Analyst Meet / AGM 07-Feb-19
Conference Call
JK Cement
Expansion units likely to come on stream in FY20E
The company has conducted a conference call on 5 February 2019 to discuss the financial performance for the third quarter ended December 2018 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 reported a revenue growth of 13% to Rs 1,273.19 crore in 3QFY19, led by volume / realisation growth of 7.5%/5.1%. Grey / white cement segment volumes grew by 6%/19% YoY respectively.
The company Clinker utilisation for Northern and Southern units stood at 90% and 60%, respectively in Q3FY19. Clinker factor stood at 72%. The Company cement capacity utilisation altogether for Northern and Southern units crossed 90%- mark in Jan'19.
The company not hiked cement prices in Dec'18 and Jan'19, while the recent price hike in Northern region was rolled back, as industry's leaders are not supporting.
Expansion Plan: The Company is currently setting up 4.2MTPA of capacity across north, central and west India and is happening as per schedule. The company is setting up a grinding mill at Mangrol with 1MTPA grinding capacity along with 2.5MTPA of clinker, 1MTPA of expansion through debottlenecking in Nimbahera plant, 1.5MTPA of greenfield grinding unit in Aligarh and 0.7MTPA of greenfield grinding unit in Gujarat. In Mangrol integrated unit, key equipments were received and the basic construction work is moving as per schedule. Commercial production of Mangrol integrated unit is likely to commence from Q3FY20. Nimbahera GU is also expected to be commissioned in Sept'19. For Split GUs at Aligarh & Silvasa, lands have been acquired and EC for Aligarh unit is obtained and for Silvasa unit it is to be obtained in the current month. These units are expected to come on stream in Q4FY20E.
The Company has not receiving tax incentive for Gujarat SGU, whereas Western UP unit enjoys incentive up to 100% of the investment for 7 years. Notably, Company has booked Rs12 crore as incentive in Q3FY19.
UAE Update: Total sales volume for CY18 stood at 0.25 mt (cement) and 0.1 mt (clinker). The Company expects subdued demand for another two quarters due to a decline in construction activities. JK Cement has also opened an office in Africa and expects strong demand from the African markets. During 3QFY19, the company also supplied cement to South India. The Company believes that its recent initiatives i.e. selling in Southern markets (TN and Kerala) up to 50k annually, cost rationalization and new markets in Africa will aid it to be profit making unit in 2021.
Gross Debt: Standalone gross debt for 9MFY19 stood at Rs 2120 crore. The Company expects Term loan sanction of Rs 1300 crore to be added in the February 2019. The Company expects peak debt at Rs 3200 crore in FY20 after factoring debt repayment of Rs 380 crore in FY19, and it will maintain a minimum cash balance of Rs 500 crore.
The Company raised Rs 511 crore through QIP to fund the upcoming capex (likely to be Rs 2000 crore). The company has incurred a capex of Rs300 crore till December 2018. The majority of the FY2019E planned capex will be in 4QFY19 on receipt of ordered machines. The company is expected to generate operating free cash flow of Rs 1900 crore over FY19-20E to support the capex planned over the period.
The Company fuel Usage at Kiln was Petcoke 85%, AFR 10% and coal 5% in Q3FY19. The trade volumes were close to 68% in the quarter—lower than 72% for Q2FY19. The Company lead distance for Southern unit – 350 kms and for Northern unit – 450 kms.
The Company hired a consulting firm to focus on reduction in logistics cost by Rs50-60/ tonne and has already achieved cost savings of Rs40/ tonne by 3QFY19. The Company plans to save costs in other areas—overall the company is working on saving of Rs125-130/ tonne and has already achieved 50% of target savings.
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