Heidelberg Cement Q4Y17 Concall Summary

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Financial HIghlights

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  • In 2016 – 2017, paid up debt for about €45 million of ECB
  • The net debt stands at about Rs. 711 crores - Rs. 712 crores
  • Debt to equity ratio below CAPEX lies between Rs. 40 crores - Rs. 50 croreReceived Rs. 96 crore from an industry client from U.P.
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Volume Development

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  • Achieved 70% capacity utilization as against industry average of marginally less than 70%
  • Overall volume growth for the year has been flattish
  • In Q4 volume have increased by 9%
  • Q1 and Q4 had positive volume growth and overall volume growth for the year is 12%
  • Total volume- 1.21 million tonnes
  • Debottlenecking equipment to improve capacity by 5% to 10%
  • Flattish graph for the capacity utilization in first two months of Q1 2018
  • Clinker Capacity at Damoh is 3.1 million tonnes per annum

Cost Development

  • Gross realization gone up by 4.8%
  • Operating costs increased by 5.7%
  • EBITDA increased by 14%
  • EBITDA on a per tonne basis is Rs. 654 per tonne
  • Except Q1, increase in logistic costs for the rest of the quarters
  • Lead distance below 400 kilometers and rail mix of 50% - 50%
  • Total operating costs marginally up by 0.5% for the whole year
  • Major impact in costs due to increase in pet coke ,and other fuel and power costs
  • Volume and price development added about Rs. 172 million per tonne to EBITDA
  • EBITDA / t improved to INR 654 during Q4 FY 2016-17
  • EBITDA margins for year stands at 16.5% and for the quarter at 17.5%
  • Pet coke costs for Q4 are above Rs. 9000 per tonne
  • Q-on-Q inflation of more than 40% in pet coke costs
  • Rs. 100 increase in the prices during last month
  • Flattish price in the market due to unavailability of raw material
  • 6% price increase in power segment in Madhya Pradesh in April
  • Diesel prices gone up by Rs. 2
  • Ten years of benefit from M.P. government in case of VAT and at present they are in fourth year

Credit rating

  •  Credit rating of AA+ as compared to AA- in 2015
  • Cost control by the management helped in strengthening the rating

    Demand Developments

    • Positive demand in Madhya Pradesh
    • Slowdown in demand in Uttar Pradesh due to unavailability of sand in central U.P.
    • In terms of affordable housing little improvement
    • Major concern is the raw material availability, especially the sand which is acting as a bottle-neck in the demand of cement
    • Lot of dependency of demand on the sand ban in U.P.
    • Roads and housing are the major pockets along with ports
    • Latent demand pending to take off in the private housing sectorpost new government formation in U.P.

    Market

    •  3%-4% growth in U.P., M.P. and Bihar
    • 80% trade share and 20% non-trade share same as last quarter

    Fuel Mix

    • 70% pet coke and 30% domestic coalD
    • Inspire of increase in prices of pet coke, it is still cheaperCurrently have linkage coal so no plan for using international coal
    • Might have to stop using pet coke if the MoEF disapproves it

    Pricing Trends

    • Exit price for Q4 is expected to remain flattish
    • INAM-Pro website by Government for companies to state prices
    • It is a site for government related projects
    • Can buy from this site at government nominated rate
    • The prices quoted are around in the range of between Rs. 160 to Rs. 180 per bag
    • Excise and VAT applicable on the above prices
    • Gross realization of about Rs. 3,200 per tonne
    • Rs. 5 per bag of brand premium as against industry average
    • Factors affecting price realization:
    1. Market, where they want to take
    2. Sourcing of cement

    GST Implementation

    • Ready to implement GST from 1st of July 2017

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