INDIACEM — earnings call

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Prepared remarks

Moderator · Conference Operator

MR. VAIBHAV AGARWAL – PHILLIPCAPITAL (INDIA) PRIVATE LIMITED India Cements Limited August 07, 2023

Ladies and gentlemen, good day and welcome to the Q1 FY24 Conference Call of The India Cements Limited hosted by PhillipCapital (India) Private Limited.

As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing ‘*’ then ‘0’ on your touchtone phone.

Please note that this conference is being recorded.

I now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital (India) Private Limited.

Thank you and over to you Mr. Agarwal.

Vaibhav Agarwal

Thank you, Michelle.

Good afternoon, everyone.

On behalf of PhillipCapital (India) Private Limited, we welcome you to the Q1 FY24 Call of the India Cements Limited.

On the call we have with us the entire Senior Management Team of the India Cements.

I would like to mention on behalf of the India Cements Limited and its management that certain statements that maybe made or discussed on this conference call maybe forward-looking statements related to future developments and based on the current performance.

These statements are subject to a number of risks, uncertainties and other important factors that may cause actual developments and results to differ materially from the statements made.

The India Cements Limited and the management of the company assumes no obligation to publicly alter or update these forward-looking statements, whether as a result of new information or future events or otherwise.

I would now hand over the floor to Mr. N.

Srinivasan -- Vice Chairman and Managing Director of the company for his opening remarks, which will be followed by interactive Q&A.

Thank you, and over to you, Srinivasan sir.

N. Srinivasan

Thank you.

The essence of this quarter is one of severe cost cutting, improvement in financial results to the extent that we are EBITDA-positive now.

When we started, we were 85 crores minus we went to Rs.65 crores minus which went to Rs.28 crores minus and now it is in the positive side.

That is in spite of the spike in coal prices, the company took a lot of steps to improve the efficiency of the plants, and in this direction, we have FLSmidth, we have the German experts and we also have included to advise us Boston Consulting, as a result of which, a lot of plans have been drawn up for refurbishing the plants, and to reengineering the plants so that they will perform better.

Although, all these improvements have not yet taken place fully, the result is there, that is, the whole company is working to gear to cut cost.

The coal prices which affected us, which was Rs.1.70 per kCal went up to Rs.3 per kCal.

This kind of an increase was impossible for us to manage.

Some companies have managed, but India has four regions.

In the northern region, the prices were not affected, the selling price could be India Cements Limited August 07, 2023 increased and therefore they escaped.

Some parts of western India also had their advantage.

So those who could increase the price of cement, escaped the wrath of the high oil prices.

We are in the south.

We are landlocked and we were not in a position to improve the prices once the tsunami of fuel price increase hit us.

We were also at disadvantage as the shipping through the black sea was also affected.

Slowly, some of these problems are behind us.

The cost of coal now has softened considerably and therefore we can say with certain degree of certainty that going forward the results would be even better than what you see now.

It must be borne in mind that we have a collection of plants of different vintage, of different technology which did not help us quickly reorienting to the high cost of coal.

But now that we have plans and we also have included Boston Consulting to give us further system approach, as a result of which, I am pretty certain that going forward, we will have good results, for example, the coal that is being fed into our kilns now is at about Rs.2.20 per kCal, but whereas I can buy outside at Rs.1.50 per kCal.

So, I'm carrying the benefit of so much.

The system of averaging the coal cost works against me in a falling market.

So therefore, next month.

I will have a much cheaper coal because I have in my inventory low cost coal.

These are the opening remarks I have.

I am very happy to respond to any queries.

Amit Murarka: · Another thing which has recently been coming up in discussion and I notice is the price gap

But generally, like in the past we have seen there being better discipline in the market around these things.

Why is it that we are not seeing it come back even though it's been almost like 1.5, 2 years, but seems like people are happy selling at lower pricing and earning lower margins?

Yes, exactly, that was my question that why is it so like it's been like almost two years, we've not seen any movement in cement prices almost in south, in fact it's only been way down, so just wondering why is it so?

Another thing which has recently been coming up in discussion and I notice is the price gap between Andhra markets and Tamil Nadu markets has gone down to almost zero.

Any specific reason for that?

But any reason in Andhra, it's been better apparently like prices have actually moved up in the last -

Moderator · Conference Operator

The next question is from the line of Rajesh Ravi from HDFC Securities.

Please go ahead.

Rajesh Ravi

Hi, sir, first, could you share the production and sales volume number for this quarter and then the shipping, wind and EBITDA?

Moderator · Conference Operator

The next question is from the line of Prateek Kumar from Jefferies.

Please go ahead.

Prateek Kumar

My first question is on the cost saving initiatives which you are working on with some consultants.

So, what is the kind of cash or expense outgo which -?

Moderator · Conference Operator

We'll take the next question from the line of Saket Kapoor from Kapoor Company.

Please go ahead.

Saket Kapoor

I missed the net debt number.

Sir, could you come again with the net debt number and the term loan and the working capital?

Moderator · Conference Operator

We will move on to the next question, which is from the line of Navin Sahadeo from ICICI Securities.

Please go ahead.

Navin Sahadeo

You mentioned that as a company we are engaging with the consultant for, as just said for some supply chain management related thing that saves us Rs.200 per ton or so and then we are also engaging with the likes of FLSmidth and other German equipment manufacturers who will help streamline production as you said on the waste heat recovery side and on the cooling equipment side.

So, my question was that does any of these initiatives and more so from the equipment manufacturers, will it lead to any temporary hit on production or some impact there before we see the outcome or -?

Moderator · Conference Operator

The next question is from the line of Rajesh Ravi from HDFC Securities.

Please go ahead.

Rajesh Ravi

First is on the CAPEX.

You have Rs.200 crores outgo on the WHR and there is a project, and you also have 400 crores of debt repayment, so total of 600 crores outflow, and you said that this will not lead to debt increase on books, refinancing may not be required.

Because this quarter EBITDA margin seems to be slightly negative, so are you looking significant jump in your operating profits?

Moderator · Conference Operator

Ladies and gentlemen, this will be the last question for today, which is from the line of Pratik Gadgil, an individual investor.

Please go ahead.

Pratik Gadgil

So, sir, can you please brief us on the sustainability and environmental initiatives you have undertaken in this quarter along with the figures?

Moderator · Conference Operator

Ladies and gentlemen, on behalf of PhillipCapital (India) Private Limited, that concludes this conference.

We thank you for joining us and you may now disconnect your lines.

Questions and answers

Moderator · Conference Operator

We will now begin the question-and-answer session.

The first question is from the line of Amit Murarka from Axis Capital.

Please go ahead.

Amit Murarka: · Another thing which has recently been coming up in discussion and I notice is the price gap

My first question was around the cement volume.

So, like generally we have seen that demand in the quarter has been good and volume growth has been strong for all companies, but I understand that it is not so for you.

So, like what is the reason for this continuing market share loss, if I can call that?