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Analyst Meet / AGM
10-Aug-16
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Conference Call
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JK Cement
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Expects Capex of Rs 300 crore for FY17e
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The company has conducted a conference call on 09 August 2016 to discuss the financial performance for the first quarter ended June 2016 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 posted standalone net profit of Rs 60.85 crore for the quarter ended June 2016 compared to net profit of Rs 1.05 crore in the corresponding quarter of the previous fiscal. The company's net sales increased to Rs 886.70 crore, over Rs 812.09 crore in year-ago period. JK Cement's EBITDA margin (operating margin) improved 820 basis points to 18.7% in Q1FY17 led by growth in sales volume/realization.
- The price of petcoke has increased to $80/tonne towards the end of Q1FY17 vs. $45/tonne at the start of the quarter and is currently on an increasing trend. Domestically, Reliance increased petcoke prices by Rs 600/tonne in July and Rs 600/tonne in August. For the company, the average cost of petcoke per tonne was Rs 4,800 in Q1FY17 against Rs 4,400 in Q4FY16 and is estimated to be at Rs 6,500 for Q2FY17.
- The Company silo at Muddapur plant is in non-repairable condition and needs to be brought down. The company has appointed team from US to demolish the silo and expects this process to get completed by mid-October. Post that it will take almost 9 months for construction of new silo. The cost of demolition is estimated to be Rs10-12 crore and Rs15-20 crore is the capex expected for the new construction. The kiln is currently producing at 5000 tpd through direct feeding of raw material. The management is hopeful on maintaining the supply in the South region (~1.8mt for the FY17e), however, it expects the operating cost for the plant to increase by Rs 80-100/tn (till the silo is replaced) as they will need to operate the plant for more number of days in order to maintain the supply.
- The Company revenue from White Cement segment (including Wall Putty) grew 25.4% to Rs 280 crore led by 24.7% yoy volume growth. White cement's volume grew strongly 17.3% at 0.13mt. Wall Putty's sales volume continued to grow strong at 33.9% to 0.12mt. Revenue for grey cement segment grew by 3% to Rs 600 crore. Sales volume improved 1.4% to 1.63mt.
- On cement pricing trend: In the North region, prices continued to be at June level in the month of July, however, post July there has been some correction in the prices (by Rs5-10/bag). This was primarily a factor of monsoon as no one is interested in maintaining inventory. South region, as a factor of market forces, witnessed some price correction.
- Overseas subsidiary: Sales volume was 80k tonne for Q2CY16 against 72k tonne in Q1CY16 and 64k in Q2CY15. Revenue was stood at AED37.8 million. EBITDA was at AED3.5 million compared to AED1.75mn in Q1FY16. It has successfully restructured the loan and brought down the interest cost to LIBOR+325 bps.
- The Company maintains annual maintenance of Rs 70-75 crore, ESP capex (for pollution control) at Rs 40-45 crore, balance capex left of putty plant of Rs 40-50 crore. Capex in FY17e is thus estimated to be Rs 300 crore.
- The Company expects White Cement & Wall putty Demand to remain robust and combined sales volume in India is expected to be at 1.0mt FY17e.
- The Company gross debt for standalone business is Rs2500 crore and cash is at Rs 420 crore. Scheduled repayment of debt is Rs120 crore/150 crore in FY17e/FY18e.
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