Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Orient Cement Ltd (BOM:535754, Financial) has been certified as a great place to work for the fifth consecutive year, with increasing scores.
- The company has maintained stable price realizations despite a challenging market, indicating strong pricing discipline.
- Significant progress in green energy initiatives, with 24% of power consumption from renewable sources, leading to cost savings.
- Premium product sales have grown to 23% of total sales, nearing the target of 25%, showing successful brand positioning.
- The company has managed to sustain profitability despite a 15% volume decline, demonstrating effective cost management.
Negative Points
- The cement sector has experienced a visible slowdown, with flat growth over the last year.
- Demand in key markets like Maharashtra and Telangana has been particularly weak, impacting overall sales.
- The company faced a 15% year-over-year volume decline, indicating significant market challenges.
- Expansion projects have been delayed due to regulatory and environmental clearance issues, pushing potential capacity increases to FY27.
- Monsoon season has further softened demand and pricing, with a 2.5% to 3% sequential price decline in July.
Q & A Highlights
Q: The Chittapur and NV expansion, which was earlier expected in H2 FY26, is now likely to flip to FY27. Is that correct?
A: It could be early, but I can't say for sure due to some uncertainties. Chittapur's clinkerization and grinding should take less time than a full integrated capacity, but we still need more clarity.
Q: Can you provide some operating metrics like trade share and lead distance for this quarter?
A: Our lead distance remains in the range of 300 to 320 kilometers. Trade sales are at 56% of our total sales.
Q: How is the demand shaping up in the Telangana market, which has been weak? Are there any signs of a pickup?
A: Demand continues to be very soft across Telangana. We are still waiting for signs of improvement, but as of now, the signals are not promising.
Q: What sort of volume growth are you guiding for this year?
A: Given the 15% degrowth in Q1 and the current softness in Q2, achieving the earlier guidance of 8% growth seems unlikely. We will reassess after the monsoon season.
Q: Was there any shutdown or maintenance activity this quarter?
A: There were some small maintenance activities at both plants, but no full plant shutdowns.
Q: Has there been any progress on the mining lease in Rajasthan?
A: We are still in negotiations but have not closed any deals for land in Rajasthan.
Q: How is the price environment currently in July?
A: Prices have been very soft in July, down by about 2.5% to 3% compared to the previous quarter.
Q: What is the expected CapEx for FY25?
A: We expect to spend around INR 200-300 crores, with about INR 25-30 crores for rates and possibly INR 100 crores for land acquisition in Rajasthan.
Q: What is the peak capacity potential at both the Geraud and Chittapur locations?
A: We plan to add another 3 million tons of cement capacity at Chittapur, doubling it from 3 to 6 million tons. The total CapEx for Chittapur and Devapur combined will be around INR 2,000 crores.
Q: Is there any thought process to monetize the limestone in Rajasthan?
A: The Board is not considering monetizing the limestone in Rajasthan. The focus is on diversifying our market presence.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
