Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ambuja Cements Ltd (BOM:500425, Financial) achieved a revenue of INR 8,311 crore, driven by strong micro market management and expansion of the dealer network.
- The company has secured 275 million tonnes of new limestone reserves in Q1 FY25, strengthening its resource base.
- Ambuja Cements Ltd (BOM:500425) plans to increase its cement capacity from 89 million tonnes to 140 million tonnes by FY28 through internal accruals and operating cash flows, while remaining debt-free.
- The company has successfully reduced its energy costs by 13% due to better fuel management, resulting in a 17% reduction in kiln fuel costs.
- Ambuja Cements Ltd (BOM:500425) is committed to sustainability, with initiatives such as increasing waste heat recovery capacity and targeting 60% of power requirements from green power by FY26.
Negative Points
- The company experienced a decline in EBITDA per tonne to INR 807, reflecting a margin of 15.4%, which is impacted by lower cement prices.
- Ambuja Cements Ltd (BOM:500425) faced challenges in the East and South regions, leading to lower volume growth in these areas.
- The company has significant capital expenditure plans, including INR 10,000 crore for FY25, which could strain cash flows despite a healthy cash position.
- There is a potential risk of increased maintenance costs during the monsoon season, which could impact EBITDA margins in the short term.
- The integration of newly acquired assets like Penna Cement and Sanghi Industries may pose operational challenges and require significant management focus.
Q & A Highlights
Q: What's the bifurcation of Ambuja Cements' supply to private and public sectors?
A: Approximately 75-80% of our cement supply is to the private sector, while 20-25% is to the public sector, which includes government-driven infrastructure projects. (Ajay Kapur, CEO)
Q: Is there a delay in the 1,000 MW green power project?
A: The first 200 MW phase is delayed to Q2 FY25, but the overall 1,000 MW project remains on track for completion by Q1 FY26. The total CapEx for this initiative is INR 6,000 crore, with INR 1,500 crore already invested. (Vinod Bahety, CFO)
Q: What is the status of the Penna acquisition and its impact on Ambuja's operations?
A: The Penna acquisition is in advanced stages and expected to close within a fortnight. Full integration benefits will be seen in Q2 FY25. Ambuja, ACC, and Penna brands will be used strategically in South India. (Vinod Bahety, CFO; Ajay Kapur, CEO)
Q: What are the implications of limestone lease expiries by 2030 for Ambuja and the industry?
A: Ambuja has no leases expiring by 2030, while ACC has a few. The industry is aware of the issue, and representations have been made to the government for a solution. (Ajay Kapur, CEO)
Q: When will Sanghi Cement reach optimal capacity utilization?
A: Sanghi's major refurbishment program will complete by mid-November, and full utilization is expected in the last quarter of FY25. Further investments in wind power are planned to reduce costs. (Ajay Kapur, CEO)
Q: What is the strategy for consolidating Ambuja, ACC, and other subsidiaries?
A: Currently, there are no plans to take ACC or Sanghi private. The focus is on operational synergies through a management services agreement (MSA). Any future consolidation plans will be communicated when finalized. (Ajay Kapur, CEO; Vinod Bahety, CFO)
Q: Why invest heavily in renewable power instead of sourcing it externally?
A: Investing in renewable power aligns with our ESG goals and reduces production costs by INR 100 per tonne, improving EBITDA. This strategy supports our long-term sustainability and cost leadership. (Ajay Kapur, CEO)
Q: How does Ambuja plan to achieve the target of INR 3,650 operating cost per tonne by FY28?
A: The target is based on current costs and includes savings from green power, waste-heat recovery, and other efficiency initiatives. Inflation and other factors will be managed to maintain cost competitiveness. (Ajay Kapur, CEO; Vinod Bahety, CFO)
Q: What is the expected CapEx for FY25 and FY26?
A: The total CapEx for FY25 is targeted at INR 10,000 crore, including growth and maintenance CapEx. After factoring in Penna acquisition and other investments, the expected cash and cash equivalents by year-end will be around INR 10,000 crore. (Vinod Bahety, CFO)
Q: What is the impact of the current market conditions on Ambuja's pricing and profitability?
A: Prices have declined by 5-6% due to tepid demand and early monsoon. However, post-monsoon, prices are expected to recover. The cost reduction initiatives are independent of market prices and will continue to improve profitability. (Ajay Kapur, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
