will be able to meet that challenge, a month here or a month there. Hello?
Ashish?
Mr. Jain, if you're able to
hear I think he is disconnected or lost a signal. Yes, seems like we lost the
connection for Mr. Jain. We move to the next question from the line of Amit Muraka from Axis Capital. Please go ahead.
Yes. Hi. Good evening, Suraj. Yes, so my first question is on mix. So what would have been the trade mix in this quarter?
69% 57% is trade mix. So broadly stable. And also like on other operating income, I see that it has jumped quite Sharply this quarter. So any reason for that? So, no, incentives keep coming in and out.
So this quarter, we had a car incentive coming in, some incentive expired, and there could be some other miscellaneous income kicking in. So this will be a one off and I would have a stability at So we have been around INR 60 crores to INR 70 crores per tonne. Right. Okay. So this quarter that is it's almost double of your usual run rate in that?
Yes. Yes. Okay. And Also in terms of the capacity, Greg, obviously, you've highlighted about the ongoing expansions, which are on track, Which should be done, let's say, March 23, but given that we know that it takes, let's say, 18 months or 2 years or more also if it's a greenfield to do, Like, are you thinking around further expansions more from FY24 and further pipeline point of view? Yes, we cannot stop growing.
India is the only market, as you very well know, Which is expected to see a growth of 6% to 8%, 6% to 7%. But if I look at the CAGR of 10 years, 6% to 7% is a very confident number to go by. If we don't grow, then we will start losing market share. Okay. So we should assume, let's say, that kind of a capacity growth rate on a usual basis.
Inorganic or organic. Okay. And also in terms of capital allocation now that like you're quite fast going towards the net cash balance sheet, What is going to be the capital allocation plan or inorganic back on such a dar or how is it? It's always there on the radar. The right opportunity is what we would look for.
And capital allocation, as you know that The return to shareholders will increase. We had stepped it up in last financial year and I Sure. I think this was a very well thought out decision taken by the Board After looking at the long term cash flow plan that we will be able to step up returns to shareholders After taking into account our requirements for growth, which will not be leveraged. Okay. So then like is it fair to say that the balance sheet will not turn into a net debt balance sheet maybe even if there is an Acquisition or something?
So if there is an acquisition, so there will be 1 year of Levesque because you see acquisition has a bulk So, I'll take it to payment. So, depends on the size also. If it is small, I mean, sometimes you will not even Realize that the balance sheet has absorbed it, but if it's a 10,000,000 ton or a 13,000,000 ton That's what I should say. Then bump up for a year will take place. It all depends on the kind of opportunity We get an obviously, if the opportunity is quite big, then as Atul said, likely it may have I think I have stated mentioned this earlier also in some forum.
Your financial models will tell you what is the size of the EBITDA that Ultratech will B, in FY 'twenty four. FY 'twenty three all capacity, 20,000,000 tons of new capacity coming on stream, stabilizing in 'twenty four. 'twenty four is the New normal EBITDA for Ultratech. Yes. Keep a thumb rule of whatever leveraging you want to do on that, and it's a 1 year reduction.
Right, right.
Got it. And lastly on Superdollar, like I guess there is some more delays, like could you just throw some light on that? You know Quite unforeseen, unfortunate instances keep taking place. At the bureaucracy level, we were scheduled Too fast tracked and PM visit happens. So everybody went into the PM visit, no meetings taking place Or somebody not there, etcetera, etcetera.
Having said that, March 2022 is A very realistic number that we will have our plant cleared up, ready to start work. March 'twenty two, yes. Okay. But you also You with the nitty gritty, there are So many things that we're dealing with, yes. But I remember there is some work also that needs to be done once you get the plant because it's been shut for a long time.
Yes. But you see that we have clearly identified the CapEx plan. If I am able to Wrap it up by December. We'll start work in January. Touch and go March, April, we'll start the letting clinker from there.
It's a 2,300,000 tonnes link up. Of course. This is all. Thank you very much. Thanks.
Thank you. The next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi, sir. Thanks for the opportunity. A couple of questions. Sir, first, is it possible if you can break up the Ritesh Shah if I can break up the 2.86, so number you did indicate that incentives related to the ARCH event. Related to this, I wanted a wider answer from you regarding what are the sort of incentives that we are expecting from Sidhar or Pali or From the incremental announcements that we already made, so that's the first question.
Let me first, before I forget, your questions are long and more complex, you didn't say. So incentives are not standard anywhere. So you have to approach the authorities, the regulatory body and see whatever is best possible Under the ongoing team, currently a new team gets announced. So whether you are eligible, not eligible at all is It's a mixed bag. So we don't count don't depend on incentives at all for our profit returns.
With the incentives are always our top up. And Pali let's say, Pali, I expect to commission by September 23, when will I get the intended application is fairly advanced. When will I get it? I don't know. Practically, all the projects are there in different stages of consideration at the state authority levels, Remains to be seen when we get it.
So specific coming back to Dhar, I understand that Under the government, cement was in negative risk for MP. And after that, it was taken off. So I'm sure like we would have got some So if you can confirm just to understand the IRR of the project better, that will be useful if possible. There is I will give you details offline, but now the earlier the incentives used to be directly linked to BAT. Now They cannot be linked to SG SG because it's very difficult to track from the state of Shekhar's perspective How much material is sold within the state and how much material has gone out?
So they keep structuring different packages to incentivize Investments. We have got a completely different incentive package for Thar and completely different Hypothesis which we are pursuing, which we're at value. So it's completely different. Sure. So second question, just coming back to the cost inflation part.
Sir, what is the Procurement strategy, so basically when we procure fuel, we have optionality for pet coke, which you indicated will increase in pie going forward. But when it comes to pet coke or coal, there will be spot contracts, medium, long term contracts. I just wanted to understand what is the sourcing So, Attaghi, when we say that our cost will only increase by $20 to $30 next quarter. So, is it like we already have booked something at low cost? So just wanted to have some sense and thought process behind that.
So I'll give you a bigger picture instead of giving exam details being confidential Competition perspective, we in cement, obviously, we are the largest consumer of fuel, 12,000,000 to 13 12,000,000 to 13,000,000 tons off here. So we cannot depend on spot alone. We do a blend. We do long term contracts at fixed prices. We are we do long term contracts on index Link prices, discount to index, different sources to try and manage the average cost.
We do blending of fuel within as a kiln fleet to reduce the average Fuel cost, we are trying to increase a small number, but we are trying to increase our alternate fuel, so that dependence on Fuel goes down. We are increasing our WHRS capacity, which is helping me reduce my fuel consumption. For Power, We are ongoing and there are also number of initiatives ongoing initiatives in terms of Fuel and Power, the efficiency improvement. Yes, consumption, no. So it's a combination of multiple things actually.
And of course, the blended part of it. Continuity is trying to improve our conversion ratio. So that is also helping improve the fuel consumption. Sure, sir. This is very helpful.
Should you have any follow-up, may we request you to rejoin the queue. The next question is from the line of Madhu Marga from Fidelity International. Please go ahead.
Yes. Hi, sir. Good evening and thank you so much for your time. I just had a quick question. So basically, Architec, like you mentioned, is the largest consumer in the Indian cement space and we have all these long term contracts.
If you think about some of the smaller players in the industry, would they also have access to such long term contracts This would be at sort of more fixed prices and more favorable prices or such contracts would be more limited to the larger players in the industry? Would you like to ask them Instead of asking me about them? We might reverse it then and then you ask me. So there Margot, there are benefits of scale and size, which Tetrick certainly enjoys. I don't want to comment about what others are doing on a public forum.
Okay, And then just the second question was that like you said, side hikes should happen considering how Heavenly coal and pipe, petrol costs have gone up. Should we, Georgi, basically expect this to come through January onwards, 1st week season kicks in Or it could be even earlier? Sorry, Abhut, can you repeat your question, Madhav? No, the price hikes, basically, Would be coming usually as it happens January onwards when the peak season is now? October onwards, yes.
October 7 onwards. Okay. So we keep on passing ahead through the quarter. Absolutely, absolutely. I mean you can't do a lag effect over here.
Otherwise, the damage would be done in this quarter.
The next question is from the line of Satyadeep Jain from Ambit Capital. Please go ahead.
Hi. Thank you for the opportunity. 1st on the on capital cost inflation, given where fee prices are, some inflation are, are you seeing any capital cost inflation On your existing project or if you had to start a new project, could you elaborate on that?
So let me take the latter part of the question first. A new project obviously will cost much more. A greenfield project would go above $100 per tonne very easily. As for our ongoing projects, there are some cost overruns, But there are the cost reductions and optimizations. Again, thanks to bulk buying longer term contracts That we have been able to largely weather the storm of increase in steel prices.
I mean steel has become a major component for CapEx Yes. Just to further add upon because our the major context for the technology supply and the steel part was Reasonably well covered before this, the price the steep price increase started in spring and the other metals. So I don't think there would be a major surprise in terms of the post. There will be some minor here and there, the Very marginal increase may be there, but we are putting all efforts so that by That has the efficiency or other improvement initiative we can contain in the course within the Total project cost for the 19,500 or 6,000, Yes. I think INR 6,800 is the number to my memory.
We will remain at that.
Okay. But if you had to, so you built out of the existing projects, if you had to start a new project, obviously, there you'll see some capital costs in
the future.
Yes. There the cost will go up. Yes. Obviously, because it's on the overall interest and then the impact of the excess rate and So many other factors. And it's not only cement, but I think all metal prices, right, from copper, aluminum, everything.
So The contracted cost is also now increasing substantially. So if you were to look at Average greenfield cost of, let's say, dollars 90 it would go up to $110 for sure.
Okay. Secondly, you did talk about imported coal, but coming to domestic coal also for your CPPs, What kind of long term FSAs do you have with Coal India for a co refinement and
As of also, Coal India is canceling the Shipments, because they have totally stopped for the time being allocation of coal to the non power sector. But yes, obviously, it's the combination of FSA, the auction coal and How much is the domestic coal? 17% combined. So between Kiln and our power parts, Total cumulative, the main target is domestic, which was being met out of auction coal or FSR. Don't count what is happening today or yesterday as of now because that's, I believe, temporary.
Coal India will get its We're back on track. There were delays because of heavy morsels, movement was not taking place, So on and so forth. With season improving, things will come back to normalcy in the Indian domestic supply.
Okay. But as you do your planning and you look at different scenario analysis, typically the power situation would improve in winter and soft But in case they don't, what's your fallback option that you're looking at for your CCTs?
Well, we'll have to depend on grid power also and imported coal.
Okay. Thank you so much.
Thank you. The next question is from the line of Naveen Sahadev from EagleWeiss. Please go ahead. Yes. Good evening, sir.
Hello? Am I audible?
Yes, Hamid. How are you? I'm good. I'm good. Thank you.
Thank you, sir, and thank you for
the opportunity. Two questions. One is first of all, a clarification, I'm sorry if I repeat. You said Q2, the average fuel cost was about $120 which in the current spot terms is over 200. And for that increase, the max hit that will come to us in terms of Average fuel cost increase will be just about INR 200 or roughly $3 Is that understanding correct?
Okay. Yes. In Q3. In Q3, okay. Yes.
Okay. So in Q3, we are expecting a Fuel cost increase of roughly INR 200 per tonne and thereafter another impact in Q4 because of course, the waste spot is That's great. Right. So if I were to just ask from let's take Q2, the current quarter as a base at which it's about $120,000,000 and the spot of $214,000,000 $250,000,000 I really hope that it spirals down as quickly as it went up. But assuming at the current rate, what is the cost delta?
Cost? Sorry, for what period? We then discuss. Yes. But when you said it's Q3 Fuel cost goes up by INR 200, INR 200.
In Q3?
Yes.
But at current spot, it goes up to how much? Current spot, it will should go up by maybe INR 5 rupees more. If I have to consume everything at $2.25 $2.30 $2.40 But I am very peaceful and sleeping around here at night because We are passing it on to you if you are constructing your house. No, I already did last year. Thank you.
You're checking out and you're in villa and Alipa, I know, Naveen. Thank you so much for that. Then the second question is about the fuel mix. So Petco So Q4 has been falling, I think it was 28%, 30% in Q4. Previous quarter, we were at about 17%, 18%.
Currently, where is this fuel mix in terms of broadly pet coke, imported coal? How should one look at it? Pet coke was how much? 18%. 19%.
In 19%
In 2019, Petco was 19%. Now in the interest in unit. And just to add upon, see, the fuel mix is very dynamic actually because One part of it is that coal was very competitive and petrochem become expensive. Now the petrochem is equally competitive. And the second is now the major challenge is about the price.
If you ask me, obviously, it's availability and the fuel security. So but we have developed a reasonably very good skill to switch over from one field to another, So very quickly without losing much of time. So it all depends what kind of prices of the petroke and the coal. No, precisely, sir. I asked this question precisely for that reason that it's not about the price, it's about the availability.
On KCal basis, As we speak, I think the imported coal is much costlier as compared to pet coke, but pet coke availability is a challenge. So With that in mind, as we speak, as you said, pet coke has again become the favorable fuel. So how much can it go to In terms of the same thing? You will know it better. Yes, you ask a coal analyst, not a cement.
It's very difficult, very honestly to Pimikesh, you said very rightly the availability of Paycorp is not such a huge deal, but there the polling is available. So It all depends actually what kind of scenario you get from different part of the world, not only from India. Okay. So maybe to give you comfort, 2 things. As of now, The pipeline has not choked.
So there is a continuous flow, and we are ensuring that none of our operations, Our Singling plant will suffer our shutdown because of non availability of fuel. Of course, That must be certainly just a voice and a yes, I think that's the beauty of being a large player. You have the reach practically everywhere to get resources. And secondly, I'm sleeping peacefully because the cost is being pushed on to the consumer. Great.
That's really nice. Just one last question, if I may slip in. Staff cost sequentially is higher. I know other expenses higher because of maintenance, The staff cost sequentially is higher. So that's for the increment.
So is
it Yes,
I know what he told you, the increment was got factored in, in this quarter. Correct. So can that be taken as a normalized base to be analyzed? We cannot analyze the other expenses. There were some one time
Please limit your questions to 2 per participant. Should you have any follow-up, maybe request you to rejoin the queue. The next question is from the line of Girish Chaudhry from Spark Capital Advisors. Please go ahead.
Yes. Good evening and thanks for the opportunity. Most of my questions have been answered. But one thing, If you can share the regional pricing trends like you generally share on a sequential basis, that would be great. Regional pricing trend for what?
During the quarter, yes, during the quarter or 2Q. For the last quarter? Yes, yes, For Altertech? Well, the One is the average prices were up about 4% to 5% on an all India basis. There was an increase of 2% to 3% in North and East, Central was flat.
West was 5% increase. South was flat. So these were on YOY basis, right? YOY. Yes.
Can you share the sequential number? Sequential, the prices were marginally down about 3%. The biggest drop was in the Eastern market, Close to 10%, but otherwise average 3% plus minus that's due to that. Got it. Thank
you. Thank you. The next question is from the line of Rajesh Ravi from HDFC Securities. Please go ahead. Mr.
Ravi, your line is open.
Yes. Hi, good evening. Yes, On the earlier part of the call, you mentioned that the second half you're looking at 6% to 8% volume growth. So
if you
do the math, for the full year, it works out to be around 13%, around 97 or 1,000,000 tonne breakeven sales. So is this what you're looking at?
I guess so.
Great. And second is, If I look at the rate driven performance on a Q on Q basis adjusted for the other 2 businesses, Realization is down just 1%. So any specific reason here because markets we understand that prices are down 3% to 4% across markets, barring North and Central, although it seems to be slightly flattish. So Is it there any change in sales strategy which help you clock lower decline sequentially?
Are you a shareholder, Rajesh?
Yes.
Yes or no? No, no, I'm not.
No, no, I'm not.
Well, you should be holding AlJTeq then. I think AlJTeq as a leader in the industry Always command respect in pricing as compared to the other brands.
Okay. And on the cost side, if I look at the cost line items which you mentioned in the PPT, And if I take that with a great financial realization, this year on
330 odd rupees declined, you don't see
any EBITDA
margin. So, is this all because of the power and fuel cost or
It's cost, cost, cost.
Okay. And this is what you're looking through, the realization increase from this month onwards?
Yes, because monsoons made it very As it is, there is a pressure on volumes and in spite of the heavy monsoons, I think Nobody complimented us, but I take the compliment from you that we did a 7.5%, 8% growth in volumes. The moment bonds have started subsiding, we have taken the opportunity of increasing the prices.
Okay. Okay. And on the cost inside, WHR which you installed 13 megawatts, so what is the total installed capacity close to that?
It's mentioned in the presentation, 1, 160 something, right? 137 megawatts. 137 megawatts WHRs.
Okay. 137 megawatt.
For a non general, you asked so many questions.
And
Lastly, on that capacity, which is
Let me take on some other questions.
Thank you.
Thank you. The next question is from the line of Pratik Kumar from Amtech Stock Broking. Please go ahead.
Yes. Good evening, sir, and thanks My first question is on the tucker issue in its market. So is this something which impact us also? There was a strike which is LTM to close down some plants in September. And has that issue been resolved?
Yes. No, the truck cut issue is there in Satyagraha. And but the good part is We are not too much impacted obviously because our all past sales are really exciting actually. So yes, definitely there There is some marginal impact on the ROAR movement actually from the plant. And as of now, I understand it is getting resolved tonight or By tomorrow morning, the almost understanding has been reached.
But let's see there because this development of negotiation discussions is happening since last But yes, we are near to raise to some understanding. Thanks, sir. And second question is on this demand trend chart, which we generally give on our presentation, which is also very useful, Which mentioned that Central Region has a flat growth during the quarter. Is this only reflection of Monson? So or Any Monson, yes, cities like And Madhu, please see a torrential range this time.
Okay. So like something like elections Related demand coming in UP is something which is seen on the ground or it is also sort of impacted by Monster? Now you will have the benefit of election demand. 'twenty three 'twenty two, 'twenty three will be all election driven demand. General elections are there 24.
So you've seen what happened in 'nineteen. I was talking about certain elections in DC. Besides general election, I'm referring to general elections also coming in. So 2022, 2023 will see a pretty robust demand Momentum. Thanks, sir.
These are my questions. I'll get back to this.
Thank you. The next question is from the line of Mahesh Javeri from Evendes Capital. Please go ahead.
Yes. Thank you for the opportunity. Just wanted to ask you, Dalit, since this demand thing, Which you said in second half, which is going to be 6% to 8%. If I look at clearly from a math angle, the base is pretty high in Q3 and Q4. Last year was phenomenal given the COVID situation.
Even Q1 was very strong. So how should we look at it?
Is this Is there a
risk to this guidance or No, we have a very high risk. There is a huge, huge I went in a long detail in my commentary On the infrastace, let me give you the basics. What is now happening is post COVID, The housing sector has also been urban housing sector has also been reviving. Monzons have been good, crops So rural demand will continue to have a party time. Infrastructure was continuously growing.
Earlier, pre COVID, rural markets and infrastructure was The cost bearers for demand, now you are seeing the urban housing also coming in. I also touched upon the IT related commercial demand which is coming up in Karnataka, in Andhra big time, In Tamil Nadu, in a big way. So you will see huge amount of cement consumption going forward. Okay, sir. And just a clarification on the cost part, sir.
So the cost impact, Probably what you highlighted is from the fact that Q3 will have a less impact. So cost impact clearly will continue given that current spot as in Q4 and Q1 as well, right? Q2. I mean, Okay. The cost will be not planned.
Okay. Thanks a lot. Thank you for my time. Thank you very much. Thank you.
Thank you. The next question is from the line of Kamlesh Palmar from Prabhu Das Lilater. Please go ahead.
Sir, just one question For like related to your Middle East and overseas operations, I believe this quarter has been one of the worst in last like say around 18 odd quarters. Our derived or improved EBITDA has been hardly around INR 8 crore. So what has been the reason behind that? Has there been some one time This was a temporary setback. One is costs going up in the UAE market and Both markets into Sri Lanka from India suffering.
We had a bit of a slowdown from our Gujarat's plant into Sri Lanka. But now I think there will be a catch up Because Sri Lanka, which we sell close to 1,500,000 tons per annum, It was a controlled price regime. Now it's going to free price. The prices are de controlled. Price increases have already been taken in Sri Lanka.
So I expect it to come back. It's a one off bad quarters for our overseas operations. So lastly, sir, we know that Q2 is a mix of maintenance cost and lower efficiency. So but like I said, given the Q3 where we could have a peak quantity, a very strong quantity of cement and on top of that better Efficiency. And secondly, we will have a higher energy cost.
So taking that into consideration, let's say, for Q3 and Q4, Fixed cost element is also there. So how do we see the cost? I know that a lot of questions have been asked, Like I believe most of the part have been discussed on that thing. But taking fixed costs, shutdown costs, all that in consideration, Q3, Q4 or combined H2, over Q2, how the cost would pan out in terms of overall trajectory? I will give you some homework.
You do the calculation of our operating leverage over the last 3 or 4 quarters and it will answer Okay, great, sir.
Thanks a lot. Thank you. We take one last question from the line of Sanjeet Kumar Singh from Motilal Oswal Financial Services. Please go ahead.
Thanks for the opportunity, sir. I wanted to understand what
sort of capacity additions are you pursuing in the industry? And secondly, in terms of inorganic acquisition, I believe that in one of the presentations we have written
So first point, I think this year 20,000,000 to 25,000,000 times is what I would Slowing down next year. And on a longer term basis, I still believe as auction mines Come into play. Recently, somebody took a small mine in Chhattisgarh at $6.60 So it's quite unrealistic to generate a return on these kind of highly expensive resources. So you won't see too many CapEx besides, you need to also to look at what are the mining resources Each player has at what location the data is easily available? Yes.
If somebody wants to run a plant at With just 5 years or 10 years of life, God save them and God save the investor who is putting money in that company. So Expansion, 20,000,000 tons coming up next year. Again, we have a large chunk of our expansion, 15,000,000 tons coming up Next year. Beyond that there is, I would say, slowdown in investments. As for acquisitions, we are always open to a target which And such gives us a profitable growth opportunity.
So growth as an increase in my market share and profitable, Obviously, it has to generate a return on my investment. As of now, there are a couple of transactions which I am examining, Small ones, not worth very small ones, but I'm sure there will be people who will want to cash out At some point or the other, and we will be there to have a discussion. Okay. Okay. And second part, just a clarification.
Was gas to gas relation down to what Reliability is down Q o Q. Yes. We are 2.5%, 3%. Okay. Thanks a lot.
Thanks. Thank you.
Ladies and gentlemen, on behalf of WealthTrack Inc, that concludes this conference. Thank you all for joining us and you may now disconnect your lines.