JKCEMENT — earnings call

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Prepared remarks

Moderator · Conference Operator

MR. VAIBHAV AGARWAL – PHILLIPCAPITAL (INDIA)

PRIVATE LIMITED. · Management

JK Cement Limited May 30, 2023

Moderator · Conference Operator

Ladies and gentlemen, good day and welcome to the JK Cement Q4 FY'23 Call 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 sir.

Vaibhav Agarwal

Good evening everyone.

On behalf of PhillipCapital (India) Private Limited, we welcome you to a Q4 & FY'23 Call of JK Cement Limited.

On the call we have with us Mr. Ajay Kumar Saraogi – Deputy Managing Director and CFO; Mr. Sumnesh Khandelwal – Deputy CFO; and Mr. Prashant Seth – President (Business Information & Investor Relations).

I would like to mention on behalf of JK Cement Limited and its management that certain statements that we made or discussed on this conference call may be forward-looking statements related to future developments on current performance.

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

JK Cement 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 now hand over the floor to the management of JK Cement for their opening remarks which will be followed by interactive Q&A.

Thank you and over to you Saraogi Sir.

Ajay Kumar Saraogi

Good evening, I will just go ahead, the Board of Directors met on 27th of this month to review the Company’s operations for Quarter ended March '23 as well as for the year.

Though we have posted everything on our Investor Presentation and also on the site, but still I will just read out some of the major achievements.

The quarter-on-quarter net sales was Rs.

2,332 crores as against Rs.

2,224 crores in the previous quarter an increase of 4%.

And the EBITDA during the quarter was Rs.

372 crores as against Rs.

257 crores an increase of 39%.

If we look at for the year our net sales was higher by 17% at Rs.

8,776 crores as against Rs.

7,529 crores.

And the EBITDA was however lower because of exceptional high cost mainly, was Rs.

1,346 crores as against Rs.

1,536 crores.

The earnings per share was Rs.

72.80 paisa as against Rs.

81.60 paisa.

This year as a whole has been a quite achieving year for the Company, the Company as you know commissioned the greenfield project of 4 million tons besides have also increased grinding capacity at different locations by 2 million tons.

So, 6 million tons have been added in capacity this year by which the Company is now a 20-million-ton capacity Company.

JK Cement Limited May 30, 2023 A further 3.5 million tons greenfield grinding is under installation, 1.5 million at Ujjain where the work has already started and within this fiscal this would be get commission.

Also at Prayagraj we have acquired the land and are awaiting the other approvals.

However, we have finalized the plant and equipment and we hope that by 2nd Quarter FY'25 this should also be on stream.

So, I would think we should not go on any other details, we will go straight to the question answers.

Shravan Shah: · Lastly on the CAPEX, so how much for this year, everything if you can break it up in the paint

So, it has reduced sizably from 470 odd hours versus last quarter so I think that was, we were trying to do.

So, is there any further scope since the Panna now is at 58% utilization.

So, can we say 10 to 15 kilometers further reduction from here on?

Second broadly in terms of now the entire growth particularly in the grey is driven by the Panna, which is already at 58.

So, how much we can expect the utilization for this?

So, broadly I am trying to looking at, can we see a 2.5, 3 million ton coming from the Panna so that would be the major growth for this year.

So, net-net kind of a 15% plus kind of a volume growth on the grey front, can we expect?

Thirdly if I heard it correctly on the media, our Kcal cost for this quarter was 2.4, what was in terms of the value terms.

Last quarter it was I think 12400 kilometer and how much more reduction we can expect in the first and second quarter?

So, at least for two quarters we can see at over Rs.

75 kind of a reduction.

So, broadly the thing was I was trying to understand from the perspective that now in terms of the pricing I don’t think we would have seen any increase in this April and May or maybe could we have some decline so overall in terms of improvement in profitability Rs.

100 to Rs.

120

Lastly on the CAPEX, so how much for this year, everything if you can break it up in the paint also and whatever ongoing is there for this year and next year?

I think last time we were looking at close to Rs.

1,400 odd crore CAPEX including everything but the numbers --

Moderator · Conference Operator

Thank you.

Next question is from Navin Sahadeo from ICICI Securities.

Please go ahead.

Navin Sahadeo

My first question was about realization.

So, simple arithmetic suggest your standalone realizations are up almost 2.9% or nearly 3% quarter-on-quarter and from the presentation if I include Panna even then I think sequentially there is a movement or improvement of almost 1.6% or over 1.5% and same improvement in realization.

So, my question basically was most of the industry peers have actually reported a flat to marginal decline in trend in realizations.

But I also understand this is a yearend quarter.

So, are there any yearend adjustments related to the thing factoring which we should not take this realization as a base or it has got to do more with the efforts of BCG and others that we were trying to narrow the gap, how should one look at realization?

Moderator · Conference Operator

Thank you.

Next question is Amit Murarka from Axis Capital.

Please go ahead.

It is 438 kilometers. · Shravan Shah:

Just in continuation of the point where you mentioned that the prior quarter included paint loss, so could you just quantify what was the revenue EBITDA for paint as well as let’s say about Central India operations separately?

You are right it is around Rs.

20 crore and EBITDA is around Rs.

1 crore.

And the EBITDA would be how much there?

So, the negative number is just on account of this one-off, is it how much was the one-off if you can quantify that?

And also, on the direction of the power and fuel cost you mentioned that there should be a $20 fall every quarter, but then in Rupees per ton you said Rs.

75, so I couldn’t reconcile that, but generally every $10 gives about Rs.

50 or so kind of reduction so like should it not be like higher, Rs.

100 every quarter or Rs.

300 to Rs.

315 in total.

But I am not so bothered about quarter-on-quarter but as an overall number if we just look at the spot, mix of fuel also.

But in total like it’s fair to say that about Rs.

250 decline over three quarters.

Also, just on this merger of Jaykaycem (Central) into standalone, by when will it complete and the next question would be like, would it also lead to some fixed cost savings once the merger is done?

And would there be any fixed cost savings?

Moderator · Conference Operator

Thank you.

Next question is from Rajesh Ravi from HDFC Securities.

Please go ahead.

Rajesh Ravi

My first question pertains to the incentives that would accrue into P&L, how much would that be on a per ton basis and by when that would start flowing through P&L?

Moderator · Conference Operator

Thank you.

Next question is from Prateek Kumar from Jefferies.

Please go ahead.

Prateek Kumar

My first question is on your paint business, would you have any guidance on expectation of year one, in terms of sales and then year two of sales now as you have started the operations --?

Moderator · Conference Operator

Thank you.

Next question is from Sanjay Nandi as an individual investor.

Please go ahead.

Sanjay

Can you please guide us on the pricing scenario from the exit of the March quarter as on date in different areas of operation?

Moderator · Conference Operator

Thank you.

Next question is from Keshav Lahoti from HDFC Securities.

Please go ahead.

Keshav Lahoti

The lead distance has come down by 7%, 8% in this quarter that is actually not visible in your transportation cost, it is marginally higher quarter-on-quarter, what is the reason for that?

Moderator · Conference Operator

Thank you.

Next question is from Navin Sahadeo from ICICI Securities.

Please go ahead.

Navin Sahadeo

My question was on the working capital.

So, is there a release that we are seeing in the working capital and how sustainable is this or I see almost like Rs.

1500 crore kind of reduction in networking capital year-on-year.

So, is that a temporary thing or it could reverse back?

Moderator · Conference Operator

Thank you.

Next question is from Tejas Pradhan from Citigroup.

Please go ahead.

Tejas Pradhan

Just wanted to check your share of blended cement seems to have gone up significantly this quarter, is it a sustainable increase and any particular target you have over here?

Moderator · Conference Operator

Thank you.

Next question is from Amit Murarka from Axis Capital.

Please go ahead.

It is 438 kilometers. · Shravan Shah:

Just wanted to get some status update on the Jaisalmer limestone lease, what is the position on clearances and all that?

Land acquisition has already started or will you start --?

And any timelines for completion of the land and --?

And in terms of priority like will Panna Phase II be a priority or you think this would take precedence over that.

Moderator · Conference Operator

Thank you.

Next question is from Shravan Shah from Dolat Capital.

Please go ahead.

Shravan Shah: · Lastly on the CAPEX, so how much for this year, everything if you can break it up in the paint

Just to follow up on the same, so whenever we finalize a broad idea in terms of whenever we want to go for the next leg of expansion, so as you mentioned or maybe the preference would be the Panna.

So, maybe year end FY24 we should have a clear idea that we are going for and we will start the CAPEX for that, that is a better way one can assume?

So, on balance sheet front so what we look at, so net debt is close to Rs.

2900 crores to Rs.

3000 odd crores now and given the profitability to improve now so at what level it will give a confidence that let’s say now the net debt is Rs.

2000 and we will start spending for the next expansion.

And second just wanted an understanding when we say that our margin in grey and white is same and now when the reduction in the coal and pet-coke is going to kick in, so is it fair to assume that maybe a 6 months, 9 months down the line maybe the grey margin would be higher than the white margin?

In that sense only, I was trying to understand.

And just a last clarification, you clarified that Rs.

30 crores would be an investment, for paint business I am saying when we say Rs.

150 to Rs.

180 crores revenue.

So, just trying to get a number at EBITDA level there will not be a loss?

So, that is a gross margin, so I was looking from the EBITDA margin perspective.

Moderator · Conference Operator

Thank you.

The next question is from Uttam Kumar Srimal, from Axis Securities.

Please go ahead.

Uttam Kumar Srimal

My question pertains to the competitive intensity, when this expansion gets completed we will have around more than 9 million ton of your capacity located in the central region.

That is around 40% of your entire capacity.

So, what kind of market share you are eyeing in the central region along with the competitive intensity because UltraTech is already a market leader over there.

So, any color on that?

Moderator · Conference Operator

Thank you.

The next question is from the line of Navin Sahadeo from ICICI Securities.

Please go ahead.

Navin Sahadeo

Just one clarification about the gross debt and net debt levels, so your presentation said gross debt is Rs.

4,534 crores at the consol level and net debt is about Rs.

2,900.

What is this number including working capital loan?

Moderator · Conference Operator

Thank you.

Ladies and gentlemen, that was the last question.

I now hand the conference back to Mr. Vaibhav Agarwal for closing comments.

Thank you and over to you, sir.

Vaibhav Agarwal

Thank you on behalf of PhillipCapital (India) Private Limited, we would like to thank the management of JK Cement for the call.

Thank you very much sir.

Moderator · Conference Operator

Thank you very much.

Ladies and gentleman on behalf of PhillipCapital (India) Private Limited that concludes this conference thank you all for joining us and you may now disconnect your lines.

Thank you.

Questions and answers

Moderator · Conference Operator

Thank you very much.

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

The first question is from Shravan Shah from Dolat Capital.

Please go ahead.

Shravan Shah: · Lastly on the CAPEX, so how much for this year, everything if you can break it up in the paint

Just one data point in terms of the lead distance is how much for this quarter?