Star Cement Limited (540575) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q1 FY '22 Earnings Conference Call of Star Cement Limited, hosted by PhillipCapital India Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Agarwal from PhillipCapital India Private Limited. Thank you, and over to you, sir.

Thank you, Janice. Good afternoon, everyone. On behalf of PhillipCapital India Private Limited, we welcome you to the Q1 FY '22 call of Star Cement. On the call, we have with us Mr. Sanjay Kumar Gupta, CEO; and Mr. Manoj Agarwal, CFO of the company. At this point in time, I'll hand over to the management of Star Cement for their opening remarks, which will be followed by interactive Q&A. Thank you, and over to you, sir.

Good afternoon, everyone. I'm Sanjay Gupta, CEO of the company. I'd like you to welcome you all to this earning call for quarter 1 FY'22. I have with me Mr. Manoj Agarwal, CFO of the company. He will take you through Q1 numbers. And after that, we'll open the floor for the interactive session where you'll be able to ask questions, and we'll be happy to reply those questions. I will hand you over to Manoj Agarwal to take you through Q1 earnings. Over to Manoj.

Hi Friends, very good afternoon. I, on behalf of Star Cement Limited, welcome you to all to our control for discussing our numbers for our number of Q1 FY'22. I would like to clarify that we are discussing on the historical numbers, and there is no indication to invest. Having said that now, I will just take you through the Q1 numbers. As you are all aware that on account to the COVID -- second wave of COVID, there are restriction imposed by the state government regarding the restriction on the movement of vehicles as well as the opening of market. So that resulting the -- that has impacted our resurgence in the second month. Starting from the clinker production, during the quarter ended June 2021, we have produced 4.31 lakh ton of clinker as against 3.31 lakh ton in same quarter last year. So far as clinker production is concerned, we have produced 7.72 lakh tons this quarter as against 4.16 lakh ton same quarter last year. This quarter, we have taken shutdown in our main clinker unit that is why clinker production is lower. Now I will take you through sales volume. During the quarter, we have sold 7.60 lakh ton of cement and negligible continue of clinker and we have 4.47 lakh ton of cement and 0.02 lakh ton of clinker same quarter last year. This is as far as cement and clinker sale is concerned. As far as geographical distribution of cement is concerned, in Northeast, we have sold around 6.03 lakh tons as against 3.43 lakh tons during the same quarter last year. And as for our outside Northeast is concerned, we have sold 1.58 lakh tons of cement this quarter as against 1.04 lakh tons same quarter last year. In terms of blend mix, it is almost 8% of OPC and the rest is PPC. These are the quantity numbers of the quarter. Now I will take you through the -- to the financials. The total revenue figure this quarter is around INR 511 crores against INR 292 crores same period last year. As far as EBITDA figure is concerned, this quarter, we have done an EBITDA of around INR 101 crores as against INR 71 crores last year. That is INR 68 crores as against INR 43 crores in the same period last year. On per ton EBITDA front, it is INR 1,330 during this quarter as against INR 1,586 per ton same quarter last year. This is what our quarterly numbers till first quarter. Now I request all of you that if you have any queries, you can ask the same, and I request Vaibhav to moderate the queries wherever if required. Thank you. We'll go to Q&A.

[Operator Instructions] The first question is from the line of Shravan Shah from Dolat Capital Markets.

Sir, first of all, on the Siliguri plant. Last time, you said that due to some issues, we were able to only produce 0.1 million tons of cement till now give the situation how much we have produced in this quarter and consider the capacity utilization into ERP?

No. I think this quarter, we have produced around 159,000 tons of cement from Siliguri. As you are aware that -- these are largely the start of -- we could only get 2 months' time, right? And after that, we have started shipping there in North Bengal and the capacity utilization as of now is around 30%, 35%. But we hope that we are going to ramp up this capacity utilization in coming quarters as we go along, but we are still looking at a very robust demand as far as North's Bengal and East Bihar is concerned, which are other company matters.

Okay. So broadly, last time you are looking at a double whatever you wanted to highlight post...

Mr. Shah. Sir, your voice is breaking up. We're not able to hear you clearly.

Is it fine now?

Can you have the handset mode while speaking?

Yes, I'm using handset mode. Is that fine?

Sir, please proceed.

Yes. Sir, I was saying that post June and July and August in terms of the demand, how it is and previously, we were looking at double-digit volume. So is there any uptake in terms of guidance on the volume front? And also on the pricing. So how is the pricing post the June and July and August, how much decline we have seen in East and Northeast. So whatever you can explain, that would be helpful.

So I think you've asked all the questions in one question, right? So let me just take you through demand first. So Northeast, demand is, I'll say, still remain robust. We have seen last year the market has still grown at around 6%. We hope to see the same kind of demand, maybe probably a little bit better than the last year, they're expecting around 8% overall cement demand growth in Northeast. The East market has grown at around 4% last year. We hope to see at least a 6% overall cement demand growth in the East where -- in the areas where we operate. So that is what our overall expectation is. As far as the price is concerned, there is a small decline in prices in Northeast. And I'll say that the pricing has gone down by somewhere around 3% to 4%. There is a decline of around INR 10, INR 15 a bag. Outside market, the prices have -- if I compare them, the prices in the month of May and then June and July, and today, prevailing prices are at least down by around INR 25, but these are nothing unusual. I still feel that by the end of -- then we will be continue to see some kind of pressure on prices, but I think by September, we will see the decline to arrest. And slowly, we look forward in quarter 3, there will be an upward momentum in the prices. That's what the expectation we are having.

Sir, I was saying that just a clarification the INR 25 decline what we are talking, it is from the June exit or average of first quarter?

No, it is on the -- I would say, the peak of what we have seen in the month of May, early part of June [indiscernible] the peak. It has come down by INR 25, it's not the average of.

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

Sir, my question is regarding volumes. So last couple of quarters, we faced some hurdles because of the connectivity issues and bridge that was under repair. So what is the status on that? And second is, we've been hearing about some political situation developing in Assam and Meghalaya and I'm hearing that curfew is also imposed there. So is there any impact of that situation on our production and dispatcher?

So I think the overall -- and you asked for the about 2 bridges, I think that problem has been resolved. And I think must have mentioned in my last call also that -- The one bridge which was under repair, there's a new bridge which has already been constructed by the border division. So the movement is not -- as usual as is normal.

No load restrictions now?

No. As of now, there are no load restrictions, and we are really being able to move whatever load we want. As far as the recent development in few northeastern states like there is some problem between Assam and Mizoram, the small flashes have happened and there is a curfew [indiscernible] from last 2 days after the post independent. I think these are static incidences, which keeps on happening. I don't think that -- I think the curfew is only in the containment area of Shillong. There's no state-wise curfew as far as Meghalaya is concerned. And there's no impact as well as the movement of goods is concerned, right? Because most of the goods actually go bypassing the Shillong city. They're all in highways. So it does not impact the movement of goods. So these are, I think, static incidences, and over a period of time, we'll definitely be able to come throughout it.

So then what was the reason for very low volumes from the new unit, Siliguri unit have restocked there so that in future, if there is any problem, we can still continue production there? Or you're just basically, you don't want to flood the market very soon, and that's why the ramp-up is very slow in that segment?

No. As you understand that the Siliguri is a unit we have just started. I think the ramp-up is going to happen because as we started the commercial operation, we entered into a new season. But definitely, the ramp-up is going to happen, and we'll see a good amount of ramp-up happening in quarter 2, quarter 3 and here on onwards. So that is nothing to hear. Definitely, last year, there was some impact of production that got impacted because of the flow of clinker from the mother plant. But I don't think that any of those situations are prevailing at this point of time. So hopefully, Siliguri ramp-up will take place in coming 2, 3 quarters.

And sir, lastly, if you can share what has been your coal prices in this quarter compared to last quarter?

So the coal prices have been somewhere around, say, we have -- I will say there is no -- the price is almost the same. There's nothing because we are largely dependent upon Eastern coal sales. So we're taking coal from Eastern coal fields. There have been supply disruptions because of excessive rain taking place in Bengal and some part of Jharkhand canal. So there are -- so supply has -- but we have taken a lot of coal in before and only before the two options. And that is why we've been able to maintain the prices. We had a good amount of coal stocks also to carry over the entire lean season. So we are not facing any coal issue at this point of time. But yes, the prices of coal in the other international market and the imported coal has actually gone up. But for us, they still remain in the range of INR 8,000 a ton.

That's the landed price, right?

Correct.

And per kcal, sir, it would be in excess of 2.3 then?

Come again?

On a per kcal basis -- rupees per kcal basis? Because domestic coal, it will be in excess of 2.2, 2.3, right?

No, no. It will be somewhere around -- for the landed cost of bulk -- so we call it per DCG costs, right? So we should be -- at this point, it is somewhere around 5,000 ton, [ 7,500 ] ton. So it will be somewhere around 1.5.

5,000 ton. Okay.

[Operator Instructions] The next question is from the line of Milind Suresh Raginwar from Centrum.

Sir, I just misheard on the number of what we have sold in the Eastern market to the 0.76. Can you please -- can I get that number, please?

No, the total sale in the entire -- the quarter total volume has been 7.6 lakh tons. And Northeast volumes are 603,000 tons. And outside Northeast volumes are 158,000 tons.

158. And is it safe to assume that all this is from Siliguri?

Yes, as I said, right, so the total production as an absolutely 100%. If you look at the Siliguri production also, it would somewhere around 159,000.

Okay. Sir, what would be the corresponding number for the March quarter, if you can please share that, that is March '21 quarter?

The funding number for quarter 4, you wanted to know, right?

For quarter 4 cement sales, cement sales. We're getting 9.06 lakh.

Yes. I'm on the share of [indiscernible].

Northeast is -- it was Q4, 7.46 lakhs.

7.46. And the remaining is coming from the eastern side?

Yes, yes.

And again, it is safe to assume that all came from Siliguri?

No, that time because Siliguri was started in January. So a mix of both Siliguri as well as our Northeast plant.

Okay. I understand. Right. And sir, in terms of the coal prices that you have shared of about INR 8,000 per ton in the previous question, this is the average price of 1Q FY'22, right?

Yes. I'm saying the quarter 1, the prices have been somewhere around INR 8,000 per ton. And we hope that to continue with the same prices, yes. Definitely, we haven't taken the entire requirement. So eventually once the auction starts, I think at this point of time, the Coal India is not inviting any fresh auctions. So I think as soon as the auction starts, definitely the price will tend to go up because looking at interim prices, the way the coal is behaving, definitely, there will be an upward pressure on coal pricing.

Okay. So any color on what would be the prices in this like other spot prices, the current prices?

No, because the Coal India has not offered any auction and they have not declared any spot prices in last 1 month, so it will be hard to say what price of the Coal India fixes for the spot auction. And we are also waiting for the same.

And what would be our mix, sir, in terms of auction coal and other procurement?

So we are completely dependent on auctions. We are taking 100% of our requirement is coming from auctions.

And what would be our inventory then? Because if it's there is no auction in one month, then what would be our inventory and to what level can we...

So we will have at least this quarter, but at least the inventory in the plants and the auction bids which we have already won, that will account for at least quarter 2's, entire requirement of quarter 2.

And sir, what would be the maintenance shutdown that we have taken, can you please share the number in the other expenses that is going in for maintenance shutdown?

So, you want the other expenses detail? Milind, what you want here, a breakup of how much is the repair and maintenance costs and other expense?

Yes.

Milind, It is around INR 15.42 crores, total repair and maintenance.

Okay, INR 15.42 crores.

Yes. You must note this, Milind, that this year, we have taken a shutdown in a number of [indiscernible] system because of the lockdowns, which have taken place, and we have taken the shutdown, right? Normally, we take shutdown in quarter 2, right? So this is a one-off for this particular quarter because actually, it has got too far. So that's an additional cost that we're referring in this quarter.

Understood. Understood. Right, sir. And lastly, what would be the status of our Lumshnong expansion that we are planning for? The clinker expansion?

So clinker expansion, we have made already the application for environment clearance. That application has already been filed, and we are talking to its equipment suppliers, finally. And as soon as we get the environment clearance and finalize this technology road map and talking to the suppliers. Once we get the environment clearance, we'll go ahead with giving orders to the sub vendors. So that is the status as far as the clinker is concerned. WHR plant progress is continuing as per schedule. And we hope that -- as we said initially that in 15 to 18 months' time, we'll definitely be able to complete that plan and that is on track to achieve that.

[Operator Instructions] The next question is from the line of from Lohit Bharambe from Canara Securities Limited.

My question would be like, can you just give me freight and forwarding expense and power fuel expense for the particular quarter?

I'll pass it on you, Manoj, please.