Analyst Meet / AGM 21-Feb-18
Conference Call
JK Cement
Expects 10-12% yoy growth for wall putty and 10-12% growth at EBITDA level
The company has conducted a conference call on 6 February 2018 to discuss the financial performance for the third quarter ended December 2017 and way forward. The call was addressed by Mr A. K. Saraogi, President (Corporate Affairs) & CFO and Mr Prashant Seth, VP (Commercial), of the company.
Key Points from the discussion:
The company has announced a Brownfield expansion of 1mn tonnes each at Mangrol and Nimbahera in Rajasthan, along with split-grinding unit of 1.5mn tones near Aligarh in Western UP and 0.7mn tonnes near Silvassa. This would increase grey cement grinding capacity by 4.2mm tonnes to 14.7 mn tonnes. The company Clinker capacity at Mangrol will be increased by 2.5mn by December 2019. The company will have WHR of 13MW at Mangrol unit along with new clinker capacity. New grinding capacities (UP, Gujarat) are expected to be commissioned by March 2020. JKCE will have 100% investment tax benefit for UP plant, but there is no tax benefit for Gujarat plant. The company will incur a capex of Rs 20bn of which ~Rs 12bn will be financed by way of debt.
Tax Incentives: Post brownfield expansion, Company is also entitled to the tax benefit in Western UP to the extent of 100% of Investment till 7 years. Subsidy from Jhajjar unit amounting to Rs0.6bn (March – Dec'17) is still pending from Haryana Govt.
The company trade mix in northern and southern markets stands at 65% and 60%, respectively. The company expects it to change significantly on account of the rise in infrastructure spending.
The company gross debt stood at Rs 23bn and UAE debt at Rs 6bn with cash in hand being Rs 6bn. The company plans to repay Rs2.2bn each in FY18 and FY19 and in FY20 it expects repayment of Rs2.8bn.
The company average lead distance in northern region was 650km and in southern region it was ~400km-450km.
The company has signed fly ash availability agreement in Gujarat and the company is close to signing such an agreement in Uttar Pradesh (West) as well.
The Company imported pet coke price currently stood at $105/tn compared to US$65-70/tn corresponding last year. Even at current price, usage of pet coke is cheaper compared to other forms of coal (at pet coke price of US$130/tn, cost of domestic coal will be equivalent to pet coke cost in kcal terms). Domestic petcoke (supplied by Reliance) is Rs300/tn cheaper than International supply. Company is back to proper usage of petcoke in kiln after the turbulence caused by Supreme Court ban. Current average use of Petcoke is 90%.
The Company expects 10-12% yoy growth for wall putty and 10-12% growth at EBITDA level for this segment. Sustainable OPM should be at 25-30% for this segment going forward. In India, the market size of wall putty is at 2-2.5mt with combined market share of 50% for UltraTech and JK Cement. Rest of the market is with small players and paint manufacturers who are dependent on outsourced clinker or white cement. Import of clinker and white cement for putty manufacturing is 0.05mt/year.
UAE operations:
The Company sales volume stood at 0.37mt against 0.34mt in CY17 with EBITDA remaining flat yoy. Clinker sales volume in the same period was up 5-6% yoy while Cement volume remained flat yoy. Clinker unit achieved full utilization rate of 100% during the quarter. Cost efficiency measures have been taken for this unit, but, political uncertainty in Saudi Arab and Qatar, remains a concern for demand uptick for this plant. The management expects the challenges to continue for next two years. Also, early celebration of Ramzan & EID this year will also impact the performance going forward.
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