Release Date: October 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sanghi Industries Ltd (BOM:526521, Financial) remains debt-free, which strengthens its financial position.
- The company achieved a revenue of INR 7,516 crores, driven by strategic market management and expansion of dealer networks.
- Operational costs per tonne decreased by 4%, aided by a 10% decline in energy costs due to better fuel management.
- The company secured 70 million tonnes of new limestone reserves, ensuring long-term raw material availability.
- Sanghi Industries Ltd (BOM:526521) is on track to increase its cement capacity to 140 million tonnes by FY '28, with several projects underway.
Negative Points
- The company experienced a substantial year-on-year decline in pricing, impacting overall revenue.
- Some projects have faced delays due to heavy monsoons, affecting timelines for capacity expansions.
- There is a significant increase in other current assets and liabilities, impacting cash flow.
- The integration of newly acquired assets like Penna is still in progress, with some operational challenges.
- Despite strategic acquisitions, the company faces challenges in maintaining consistent volume growth organically.
Q & A Highlights
Q: Can you explain the significant volume growth of 9% year-on-year, especially when the industry is struggling?
A: Our volume growth is driven by both current and acquired capacities, such as Sanghi, which have helped fill market voids. Additionally, growth in the B2B segment and strategic marketing have contributed. Even excluding clinker sales, the volume growth is a healthy 7%. (Ajay Kapur, Non-Executive Non Independent Chairman of the Board)
Q: What is the status of the Penna acquisition, and how has it contributed to the current quarter's results?
A: Penna's operations contributed for about 45 days this quarter, with cement volumes around 1 lakh to 1.5 lakh tonnes and significant clinker production. The integration has gone well, with utilization reaching 70% and expected to hit 95% by year-end. (Vinod Bahety, Non-Executive Non-Independent Director)
Q: With the cash reserves and ongoing acquisitions, what is the company's appetite for further acquisitions?
A: Currently, we are focused on completing the Penna and Orient acquisitions, which are strategic for cost and volume efficiencies. We are also expanding organically with new kilns and expect to reach 118 million tonnes capacity by FY '26. Our balance sheet remains strong, allowing for future opportunities. (Ajay Kapur, Non-Executive Non Independent Chairman of the Board)
Q: How much of the targeted INR 500 cost reduction has been achieved, and what remains?
A: Approximately 25-30% of the cost reduction target has been achieved, equating to around INR 150. We are on track with initiatives like green power, logistics optimization, and operational efficiencies to achieve the full target by March '28. (Vinod Bahety, Non-Executive Non-Independent Director)
Q: Can you provide more details on the cash flow changes, particularly the increase in other current assets and liabilities?
A: The increase is due to higher receivables from increased OPC sales and strategic inventory buildup of coal. Additionally, the purchase price allocation for recent acquisitions affects the balance sheet. (Vinod Bahety, Non-Executive Non-Independent Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
