JK Lakshmi Cement Limited (500380) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Q3 FY '22 Conference Call of JK Lakshmi Cement Limited, hosted by PhillipCapital (India) Private Limited. [Operator Instructions] Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital (India) Private Limited. Thank you. And over to you, Mr. Agarwal.

Thank you, Janis. Good evening, everyone. On behalf of PhillipCapital (India) Private Limited, we welcome you to the Q3 FY '22 call of JK Lakshmi Cement. I need to highlight that JK Lakshmi Cement is also the holding company of Udaipur Cement Works Limited, and therefore, the call is also open for discussion about the performance of Udaipur Cement Works Limited. On the call, we have with us Dr. Shailendra Chouksey, Whole-Time Director; and Mr. Sudhir Bidkar, CFO of JK Lakshmi Cement. I would like to mention on behalf of the JK Lakshmi Cement and its management that certain statements that may be made or discussed on the conference call may be forward-looking statements related to future developments and 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 Lakshmi Cement Limited and the management of company assumes no obligation to update or alter these forward-looking statements, whether as a result of new information or future events or otherwise. I will now hand over the floor to the management of JK Lakshmi Cement for their opening remarks, which will followed by interactive Q&A. Thank you, and over to you, sir.

Thank you, Mr. Vaibhav, and good afternoon, ladies and gentlemen. This is Sudhir Bidkar, CFO, JK Lakshmi; along with my colleague, Dr. Shailendra Chouksey, Whole-Time Director, welcoming you for Q3 FY '22 con-call. We had the Board meeting yesterday; you would have all seen the results. So nothing much to add. I'll throw the floor open for question-and-answers, so that we have more questions, and we are able to clear whatever clarification or doubts you have with regard to the business or our [indiscernible] Over to -- the floor is now open for question-answer, please.

[Operator Instructions] The first question is from the line of Rajesh Ravi from HDFC Securities.

First of all, could you share the clinker production number and -- yes, for the quarter, was stand-alone and consol?

What do you want, clinker?

Clinker production number for this quarter, stand-alone and consol?

Yes. The clinker production in this quarter was -- for JK Lakshmi was 17.38 lakh tonnes, JK Lakshmi Cement. And as far as The UCWL is concerned, it was 3.08 lakh tonnes.

3.08 lakh tonnes. Okay. And sir, with RMC and noncement revenues?

Approximately INR 100 crores this quarter.

This is what, RMC or total noncement revenues?

Total noncement.

Okay. And RMC will be how much in this, sir?

RMC would be INR 42 crores.

Okay. Okay. And coming to Udaipur Cement, the CapEx, could you explain what is the progress and on the funding of the same?

Yes. As far as UCWL is concerned, this project is of you know as we mentioned last time is of 1.5 million clinker and 2.5 million tonnes of cement. So out of -- while the clinkerization entire will happen to Udaipur, 1 grinding unit of 1 million will also happen at Udaipur that is -- we'll take that as the first phase. And the second phase will involve a split location grinding unit of 1.5 million tonnes in Rajasthan. So the first phase, we have taken up for implementation and out of that INR 1,650 crores, this will cost about close to INR 1,250 crores and the INR 400 crores we have kept for the split location in grinding units. So most of the long delivery items have already been ordered, and we are -- we've already initiated action for seeking the government clearance and clearance from Rajasthan government also. Public hearing has completed. And the approval from airport authority being -- the plant being in proximity to the Udaipur Airport is awaited. [indiscernible] has already started. That is where we stand still now.

Okay. And on the funding aspect?

As far as funding is concerned, this will -- out of 11 -- as we mentioned last time out of INR 1,650 crores of project, this will be funded through a debt equity of 2:1, means INR 550 crores will be promoters' contribution and INR 1,100 crores will be the loan means that loan amount is INR 850 crores. So the financial closure has happened now. We have tied up the entire loan. And UCWL in their Board meeting held on 27th of January has already approved the funding of that INR 850 crores. So we have been able to get very fine rates. On a 15-year loans, we have tied up with the banks and -- which will have above 4 years moratorium and 7 years repayment. And out of the 4 years, 3 years may go in implementation, though the period could be shorter, and there will be 1 year moratorium after the COD, and we are in a state depend on a ballooning basis.

Okay. And this rights issue, is there any plans on that?

We will come back to the Board in the month of May when we announce the results with the exact timing and the terms of the rights.

Okay. Great, sir. And last, if you could throw some thought on the fuel price, how much per kilogram costing in the December quarter of per tonne costing? And how is that number in current quarter?

As far as the fuel cost is concerned, we saw the impact of the escalation in fuel prices also impacted us because we have been also -- though that impact is not amounts much because of the old inventory, but it's still impact is there. In this quarter, our blended fuel cost was INR 9,500 per tonne, about INR 6,600 in the corresponding quarter and about INR 8,350 in the preceding quarter. Currently, it is over INR 10,000, as per present fuel cost is concerned.

[Operator Instructions] The next question is from the line of Nitin Arora from Axis Mutual Fund.

The first question is, could you can throw some light on the demand because that's something looks like not improving [indiscernible] mix stock profits there. So if you can throw some light?

Yes. You want some light on the coming quarters, right?

Sir, the coming quarter. If you can throw some light why the demand is not improving in the last 4, 5 months? And what's your outlook on the demand, how one should assume going forward? That's my first question. The second question is, if I look at your profitability, and especially, the EBITDA per tonne, mostly you are touching INR 1,400, INR 1,350 over the...

Your voice is breaking, can you -- a bit louder?

Sure. Sure. What I'm trying to understand from you on the profitability, the EBITDA per tonne for us at the peak when the industry was doing INR 1,400, we were doing INR 900. And when the industry is down let's say, INR 1,200, INR 1,250 we are down to INR 600. Now going forward, if you can help us guide that for FY '23, what's the sustainable EBITDA per tonne one should assume? Should we go back to INR 700, INR 750, which we used to do earlier? That should be the sustainable number? That's my second question.

Well, as far as the first question is concerned, I think the demand got impacted mostly in the month of November. So 1 month alone was fairly bad. And that was because of the unseasonal rains and then reemergence of corona in the North and Gujarat. So the demand hit. Second reason why our volume went down was we had the strike of transportation in the East. So that affected our overall volume. But as far as demand is concerned, the third quarter, I think most of us suffered because of the very poor demand in November and first half of December. But otherwise, October was good, and second half of December was good. And consequently, in the month of January, we saw a good run on the demand. And I'm quite bullish for the demand continuing its trend in the month of February and March. So I think the January-March quarter should see a good improvement over the quarter October to December.

Now as far as the second part of the question is concerned, which is regarding the EBITDA per tonne going forward. So we expect it to be in excess of over INR 850 per tonne, depending on the -- that will be subject to 2 major things. One, how much fuel prices further pick up or settle down or soften; and two, our ability to pass on the cost increase on to the consumer, which will be a function of the demand in various markets where we serve. So we are quite hopeful it should be in excess of INR 850, close to INR 900 going forward.

Just to supplement Mr. Bidkar. See, in the last quarter because of the very low demand, it's 1.5 months period of the quarter, we -- our ability to push prices was not there. And then most of the companies refrained from making any attempt because of the continuing the very cold weather in the entire northern part. Now looking at the current demand, one is hopeful that one would be able to pass on some of these increases in the cost of their input, which has taken place. And if that happens, then obviously, our EBITDA correction should take place.

[Operator Instructions] The next question is from the line of Amit Murarka from Axis Capital.

Just on the cost side, like the WHRS, I believe was about the commissioned in December. So could you just confirm when did it get commissioned and also guide us to your cost savings that you expect to get in FY '23 from this?

This trial runs have already commenced therein. The -- some last-minute hooking is required. But otherwise, that has already been completed as far as the Waste Heat Recovery is concerned. And there, we expect to generate, as we mentioned last time also, a savings in excess about -- in the vicinity of about INR 22 crores to INR 25 crores.

Okay, sure. And could you also just share the debt numbers?

Yes, debt number, we -- as on -- as far as stand-alone JK Lakshmi is concerned, as of 31st December, we have total debt of INR 1,078 crores. And net of cash, it is INR 414 crores only. And if we -- one were to talk of the consolidated debt, it is INR 1,634 crores and net debt of INR 922 crores after taking into account cash and bank balance of INR 700 crores on a consolidated basis.

Got it. And also, could you share the trade mix in the quarter?

We had the total trade of about 54% in this current year. 54% is trade and 46% nontrade.

In Q3, right?

Overall, yes. Overall in the current year.

For the 9-month's period? Okay. It is 9-month's. Okay. Fair enough.

[Operator Instructions] The next question is from the line [ Yashwanth Kumar from Axis Securities ].

Sir, within the month of October, the 70 days, there were no production. So how much volume we would have lost because of that?

Because of the transporter strike, it was there for 30 days. It started around 19th of October -- September and continued up to 18th of October. So it was -- the impact was about 18 days for the current year -- current quarter as far as October-December is concerned, that too at about our plant only. So the impact was about 110,000 -- about 1 lakh, you can say broadly.

Okay. Okay. And sir, any price increase that you have taken in the month of January in our markets?

Yes. We have taken minor increase of about INR 5 a bag.

Okay. This is in all markets where you operate, East, West and North also?

Yes. You can say that.

Okay. And sir, how has been our premium cement sale during this quarter out of the CRISIL?

We are doing more than 25% alone, all markets combined.

Okay. So it has gone down because last quarter, it was around 30%, I think?

I think 30% was excluding the East, where our premium cement is lesser, but now cement is taken overall, is about 25%. Expecting a further increase there.

Okay. And sir, my last question, how has been our fuel mix during this quarter?

Sorry?

Fuel mix during this quarter?

Fuel mix was basically, we were using about 60% petcoke, 30% coal and 10% other biomass, et cetera.

[Operator Instructions] The next question is from the line of Mangesh Bhadang from Nirmal Bang.

Sir, a couple of questions from my side. Sir, firstly, on the fuel prices. So last time around, I think you have mentioned that we have fuel till Jan and Feb. So the impact would be limited. So is that -- was that basically the volume perspective or even the price was locked? That is the first question.

That was volume. Price was, obviously, we were procuring as and when based on the current market price only. But yes, the -- in the current quarter, our price was what we hit in the P&L was INR 9,500.

Okay. And sir, if you can give that the sale price -- sorry, the fuel mix that you gave, is it possible if you can give it for North and East, it is would be really helpful?

Sorry, come again?

The well mix for North and Eastern operations?

We generally don't give planned, right? But generally, just for the information of you and everyone, coal consumption is more in East because of their proximity 1 and to the linkage which they have. But generally, we don't share it region-wise. Broadly, I've given for the company as a whole. [indiscernible].

Okay. Sir, secondly, the cost item, which is purchase of traded goods, I think the highest that we have reported. So...

Sorry, can you repeat your question?

Sir, purchase of traded goods, the cost item in the P&L is the highest that we have reported, almost INR 120 crore. Is it largely because of the clinker purchases that we have to do on -- for the northern operations?

It is also what we are -- also at times procuring and getting clinker from Udaipur and getting it grounded at our locations in Gujarat to enable them to meet their and -- Gujarat needs. So that is...

Okay. So inter-company is also there?

Yes.

Yes. It's actually a part of our synergistic operations that we resort to the traded goods.

So overall, when we report the consolidated numbers, those get eliminated, obviously.

Okay. But sir, I just wanted to understand what would be the clinker purchases that you will need for this year?

We don't need any clinker purchases per se. It is more to take care of our logistics improvement -- cost improvement or cost reductions so as to say. Now if you can well understand if Udaipur was to sell in Gujarat, instead of they're transporting the entire cement from their plant to Gujarat, it makes better sense for them to sell -- transfer only clinker, which is only 17% of the cement and then use grinding facility -- our grinding facility where the flash is available and then save on 30% of the logistic cost. So that is how we are doing. Similarly, if we were to sell something in the -- closer to their plant, we also procure from them. So that is how the overall logistic cost rationalization is happening and market rationalization. So there's nothing called a requirement of clinker to be bought as such because our grinding capacity and clinker would be good enough to take care of our demand requirement in our regions.

Understood. So given the current clinker capacities that we have, what is the maximum cement production we can do, sir, for both? So we have -- probably, we would be doing somewhere around 10 million tonnes to 10.5 million tonnes this year. Where can it maximize?

It can certainly go maybe 12-plus million tonnes close to about...

Okay. But that assumes clinker from UCW, right? Higher -- much higher amount of clinker from UCW, right?

Yes. The combined clinker and the combined cement that can be made.

Yes.

Okay. Sir, if I can just ask the last question? So this is any consultancy charges that we have -- we paid this time around and what it will be for this year?

Sorry? Come again?

Any charges to consultants?

No, no. We -- that is long over. Nothing has been paid during the year to any external consultants.

[Operator Instructions] The next question is from the line of Sanjeev Kumar Singh from Motilal Oswal Financial Services.

Sir, I want to understand about cement prices and your realization. So in last 2 quarters, I believe, that realization for the company has gone up by around INR 200 per tonne. 2Q also, there was an impact of lower prices; 3Q also, we had lower prices in the East region. So what has contributed to this realization growth?

Yes. In the last quarter also, there was some price increases in terms of markets. So it was not that there was no price increase that we've made. But we could not take a uniform price increase, number one. Number two, we could do some improvement in our logistics in terms of direct sales, some higher percentage of trade and so on, and where it could get to higher prices. So it's a mix of efficiency improvement and some price increases this year.

Okay. So it's also because there have been improvement in trade sales, you are saying?

Yes. The improvement in trade sales as well improvement in the direct dispatches to the parties.

And in this quarter, can you give some sense how regional prices moved in the East, West and South and North region where you're operating?

Well, in East region, we have seen a price increase of about INR 10 in the month of January, and we are expecting a further increase. In South region also, we are expecting a price increase of about INR 8 to INR 10 a bag. Other states of the country are very minor. So I wouldn't comment there. These 2 states take about 70% of our contribution. If I come to North-West, we are starting to increase of about INR 5 in the northern market. And I expect a price increase of -- further about INR 5 to INR 10 between February and March.

Sir, I was asking about price movement in 3Q, the quarter which has gone by.

Yes. I think I told you about Q3. We have seen some price increases in the East, some in -- about INR 5 in North and about INR 7 to INR 8 a bag, which we'll have.

Okay. Okay, sir. Got it. Also, can you give consolidated sales volume?

Sorry?

Consolidated volumes?

For this quarter, yes, we had separately mentioned about 24.59 lakh tonnes for JK Lakshmi including clinker and 5.59 lakh tonnes for Udaipur. If one were to eliminate the interunit, then on a consolidated basis, we have clocked 26.14 lakh tonnes, which includes 23.43 lakh tonnes of cement and 2.71 lakh tonnes of clinker.