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RAMCOCEM — earnings call

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Prepared remarks

The Ramco Cements Limited (RAMCOCEM) Investor Update 2QFY24 November 9, 2023 “The Ramco Cements Limited

MF Farooqui – Chairman · A.V. Dharmakrishnan - Chief Executive Officer

A.V.

Dharmakrishnan - Chief Executive Officer S.

Vaithiyanathan - Chief Financial Officer

Moderator · Conference Operator

Navin Sahadeo – ICICI Securities Harsh Mittal – ICICI Securities The Ramco Cements Limited (RAMCOCEM) Investor Update 2QFY24 November 9, 2023

Good evening, everyone.

On behalf of ICICI Securities, I welcome you all to the Q2FY24 earnings call of The Ramco Cements Limited.

From the management, we have with us, Chairman, Shri.

MF Farooqui; CEO, Shri.

A.V.

Dharmakrishnan; and CFO, Shri.

S.

Vaithiyanathan.

We will start the call with opening comments by the management followed by interactive Q&A.

So without any further ado, I’ll hand over the call to the management for their opening comments.

Over to you, sir.

MF Farooqui – Chairman · A.V. Dharmakrishnan - Chief Executive Officer

Thank you very much.

Good evening, everyone.

We very warmly welcome all of you to the earnings call of Ramco Cement to discuss unaudited results for second quarter of financial year 2023-2024.

We hope you would have seen our results and updates by this time.

The cement demand has been strong, but the prices have been under constant pressure during this quarter.

Prices have improved in October 2023 and I hope it sustains.

The key highlights of our performance for the current quarter is, sale of cement has improved to 4.61 million tons, compared to 3.35 million tons in the corresponding period, with a growth of 38%.

The share of premium products has improved to 28% in the current quarter from 25% in the corresponding period.

The cement utilization rate for the current quarter is 82% as against 66% in the corresponding period.

Net revenue for the current quarter is Rs.2,343 crores as against Rs.1,793 with a growth of 31%.

EBITDA for the current quarter is Rs.412 crores as against Rs.193 crores in the corresponding period last year.

EBITDA margin for the current quarter is 18% as against 11% in the corresponding period.

Blended EBITDA per ton for current quarter is Rs.894 as against Rs.575 in the corresponding period.

Profit before tax for current quarter is R.138 crores as against Rs.16 crores in the corresponding period last year.

The power and fuel cost per ton of cement for current year second quarter has decreased to Rs.1,358 from Rs.1,989 in the corresponding previous year period.

A change in utility of sale of wind power to captive use has helped to reduce the overall power cost.

The overall green power usage has significantly improved to 38% during the quarter from 22% in the corresponding period.

Thanks to the wind power usage for captive purposes and the Waste Heat Recovery System, WHRS.

The green power share is likely to reach 40% for the financial year 2024, and 45% in the financial year 2025.

Coming to fuel prices.

The spot CIF prices of pet coke was as low as $104 in June 2023, but slowly has gone up to $138 now.

The pet coke prices are key to watch.

Our pet coke consumption for the current quarter stands at 53%.

Due to commissioning of Kolimigundla Integrated Unit, RR Nagar Line-3 and Dry Mortar Plants in RR Nagar and Salem, the interest cost and depreciation has gone up to Rs.117 crores and Rs.157 crores, respectively, for the current quarter.

With regard to the status of capacity expansion in Kolimigundla, TPP of 18 MW will be commissioned during December 2023 and railway siding will be commissioned during June 2024.

Expansion of capacity of dry mix products in AP and Orissa will be commissioned during December 2023.

Expansion of grinding plant from 0.9 MTPA to 1.8 MTPA in Orissa is expected to be commissioned during January 2024.

During the current quarter, the company has incurred Rs.941 crores towards CapEx, including the purchase of limestone bearing lands in Andhra Pradesh and Karnataka.

The net debt as on September 30, 2023 is Rs.4,966 crores.

The Ramco Cements Limited (RAMCOCEM) Investor Update 2QFY24 November 9, 2023 With this, I will conclude my opening remarks.

We are open to questions now.

You are welcome to pose your questions.

And indeed, before parting, I'd like to wish all of you a very, very happy Diwali.

Moderator · Conference Operator

Great.

Thank you so much, sir, for the opening comments.

Should we begin the Q&A?

Great.

So, ladies and gentlemen, we'll start the Q&A.

Please press the show of hand icon.

We already have three participants for the Q&A.

First, we start with Amit Murarka.

Amit, go ahead, unmute yourself and ask your question, please.

Amit Murarka

Yeah.

Hi.

So the first question is on CapEx actually.

So I see from the balance sheet that Rs.1,225 crores has been spent in the first half.

Where do we stand now on the CapEx for FY24?

And could you explain the reasons for the spend being so much higher than the expected numbers?

Could you quantify that amount?

So how much would that amount?

Okay.

And for full year then what should we expect?

Like including this Rs.1,225 crores, what should we think of full year now?

Moderator · Conference Operator

Thanks.

Amit.

Please mute yourself.

We have the next question from Indrajit Agarwal.

Indrajit, please unmute yourself and go ahead, please.

Indrajit Agarwal: · Yeah. This is helpful. And, lastly, one more question on expansion, right, while you

Hi, thanks for the opportunity.

I have a couple of questions.

First, going back to the land acquisition that we have done, is it more for the expansion of capacities or will it only augment the current limestone block?

So can we assume that this will enable us to add more capacities or just for reinforcing whatever we have right now?

Got it.

And if you can help us understand what is the remaining CapEx on the ongoing projects?

Not for the new projects, but for the ongoing projects, just to get a sense that what kind of CapEx we can see in FY25?

Yeah.

This is helpful.

And, lastly, one more question on expansion, right, while you will say that you will come back with more details.

But is there a thought process of expanding out of south and east, maybe north or west?

Any of the other regions we are evaluating or any progress on that we have?

Sure.

Thank you.

That is all from my side.

Moderator · Conference Operator

Thanks.

Next in line is Shravan Shah.

Shravan, please go ahead with your question.

Shravan Shah

Hi.

Thank you for the opportunity.

So first is on the pricing front, how much of October prices what we have seen?

So how much till now we have seen the prices getting absorbed?

Moreover, is there a possibility, because in November festivity season, how much more rollback is possible?

In addition, if at all happens and by December can we again able to take a price hike?

Moderator · Conference Operator

Thank you.

Next is Satyadeep Jain.

Satyadeep Jain

Hi, sir.

A few questions, just on the follow-up on the land acquisition.

I believe, in Kurnool, you already had sizable land acquisition.

The new acquisition you have done, most of it would be Karnataka, I imagine.

Moderator · Conference Operator

Thanks.

Raghav Maheshwari is next in queue.

Raghav, go ahead, please.

Raghav Maheshwari

Sir, firstly, congratulations on good set of a volume growth.

I think your right application of right product is right now working very well for you.

Sir, my question is from you at the end of FY25 our cement capacity will be around 24 million ton and clinker around 14.23 million ton.

Is it the understanding correct?

Moderator · Conference Operator

Thanks, Raghav.

We have a follow-up from Amit Murarka.

Amit, go ahead, please.

Amit Murarka

Yeah.

Hi.

Just a question on power and fuel.

I see that in rupees Kcal, the fuel cost has dropped, I think, 12%, 13% QoQ.

But the power and fuel cost number seems to have dropped by almost like 24%, 25% QoQ.

So could you just help bridge that gap in the two?

Moderator · Conference Operator

Thank you.

Next is a follow-up again from Shravan Shah.

Shravan, go ahead.

Shravan Shah

Yeah.

Thank you.

Sir, first is finance cost and depreciation, definitely, we mentioned the region just trying to understand this quarterly run rate.

What we have reported both the depreciation and finance cost.

Will it remain or likely to even inch up further in third and fourth quarter?

Moderator · Conference Operator

Hello.

So the next question is from Pathanjali Srinivasan.

Please go ahead.

Pathanjali Srinivasan

Hello.

Am I audible, sir?

The Ramco Cements Limited (RAMCOCEM) Investor Update 2QFY24 November 9, 2023

Moderator · Conference Operator

Thank you.

We have a next question from Mr. Raghav Maheshwari.

Please go ahead.

The Ramco Cements Limited (RAMCOCEM) Investor Update 2QFY24 November 9, 2023

Raghav Maheshwari

Sir, my question is right now; our green mix power is 38%.

What you are indicating that we are also looking for adding WHRS for our Tamil Nadu based plant?

So if we get succeed into the set up at Tamil Nadu based plants on WHRS, then what should be the target for the green power?

Moderator · Conference Operator

Thank you.

We think that we have a follow-up question from Mr. Shravan Shah.

Please go ahead.

Shravan Shah

Yeah.

Sir, just to clarify.

So currently our cement capacity is 22 million ton; 0.9 million ton, Orissa will come.

So that will take to 22.9 million ton.

And with the Kurnool grinding, whenever we will take – that will take to 25 million tons.

So close to 2.5 million ton grinding will be there for Kurnool.

Moderator · Conference Operator

Thank you.

We have a follow-up question with Mr. Raghav Maheshwari.

Raghav, please proceed.

Raghav Maheshwari

Sir, one question from the pricing front.

Firstly, we saw the price collapse particularly in the Tamil Nadu in the month of the March, which again started to raise until some level from the October.

I think, in my understanding, I saw this is the first time in decade, where the Tamil Nadu prices are lower compared to the AP or the Telangana based players?

So how will you see the pricing right now and for the future and for this financial year, particularly for the Tamil Nadu and Kerala markets?

Moderator · Conference Operator

We have a next question from Mr. Amit Murarka.

Please go ahead.

Amit Murarka

Yeah.

Hi, thanks for the follow-up.

So just wanted to get some update on the Karnataka also, I believe you already had some limestone and then you are acquiring land as well.

So if Kurnool is going to the priority, then should we then expect like Karnataka project to be taken up only like post FY26?

Moderator · Conference Operator

Thank you.

We have our next question from Mr. Rajesh Ravi.

Please go ahead.

Rajesh Ravi

Yeah.

I say congrats on good set of numbers.

Very strong volume growth.

Maybe you guided the second half also; you could replicate this volume growth of 1H.

Just on the CapEx front, if I missed it earlier, what is the total CapEx guidance for this financial year and next year one?

Second, for the Kurnool project, you mentioned the incremental capacity addition would be around 1 million-ton clinker and 2 odd million ton grinding?

Moderator · Conference Operator

Right.

Thank you, sir.

Therefore, we have next question from Navin Sahadeo.

Sir, please go ahead.

Navin Sahadeo

Right.

Thank you for the opportunity.

Sir, just a clarification you mentioned volumes in the second half will be good as the first half, so did you mention the growth rate of 30%, 35% year-on-year or absolute volume?

Moderator · Conference Operator

Thank you.

We have our next question from Mr. Prateek Maheshwari.

Prateek, go ahead.

Prateek Maheshwari

Thank you, sir.

Thank you for the opportunity.

Sir, I have one question relating to your east operations.

So, just wanted to understand, sir, over the last 2 years, how's the presence in the other markets, apart from your South West Bengal, like for the Jharkhand, Bihar and North Bengal, which was planned to kind of you will expand your presence.

So how has that shaped out like has the share of your volumes in east has increased in these markets and what is happening there?

Another question, sir, just wanted to understand since you are saying that you do not have lot of reserves in other markets apart from the Karnataka.

So what is your perspective on inorganic expansions?

There are a lot of assets that have come in, but we have rarely seen your participation for these assets.

Apart from this just recently bought Prism.

So just wanted to understand, sir, your perspective on both aspects.

The Ramco Cements Limited (RAMCOCEM) Investor Update 2QFY24 November 9, 2023

Moderator · Conference Operator

Thank you.

We have a follow-up question from Mr. Rajesh Ravi.

Rajesh, please go ahead.

Rajesh Ravi

Yeah, Sorry, sir, missed again on this volume commentary.

What you answer to an earlier participant.

So first up you grew almost 30% plus.

So what is the outlook for the full year you are looking at, sir?

Moderator · Conference Operator

Thank you.

As there are no further questions, I hand over the call to the Ramco Cement management for their closing comments.

Over to you, sir.

MF Farooqui – Chairman · A.V. Dharmakrishnan - Chief Executive Officer

Yeah, I think we had a wonderful interaction, and I must thank all of you for your active participation and all the queries, which you have raised.

I think we believe in transparency, and we hope that we would have answered all your queries to the best of your satisfaction.

Therefore, we would now like to close this meeting, and I would once again like to thank all of you and wish you all a very happy Diwali.

Thank you.

Moderator · Conference Operator

Thank you, sir.

On behalf of ICICI Securities Limited, we thank you for joining us on this call.

Thank you and Happy Diwali.

Thank you.

Disclaimer This transcript is based on the best available information at the time of transcription and has been modified to reflect the correct picture.

The Company shall not be liable for any errors, omissions, or inaccuracies in the content.

This transcript may include forward-looking statements that involve risks and uncertainties.

Actual results may differ materially from those indicated in such statements.

The Company undertakes no obligation to update or revise these forward-looking statements to reflect events or circumstances that may arise after the date of this transcript.