Release Date: October 28, 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 year-on-year revenue growth to INR7,516 crores, driven by a strong micro market management strategy and expansion of dealer networks.
- The company remains debt-free and plans to fund its acquisition of a 46.8% stake in Orient Cements Limited through internal accruals.
- Operational costs per tonne decreased by 4% due to a 10% decline in energy costs and a 7% reduction in transportation costs.
- Ambuja Cements Ltd (BOM:500425) secured 70 million tonnes of new limestone reserves in Q2 FY25, enhancing its raw material supply.
- The company is on track to expand its cement capacity to 140 million tonnes by FY28, with several projects underway to increase capacity significantly by FY26.
Negative Points
- Despite revenue growth, the company faced a substantial year-on-year decline in pricing, impacting overall profitability.
- There were delays in some expansion projects due to heavy rains, affecting the timeline for capacity increases.
- The integration of acquired assets like Penna and Sanghi is ongoing, with some operational challenges still being addressed.
- The company's cash flow was impacted by an increase in other current assets and liabilities, leading to a cash outflow.
- Ambuja Cements Ltd (BOM:500425) faces industry-wide pricing pressures, with YoY pricing down significantly, affecting margins.
Q & A Highlights
Q: Can you explain the significant volume growth of 9% year-on-year despite the industry struggling at 1-2%?
A: Our volume growth is driven by both core and acquired capacities. The ramp-up of acquired capacities, such as Sanghi, has filled market voids. Additionally, growth in the B2B segment and strategic marketing have contributed to this increase. (Ajay Kapur, CEO)
Q: What is the status of the Penna acquisition, and how has it contributed to your operations?
A: Penna has been integrated well, with 45 days of operations included in this quarter. It contributed approximately 4.5 lakh tonnes, with a significant portion being clinker. We are operating at about 70% utilization, which is expected to increase. (Vinod Bahety, CFO)
Q: With the current cash reserves and ongoing acquisitions, what is your appetite for further acquisitions?
A: We are currently focused on integrating Penna and Orient. Our hands are full with these strategic acquisitions, which enhance cost efficiency and volume. Future acquisitions will depend on strategic fit and market conditions. (Ajay Kapur, CEO)
Q: How are you progressing with your cost reduction target of INR500 per tonne?
A: We have achieved about 25-30% of the target so far. Initiatives include better fuel management, green power, and logistics optimization. We are on track to achieve the full target by March 2028. (Vinod Bahety, CFO)
Q: Can you provide more details on the incentives received and expected for the year?
A: We expect around INR600-650 crores in incentives for the year, with INR138 crores already accrued from the West Bengal government. These are part of ongoing business incentives. (Vinod Bahety, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
