Nuvoco Vistas Corporation hosted a conference call on May 02, 2024. In the conference call the company was represented by Mr Jayakumar Krishnaswamy-MD, Ms Madhumita Basu- Chief Strategy and Marketing officer and Mr Maneesh Agrawal-CFO.

Key takeaways of the call

Recently released GDP numbers surprised strongly on the upside. Q3FY2024 GDP expanded by 8.4%. Economic activity gained momentum in February 2024 after witnessing a slight moderation in January. GDP growth for FY2024 is estimated to be closer to 8% for FY24 and 7.4% for FY25.

The company is delighted to report a strong performance in FY2024 despite volatile demand environment.

The Company''s consolidated cement sales volume stood at 18.8 MT in FY24.

Consolidated revenue from operations stood at Rs. 10,733 crores in FY24.

Consolidated EBITDA improved by 35% YoY to Rs 1,657 crores and Net profit of Rs 147 crore in FY24 which is the highest ever since FY22 in which the company launched its IPO. This underlines the effectiveness of the company’s strategic initiatives and operational efficiencies.

Blended cement: OPC cement stood at around 20% and the other cement at 80% for FY24 for the company.

Despite demand challenges the company stuck to its strategy of value over volume, premiumization , geo mix optimization, brand strengthening and cost optimization.

The company stopped accruing Panagarh incentives from April 2023 and incentives from Rajasthan plants ended in June 2023. These incentives were around Rs 60 per ton in FY2023. Taking the same into consideration the margin expansion is more commendable.

Healthy margin improvement has led to decline in net debt by Rs 384 croreYoY to Rs 4030 crore as on Mar 31,2024. This has led to decline in NET Debt to EBITDA to 2.4x.

Operational efficiencies: The company has significantly reduced cost in the areas of power and fuel and raw material. The company has reduced cost by Rs30/ton which is achieved under Project BRIDGE 1.0 since its implementation in Q2FY2024.

In Q4FY2024, power and fuel cost reduced 4% QoQ due to efficient sourcing and optimization of fuel and power mix coupled with decline in pet coke and coal cost; Raw material cost declined by 2% QoQ mainly due to decline in slag cost. The company is better placed with respect to raw material due to long term supply agreement and distribution cost reduced QoQ due to operational efficiency in logistics.

Fuel cost per K Cal reduced from Rs 2.31 in Q4FY2023 to Rs 1.65 per k cal in Q4FY2024. The company expects the fuel cost to remain at similar levels for next 1 or 2 quarters unless anything major happens in the external world.

Lead distance in Q4 stood at 340 kms . AFR mix stood at 12% for Q4FY24 and CQ ratio stood at 1.74 in Q4FY24 and the company is looking at CQ ratio of 1.76-1.8 for FY25.

Fuel mix for Q4FY24: Linkage coal stood at 23% , non-linkage domestic coal stood at 11%, imported coal stood at 1%, pet coke stood at 52% and AFR at 12%.

Premium products: Premium products have played a critical role in the company’s portfolio. Premium products contributed to 37% of the total trade sales of the company in FY24. The company launched ‘Duraguard F2F’ -a premium composite cement in West Bengal and Jharkhand. The company also extended premium cement variant ‘Concreto UNO’ to Jharkhand.

RMC and MBM:

Ready mix concrete (RMC) and Modern Building Materials (MBM) business is progressing well for the company.

The company has commissioned 7 new plants in RMc business taking the total plants to 58 pan-India. Value added product mix stood at 31% of the total sales volume in FY24.

In MBM segment the company’s tile adhesive and cover block segments continue to witness sales improvement and the company has introduced tile cleaner under the tile application category.

Sustainability: The company has been able to reduce carbon emission by 2% YoY to 454 KG CO2per tn in FY24.

Alternate fuel contribution stood at 13% of the total fuel mix in FY24. The company’s Chittor and Nimbol cement plants showcased capability of 35% and 28% AFR respectively. The company plans to take the contribution of AFR from the current 13% to 16-17% going forward.

CAPEX:

The company’s railway sidings at Sonadih&Odisha are at advance stages of completion.

The company commissioned 1.2 MTPA grinding unit in Haryana taking the total capacity of the company to 25 MTPA. The new plants utilization has been ramped up to over 60% with in one quarter of its commissioning. With this the company’s North cement capacity share improved to 24% from 20%.

The company operated at 90% capacity utilization in North region excluding the new plant in FY2024 and the company expects to achieve 90% capacity utilization including the new plant by FY25.

Over all CAPEX for FY25 will be around Rs 300-400 crore including the unspent CAPEX of FY24

Strategies for FY25:

For revenue growth the company focus will be increasing the realization by focusing on prmiumization.

The company will continue to expand its presence in its key markets of North, central and western region by capitalizing on growth potential.

The company will try to boost it sales in its home market with in the radius of 200 kms of its manufacturing plants there by consolidating the market leadership and optimizing logistic cost.

With respect to profitability based on the achievements of project Bridge 1.0 , the company will enhance the operational efficiency & cost savings through Project BRIDGE 2.0 in FY25 targeting cost savings of  50 per ton.

Demand and outlook: During the year North showed strong demand and the company grew ahead of the industry in the region. However, east region faced challenges throughout the year particularly in the core markets of the company including West Bengal, Bihar and Jharkhand. The demand was totally subdued. Within east Chattisgarh and Orissa demand surged ahead showing significant improvement in FY2024.

The company’s optimism in its core market is dependent on its trust on infrastructure development, including railways, roadways and affordable housing. Under PMAY, 27 lakh houses are pending for construction of which 14 lakh are pending in West Bengal alone. Further, the Union Government has announced that 2 crore more houses will be taken up for construction.

Further 19000 kms of road are to be constructed under phase 1 of which 3500 kms will be in West Bengal alone.  Additional the rising urbanization, growth in the real estate sector and increase spending on commercial and industrial projects is expected to support the demand for cement.

The company has head room to grow volumes in double digit for next 2 years with the current capacity.

In North, the company will drive volumes as the company ramps up operations in the company’s Haryana cement plant. The company expects further volume growth in North region as it improves its utilization.

The company also has opportunities to increase volumes in the non-trade segment.

Price: In April 2024, prices have remained stable in the northern region when compared to March quarter. However, in the east prices have increased by Rs 8-10 per bag gross of GST in April. The company expects prices to improve further going forward in east.

Management commentary:

Commenting on the performance of the Company, Mr. Jayakumar Krishnaswamy, Managing Director, Nuvoco Vistas Corp. Ltd., stated, “The Company enhanced its operational efficiencies and delivered strong growth in EBITDA and PAT despite a volatile demand environment during FY24, achieving the highest profitability. Our commendable operational outcomes reflect our dynamic and efficient strategy focused on premiumisation and cost optimization. Moving to FY25, our strategies focus on growth, expanding our market presence, and extracting more volumes from home markets while continuing our thrust on efficiency improvement initiatives.”

Furthermore, he added, “The additional capacity in Haryana allows us to expand our market presence in the North while maintaining our leadership in the East. We have also seized the opportunity to grow our ReadyMix Concrete business, commissioning seven new plants this fiscal year, bringing the total to 58 plants panIndia.”