The company has conducted a conference call on 20 May 2019 to discuss the financial performance for the fourth quarter ended March 2019, FY20, and way forward. Management team of the Company addressed the conference call.

Key highlights

• The Company has posted 20% drop in net profit to Rs 320.95 crore in spite of 17% jump in total income from operation to Rs 3,284.87 crore for fourth quarter ended March 2019. The decline in bottomline was largely attributed to jump in interest cost (up 60% to Rs 69.71 crore) and depreciation cost (up 81% to Rs 420.58 crore). Operating Margin (OPM) increased by 340 bps to 25.8%. Thus, operating profit (OP) rose 35% to Rs 847.83 crore.

• The company's total clinker production for FY2019 stood at 17.65 mt. The company maintained an average cement clinker ratio of 1.5:1.

• The Company has integrated its Karnataka plant with commissioning of the 2.4 mtpa clinker capacity in December 2018. The 2.5 mtpa grinding unit (GU) at Jharkhand is expected to commission in June 2019 whereas the 3 mtpa Odisha GU is on track to commission by Q3FY21E. Further, the Company has announced another 3 mtpa GU at Pune to be completed by Q4FY20E. The post commissioning of three new plants would increase the Company cement capacity to 46.4 mtpa (+22%) by FY2021E from current 37.9 mtpa.

• The company had received all the necessary approvals in place to put up another clinkerization facility (brownfield) at Chhattisgarh and the announcement of the same was likely in the next 2-3 quarters. The brownfield expansion would take 15-18 months post announcement. The company mentioned that it has capability of both, greenfield and brownfield, clinker expansion in North going forward. The company is acquiring land for future expansion in multiple locations. However, since the land acquisition timeline is very unpredictable, takes 3-5 years, it announces expansion only once land acquisition is complete.

• The Company has spent Rs1800 crore on project expansion and Rs2100 crore for UAE acquisition in FY2019. The company has guided a capex of Rs1500-1600 crore for current expansion projects along with Rs200 crore of maintenance capex for FY2020.

• The Company expects a tax rate of 26-27% for FY2020 and expects to receive incentives of Rs 250-270 crore for the next 2 years.

• The company had taken price increases in April and May and the current prices were Rs 30-35/bag or 10% above the average pricing of Q4FY19. On the costs front, the company expects costs to remain stable. The company expects cement demand to recover post elections and expect the industry to grow at 6-7% in FY2020E.

• UAE asset- The Company has acquired a 4 mtpa cement grinding unit with 3 mtpa clinker plant in the UAE in FY2019 for $300 million. During the 9 months of operation in FY2019, it produced 1.1 mt cement, 2.7 mt clinker and sold 1.1 mt cement, 1.6 mt clinker in FY2019. The UAE asset generated a revenue of Rs 830 crore and net profit of Rs 30 crore. Consolidated receivables have increased mainly due to higher working capital days for the UAE asset.

• The Company UAE plant doing better than expected on operational front with a consistent production of ~30% higher than the rated capacity at time of acquisition.