Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Star Cement Ltd (NSE:STARCEMENT, Financial) managed to grow its market share in the Northeast by 3% despite an overall market degrowth of 8% in the region.
- The company expects a significant improvement in EBITDA per tonne from Q2 onwards due to the cessation of external clinker purchases and the commencement of SGST benefits.
- Star Cement Ltd (NSE:STARCEMENT) has a robust CapEx plan of INR835 crores for FY25, focusing on strategic projects like the Silchar plant, AAC blocks, and WHRS.
- The company anticipates a 10-15% volume growth over the next three quarters, despite a challenging Q1.
- Star Cement Ltd (NSE:STARCEMENT) is investing in renewable energy projects, including a 12-megawatt WHRS and an 18-megawatt group captive solar and wind project, which are expected to yield significant cost savings.
Negative Points
- The company's EBITDA for Q1 FY25 decreased to INR118 crores from INR138 crores in the same period last year, primarily due to the purchase of external clinker.
- PAT for Q1 FY25 dropped significantly to INR31 crores from INR93 crores last year, impacted by increased depreciation and other one-time costs.
- Revenue for Q1 FY25 was INR736 crores, down from INR755 crores in the same period last year.
- The company faced a challenging Q1 due to adverse weather conditions and elections, which impacted demand and revenue growth.
- Pricing in both Northeast and outside Northeast regions has declined post-June, affecting profitability.
Q & A Highlights
Highlights of Star Cement Ltd (NSE:STARCEMENT) Q1 FY25 Earnings Call
Q: What were the trade share, premium share, lead distance, and KKL cost during Q1?
A: The trade share in Q1 was about 84%, non-trade cost was 16%, premium share was at 9.2%, lead distance was about 207 kilometers, and KKL cost was INR1.5.
Q: How do you view the full-year volume growth given the marginal decline in Q1?
A: This quarter was exceptionally bad due to monsoon and elections. We expect volume growth of about 10-15% over the next three quarters, down from our initial target of 18-20%.
Q: What was the EBITDA per tonne outside Northeast, and how are the pricing trends?
A: The EBITDA per tonne outside Northeast was about INR250. Pricing in East has declined by INR12-13, and similar trends are observed in Northeast.
Q: What is the status of the Jorhat and Silchar plants?
A: For Silchar, land acquisition is complete, and we plan to start erection by October and commission by next year. Jorhat is expected to be commissioned by October 2026.
Q: What is the current status of the AAC blocks project?
A: The AAC blocks project is expected to be commissioned by October this year, with central and state GST benefits.
Q: How is the demand currently in the September quarter?
A: Demand is subdued due to monsoon but is expected to pick up from September onwards. The market degrew by 8% in Q1, but we managed to grow by 3%.
Q: What is the expected CapEx for FY25 and its breakdown?
A: The CapEx for FY25 is about INR835 crores, with INR300 crores for Silchar, INR100 crores for Jorhat, INR100 crores for the clinker plant, INR37 crores for WHRS, and INR55 crores for AAC blocks.
Q: What are the details of the group captive solar and wind power project?
A: We have tied up for an 18-megawatt group captive project with JSW, expecting savings of about INR22-24 crores annually. The project should be operational within 18 months.
Q: How will the logistics costs evolve going forward?
A: Logistics costs should stabilize with more fleet operations in Q2, and full benefits expected from Q3.
Q: What is the expected tax rate going forward?
A: The tax rate is expected to remain around 21-22% for the next 5-6 years due to ongoing subsidies.
Q: What is the revenue and EBITDA potential for the AAC blocks project?
A: At 70-80% utilization, the AAC blocks project is expected to generate INR60-70 crores in revenue with an EBITDA margin of about 20%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
