Ultratech Cement S/Gdr

Ladies and gentlemen, good day and welcome to the Ultratech Cement Limited Q1 FY27 earnings conference call. 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 touch-tone phone. I now hand the conference over to our CFO, Mr. Atul Daga, Thank you, and over to you, sir.

Thank you, Reo. Good afternoon, ladies and gentlemen, and a very warm welcome to this earnings call. The one big theme for us, quarter after quarter, is demand. If the demand is good, everything falls in line, and I'm delighted to report that the first quarter of fiscal 27 has reaffirmed that conviction emphatically. The quarter began with the shadows of West Asia conflict, ended with a de-escalation, and now we know where we are. The situation is still fluid. But with a double-digit volume growth and a demand pipeline across infrastructure, housing, and urban real estate, it is as rich as it can be. Altisync has kicked off fiscal 2017 with a very strong capacity base ready to serve the country and we intend to grow like a challenger and not an incumbent. India's macroeconomic engines continue to demonstrate remarkable resilience. Even as global energy market endured one of the most disruptive supply cycles, India's domestic consumption and investment flywheel kept turning. Indian government is managing and planning its strategies supporting the industry at large in the country. Benchmark lending rates have remained attractive, improving housing affordability and lowering the cost of capital for infrastructure developers like us. There are near-term data points we watch very candidly. Core sector growth slowing down in the month of May Lower coal and refinery output and aggregate state capex in April-May growing a modest 2% year-on-year. These are, I believe, timing effect and not any change in trends. To give you a perspective of what is being announced and executed across the country, because that is tomorrow's cement demand, The first and foremost, if I were to call out, Maharashtra is planning a core 20,000 crore greenfield shipbuilding cluster anchored around Mazagon Dock. Orissa has announced a deep-sea port at a place called Ganjam shipbuilding cluster at Paradeep with investment of over 50,000 crores. Tamil Nadu has signed 18,000 crores MOU for data centers and shipbuilding projects, ports, shipyards, data centers are among the most cement-intensive asset classes in the economy. The cabinet has approved 20,000 crore plus Ahmedabad-Dholera semi-high-speed rail corridor. Metro programs continue to expand across Ahmedabad, Bangalore, Mumbai, Pune, and Uttar Pradesh. There is additional 30,000 crore infusion into NIF with private capital across roads, ports and urban infrastructure. India's capric revival is also being propelled by power and data centers, both concrete hungry sectors. Housing and urban real estate, roughly 55 to 60% of India's cement consumption, has a very strong start to calendar 26. Mumbai, the heart of construction activity in India, The property registrations grew about 6%. Across India's top eight cities, the quarter one 2026 saw a very big growth in the number of units sold as per the data available from registry records. Prices have remained strong for the real estate market, which means it's a structurally mature end user driven market, where the adoption is keeping pace with supply. Bangalore, stood out on the strength of GCC and technology sector employment. Redevelopment space is equally significant for cement industry. Mumbai's slum rehabilitation authorities had to redevelop about 850 acres of land. Developers are still land banking aggressively. Private sector real estate companies continue to acquire land parcels in various cities across the country. Commercial real estate is not getting left behind. India's graded office market opened up with a very strong first quarter I understand. Net-net, premium housing, redevelopment, office towers, hotels, this is urban India building upwards and outwards simultaneously and every square foot of it is built on cement. That gives us the confidence for cement demand growth. Let me now turn to our own scorecard. Q1 was the highest ever first quarter performance for Ultratech across volumes, revenues, EBITDA, and profit. In volumes, you'll see in our presentation, we grew about 13.1% in volume terms for the domestic markets. Capacity utilization was stronger at 81% as compared to 76%. EBITDA, 5,146 crores. and pad of 2604 crores which was up 17.2% over the last year same period. Interestingly and very proud to tell you, we have converted the Kesoram and India Cement brands to 100% Ultratech. They were operating in B or C category space. We did not vacate that space. Post brand conversion, the true performance of Ultratech is visible In fact, if you look at the brand growth, the brand has grown 21% over the same period last year. Our team has been successful in converting the customers who were buying a B or C category brand of cement into an A category brand of cement, willing to pay a price premium. Our domestic gray cement volumes growth of 13.1%. I believe will be well ahead of industry's growth, translating directly into market share gains. Capacity utilization of 81% in a seasonally transitioning quarter on an enlarged 200 million ton base speaks to the depth of our demand pipeline. This is the most important feature of Ultratech, the power of our brand. Revenues grew 16%, EBITDA rose 12%, and ever highest, you know, 5,000 crore plus EBITDA for April-June quarter. Profits were about 17%. Operating EBITDA per ton has been steady above 1,200 this quarter as well. I want you to appreciate the stability that it represents. We have absorbed and are absorbing the sharpest imported fuel cost shock in recent memory during the quarter. on a volume base enlarged by acquired assets that are still ramping up to system profitability. And we held per turn earnings essentially flat while growing absolute EBITDA 12%. That is cost discipline and operating leverage working exactly as designed. We hope that fuel prices will normalize in the near future. The acquired assets improvement, improvement CAPEX-led cash flows through the P&L over fiscal 27 and 28, which will result in the per ton EBITDA trajectory only moving in one way in a sustainable direction upwards. The discussion will not be complete if we don't talk about prices. Cement prices have been constructive during the last quarter, the quarter in the report. Our All India Exit prices improved through June even as the monsoon now sets in. East and South led price improvements. Central and West were steady and North was more or less a consistent performer. Industry expects prices to hold broadly steady through the monsoon quarter due to the impact of increase in costs which frankly is a constructive outcome for this time of year. with cost escalations of the past two quarters still to be fully passed through and demand momentum of the kind we are witnessing, we see a supportive price environment as a busy season approaches. Our premiumization engine and blended cement in the trade mix continues to do quite a compounding work on blended realizations regardless of headline price movements. This is why our retail focus matters so deeply to us. The retail market is built around the individual customer, IHP, the person who decides what their house will be built with. For that customer, a home is a once in a lifetime investment, representing a large part of their life's wealth. Hence, I believe cement is not just a commodity purchase. The customer does not shop for the cheapest bag, They reach for the brand they trust, the quality they can stake their family's future on. That is the premium and that is why it endures. As India urbanizes, last data I have is about 35% of India is urban. We will reach about 39% by 2030. This compares to In countries like Indonesia, which are already 59% urbanized, there's a long way to go for construction, development, and urbanization. We should quickly touch upon the West Asia crisis. Q127 opened with the most destructive situation, the state of Hormuz effectively closed. Nobody knew what state of, at least I did not know what state of Hormuz was before the war. crude cross $100 and our coal cost hit the roof. Things are still uncertain, but we are focused on achieving our targets. Through the crisis, our structural buffers did their job pretty well. Structural buffers, what I mean is our green power of about 1.897 megawatts met about 47% of our total power requirements at the end of this quarter. For the quarter it was a lower number but we have exited the quarter with 47% of our power being met by renewable sources which are cheaper also. We continue to ramp up our AIFR substitution and cement lead distance for this quarter has come down to 360 kilometers. We absorb the shock better than any pair and we will harvest the relief faster than any pair. Permit me briefly to be slightly modest because the data that I want to talk about clearly shows Ultratex power. Ultratex volume and profitability trajectory over the past few quarters have consistently outpaced the industry. June 2022 quarter, AlterTech grew 17.7% in volume terms, EBITDA of 1230, whereas rest of the industry, cement industry grew about 15.5% and 800 EBITDA per ton. The numbers continued like this, June 23, 20% volume growth and 15.4% volume growth for rest of the industry. Our EBITDA was higher by 25%. June 24, 6.5% volume growth and rest of the industry de-grew. Our EBITDA was 26% higher. June 25 and September 25, we had a bit of a shock in our volumes where we de-grew, but we came back with a bang December 25 quarter we grew 15% industry growing less than half our growth. March 26 we grew 9% industry growing again less than half our growth. June 26 we have grown 13% wait for the results to come out for us of the industry and we know where the market share gains are. Capix is something which is at the heart of our growth story. Pistol 26 we completed the year with about 9,500 crores deployed on the Capix program. This journey will continue in April 26 or in this quarter around 12 million tons of new capacity has got commissioned in the country out of which 8.7 million tons is by Ultratech. Shahjampur 2.7, Vishakapatnam, Patratu, which is Jharkhand. Jharkhand tweaking our domestic capacity to 200.1 million tons and total capacity to 205.5 million tons. Projects under execution for capacity growth are backed by a capex of about 17,000 crores in the next two, two and a half years. will take our consolidated capacity beyond 242 million tons with gray cement capacity to reach 212.7 million tons by the end of fiscal 27 and further balance to be completed in the next year. Every ton of committed expansion at Ultratech is fully backed by secured limestone. There is no raw material constraint anywhere on this growth trajectory. Alongside capacity, we continue to invest in structural cost advantages. Green power, which now stands at 1.897, close to two gigawatts of renewable green power. Out of this, 71 megawatts was of renewables and 19 megawatt of WSRS was commissioned in this quarter. We believe we will reach anywhere between two and a half to three gigawatts very shortly. All these growths, capexes, the cost improvement initiatives are all being funded with internal accruals. We have started the year with a net debt EBITDA of 0.94 and the quarter we have ended with 0.87x net debt to EBITDA. Our belief is and we are confident that this year also will end in net EBITDA below 1x. The call will not be complete if I don't speak about India Cements. What a turnaround story it has been for us. There has been small murmur around the revenue numbers. Let me clarify. While the printed number speaks about 1013 crores of revenues, as compared to 1,021 crores of revenue same period last year, but there's an accounting adjustment because if you look at net of freight cost, since we have started the reporting ex-factory sales from Q1 27, knocking off the freight costs, the revenues were 993 crores as compared to 821 crores on a like for like basis, which is a 21% growth in revenues. backed by a 19% growth in their volumes. This is a clear illustration of a principle this management, Ultratex management's whole secret. We deliver what we commit. When we acquired ICL, we told you it was a turnaround waiting to be unlocked. Found assets in strong markets, held back only by years of underinvestment and subscale operating discipline. One year in, That turnaround is no longer a promise on the slide. It is a trajectory you can read in the numbers. The improvement has been sequential and unbroken. India Cements EBITDA per tonne has climbed from roughly 386 per tonne in Q226 to 400 to 509 and 603 this quarter. Gain which is quarter after quarter exactly as we said it would be. and every lever behind that number is one we own. Brand migration to Altertech is 100% complete. Premium and trade volumes are rising. Cost improvement capex of about 2000 crores is being deployed into waste heat recovery, preheater upgradation, cooler upgradation, et cetera. And the step change in the green power trajectory from around 3% of their power requirements to about 86% of their power requirements by the end of fiscal 28. You should also notice the rapid improvement in conversion ratio for India Cements. Today we are already at 1.5x conversion ratio for India Cement production also. Q2 fiscal 27 may look optically softer as the seasonal monsoon slowdown and the cost effects of West Asia disruption way on the quarter. But I would like you to look through that noise. The direction of travel is unmistakable and the destination is unchanged. An EBITDA of 1000 per ton for India Cement remains very much in sight with the full benefit of the CAPEX program flowing through the P&L from Q4 fiscal 28.

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