Ultratech Cement S/Gdr

Ladies and gentlemen, today and welcome to the Alta Tech Cement Limited Q2 F524 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 statement on the basis of any subsequent development, information, or events or otherwise. 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 call, please signal an operator by pressing star, then zero on your touchtone phone. 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.

Good afternoon, good evening, everybody. Welcome to the second quarter earnings call for Alta Tech. With me, I have my managing director, Mr. Casey Chawar, and my colleagues from my finance team, so that any questions that arise can be answered fully. Let me start by saying, talk a bigger picture about cement as an industry. I personally believe cement is not for the weak-kneed people. Go anywhere in the world, it's a long-term story connected to the fundamentals of the economy. So if you're looking for a growth story, then emerging markets cannot be ignored. And within emerging markets, I'm sure everybody agrees that India is the fastest-growing large-size economy, and then that's the place to invest in. If you're investing in India... then infrastructure sector is surely generating growth, which is likely to see investments. And for infrastructure, cement is one of the key pillars for growth. Let me now jump on to the burning topic of costs and how it has been impacting the industry. When Russia war started, coal was... coal shot up to close to $400. Petco was close to $260. We have seen ups and downs from there. And it is not prudent, according to me, to analyze the costs from a given date. Input costs are never static. Every day can be different. Petco costs flirted with about $100 mark for a very brief period in the first week of June or somewhere around that time, June or July, and now have climbed very rapidly. They climbed back to $140. Whoever was able to book shipment in that period will probably have a short honeymoon in Q3. Besides coal or power and fuel is not the only cost driver, second quarter is always a very high maintenance cost quarter for cement industry. At Ultratech, we had almost 24 kills under shutdown, maintenance shutdown, which is a routine operating parameter. Besides, we are still celebrating our 100 million tons of production dispatch and sales in one financial year, which happened last year, for which a one-off special bonus was given to the employees amounting to almost 40 crores. I thought of calling it out as a one-off. And we have to wait and watch how crude behaves given the global scenarios that are emerging. Similarly, selling prices also keep fluctuating. With the recent price hikes that have happened, it's definitely a good thing to have on on the P&L, but I believe it should be a wait and watch game. Given the pressure on costs, we expect that the prices should hold, unless some companies are not able to sell at a higher price and they start peering differently in the markets. As of today, beyond the quarter ended September, I would definitely want to highlight how the prices are shaping up. Comparing to the exit of June, all India prices are up 7% to 8%, which was about 3% or thereabouts from June exit to September exit. But if you were to look at the quarter average prices, quarter average prices were marginally at 1% or 1.5%. over the previous quarter. Each region has been experiencing good traction in prices, and as we speak, currently all the prices are holding steady. We have seen price increases. Now, depending upon the comparative period, I am looking at comparison over June exit. The prices in East are almost up 7%, 8%. Similarly, Maharashtra is up 7%, 8%. South would be maybe 5%, 6%. North, again, 6%, 7%. Central is perhaps flat at the moment. Let me now quickly touch upon our expansion. The 22.6 million tons capacity expansion, which is in progress. Work is going on on full swing. we are confident of meeting our timelines. In addition to the 22.6 million tons of capacity that is ongoing, we are adding three more slag mills, totaling to 1.8 million tons, which will get commissioned along with this 22.6 million tons. So effectively, the second phase of growth will be 24.4 million tons. At the end of this second phase of growth, we should be reaching 159.65 million tons of capacity in India. The target is, let's say, June 25, plus minus. But as we start commissioning, we will gradually keep commissioning projects one after the other, and we will update you closer to the dates of commissioning. As I already mentioned, most of the locations are tracking very well on execution. During this quarter, we have, which is very visible with the kind of cash spend that we have had. We have spent almost 2,545 crores on CapEx. A large portion of that CapEx was towards our expansion programs. In addition to that, upwards of 600 crores was spent on working capital. We consciously built inventories of fuel given the short window that was available where prices were low. We expect to bring down our fuel stocks back to normal levels of 45 days of inventory by the end of March 24. We continue to remain negative in spite of bulking up our working capital. We continue to remain negative negative working capital company. Our net debt at the end of this quarter has risen to 4917 crores from the previous quarter. This is the consolidated number but this is as per plan and we are not really concerned about it. We will be able to push our net debt down further as we progress into the season time for cement industry beginning this quarter. You would have seen that we have grown 50% in domestic volumes. Along with international volumes, the effective growth is close to 16%. This is in spite erratic monsoons playing havoc in different parts of the country, disrupting smoother movements of material. I want to again call out the cement lead that we have achieved. We have achieved about 403 kilometers of lead, and the secondary lead, which is from our warehouse or railheads to the customer, is dropped to about 40 kilometers only. This clearly shows our capability and ability to serve our customers, which is supported by nearly 1,100 warehouses, 280 railway sidings, as also 52% of our dispatches are directly to our customers without having any stoppage in between. The commentary will be incomplete if we don't talk about environment issues. Some people do get concerned about cement sector because of its high emission norms. Well, as I said in the beginning, India needs infrastructure, which needs cement. And cement manufacturing, as of now, is still with limestone and fossil fuels. And fossil fuels remain to be the main source of fuel in the country. So there will be emissions. It is important to keep in mind how we are investing behind the reduction of carbon emission and continuously progressing on that path. As we speak, our various investment programs that are in place will take us to 60% non-fossil fuel energy by the time we complete our current phase of growth. You would have already heard India is bidding for 2036 Olympics. That sounds fabulous for the country and it's music for our ears. With that, thank you, ladies and gentlemen, and I hand it over for questions.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and one. The first question is from the line of Amit Murarka from Access Capital. Please go ahead.