UltraTech Cement Limited Earnings Q3 FY19 Stock code: BSE: 532538 | NSE: ULTRACEMCO | Reuters: UTCL.NS | Bloomberg: UTCEM IS/UTCEM LX
UltraTech Cement Limited CONTENTS 01 02 04 03 Key Macro and Sector Company Performance Sector guidance updates updates GLOSSARY MNT – Million metric tons LMT – Lac metric tons MTPA – Million tons per annum Q1 – April-June Q2 – July-September Q3 – October-December Q4 – January-March 9M – April-December CY – Current year period LY – Corresponding period last year FY – Financial year (April-March)
UltraTech Cement Limited M A C R O I N D I C ATO R S 01 01 02 03 04 05 Rupee WPI at 4.7% India’s Q2 GDP Crude price IIP growth for devaluation v/s 5% in growth at 7.1% corrected April- against USD Q2 FY19 v/s 8.2% in ~10% over November’18 ~3% over Q1 FY19 Q2 FY19 period: 5% Q2 FY19 (LY: 3.2% ) Estimated growth for the year: ~7.3%
UltraTech Cement Limited S E C TO R U P D AT E 02 Industry demand growth and capacity utilization trend ~ 15% 120% 16.0% ~ 14% ~ 13% 110% 14.0% ~ 12% 100% 12.0% ~ 9-10% 90% 10.0% 75% 74% 80% 8.0% 70% ~ 6% 67% 66% 66% 70% 6.0% 60% ~ 3% 60% 4.0% 50% 2.0% 40% 0.0% Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Capacity Utilisation Industry growth trend Demand growth continued above GDP Festive season & state elections Improvement in capacity utilization with moderated growth for the quarter demand growing faster than new supply Source: Published results and internal estimates
UltraTech Cement Limited S E C TO R U P D AT E 03 Key cement industry growth drivers Growth drivers Growth Key contributors • Irrigation projects in Telangana and Andhra Pradesh 22-24% • Current speed of road construction: ~28 Kms / day • Indian Railways’ investment programs Infrastructure Growth drivers Growth Key contributors • Major construction projects in ~11-12% Madhya Pradesh, Uttar Pradesh, West Bengal, Odisha and Andhra Pradesh Low-cost housing Government spending contributes 33-36% of total demand
UltraTech Cement Limited S E C TO R U P D AT E 04 Key cement industry growth drivers Growth drivers Growth Key contributors • Strong demand from rural areas ~53-55% • Steady demand in Tier 2-3 cities • Tier 1 cities showing benefits of RERA Housing Growth drivers Growth Key contributors • Office space demand growing in ~ 10-12% Bengaluru and Mumbai • Sizeable cement demand from the retail segment Industrial & commercial Cement demand profile is changing
UltraTech Cement Limited S TAT E - W I S E P E R F O R M A N C E 05 Vol. State/Region I LCH RH UH C Key drivers Gr. Haryana NGT construction ban impacted demand Delhi + NCR Infrastructure and IHB Punjab Panchayat elections Himachal Pradesh Early onset of winter impacted demand Rajasthan Infrastructure and PMAY North Infrastructure and IHB Madhya Pradesh Impact of State elections & festive season Uttar Pradesh Rural Central Rural activities Maharashtra Infrastructure and Affordable Housing Gujarat Weak rural demand West Infrastructure Key growth driver: Infrastructure Spending. Festive season impacted demand in some States I: Infrastructure, LCH: Low-cost housing, RH: Rural housing, UH: Urban housing, C: Commercial, IHB: Individual Home Builder PMAY: Pradhan Mantri Awas Yojana.
UltraTech Cement Limited S TAT E - W I S E P E R F O R M A N C E 06 State / Region Vol. Gr. I LCH RH UH C Key Drivers West Bengal Infrastructure and PMAY Bihar Infrastructure and IHB Jharkhand Infrastructure and PMAY Odisha Infrastructure and Rural Chhattisgarh Impact of State elections East Infrastructure, IHB and PMAY Andhra Pradesh Amravati Development, Irrigation & / Telangana Infrastructure and IHB Karnataka Commercial Tamil Nadu Infrastructure and Rural Housing Kerala Pots floods rehabilitation work South Infrastructure and Rural Housing Key growth driver: Infrastructure Spending & PMAY I: Infrastructure, LCH: Low-cost housing, RH: Rural housing, UH: Urban housing, C: Commercial, IHB: Individual Home Builder PMAY: Pradhan Mantri Awas Yojana.
UltraTech Cement Limited S E C TO R U P D AT E – C E M E N T P R I C E S 07 Average cement prices Challenging price dropped ~ 1-2% compared Surplus capacity environment to the preceding quarter Zonal cement price movements: Western & Southern India Eastern India Central India Northern India Dropped Dropped Marginal Marginal ~ 2-3% ~ 1-2% reduction improvement
UltraTech Cement Limited U LT R AT E C H U P D AT E S – A C Q U I R E D A S S E T S 08 Completed integration of the 21.2 mtpa capacity acquired in 2017 Plants operational parameters Carried out major overhauling in one at par or better than UltraTech of the plant in Central Region - existing plants standard cost benefit to reflect from Q4 FY19 Synergies in logistics Plants operating consistently management helped improve at ~ 75% capacity utilization profitability Achieved EBITDA per ton in line with existing assets (excluding structural cost gaps)
UltraTech Cement Limited U LT R AT E C H U P D AT E S 09 Supreme court sanctioned resolution plan to acquire Binani Cement on 19 th November’18 (Renamed : UltraTech Nathdwara Cement Limited – “UNCL” w.e.f. 13 th December’18) Acquisition completed on 20 th November’18 UNCL’s Capital Structure Rs. Crores 3,400 Equity infusion by UltraTech from internal accruals Total Debt 4,500 7,900 Total cash inflows in UNCL
UltraTech Cement Limited U LT R AT E C H U P D AT E S 10 Key steps taken for the integration of UltraTech Nathdwara (“UNCL”) Undertook initial Optimized raw Gradually Kick started the equipment material mix to started using integration of upgradation and emulate UltraTech pet coke UNCL’s dealers improvement Cement’s quality with the standards Company’s measures existing network 01 02 03 04 Commenced contract Launched UltraTech brand UNCL people manufacturing of cement for from UNCL integration in 10 th December, 2018 UltraTech at UNCL on process a cost-plus basis 05 07 06 Integration to complete by Q1 FY20
UltraTech Cement Limited U LT R AT E C H U P D AT E S 11 Update on acquisition of assets belonging to Century Cement Admission of petition with National Order approving Scheme by Company Law Tribunal (NCLT) : NCLT : Mar’19 13 th Feb’19 The next step: Complete the transfer of limestone mines Likely Record Date for share-swap: Likely closure : Q1 FY20 Q1 FY20 Transition plan initiated for the integration of Century Cement assets
UltraTech Cement Limited Q 3 S TA N D A L O N E P E R F O R M A N C E H I G H L I G H T S 12 17.1 : +14% 8,685 : +18% Growth Growth Domestic sales volume Turnover (million tons) (Rs. Crores) 1,390 : +10% 449 : +7% Growth Growth PAT Operating EBITDA (Rs. Crores) (Rs. Crores)
UltraTech Cement Limited K E Y FA C TO R S F O R Q 3 P E R F O R M A N C E 13 01 02 03 04 • Maintenance costs • Pet coke • No meaningful • Logistics costs increased following consumption at increase in increased one-time peak material cement prices following improvement prices applicability of the • Major market initiative for an 15% busy season • Impact of peak witnessed drop in acquired plant in surcharge by the exchange rates prices over Q2 Central India Indian Railways (INR / USD) • Annual Maintenance • Diesel prices for additional 11 average clinker lines consumption rate increased ~ 3% over Q2
UltraTech Cement Limited Q 3 S TA N D A L O N E S A L E S P E R F O R M A N C E 14 Mnt Q3 9M Particulars CY LY % CY LY % Capacity (mtpa) 88.5 85.0 4 88.5 85.0 4 Domestic sales 17.1 15.1 14 49.1 40.1 22 Exports and others 0.8 0.7 13 2.2 2.1 5 Total 18.0 15.9 14 51.2 42.2 21 Consistently growing higher than industry average
UltraTech Cement Limited O P E R AT I N G C O S T S 15 30% 13% 32% Energy costs up 16% Raw Materials costs up 3% Logistics cost up 4% y-o-y to Rs. 1105/t y-o-y to Rs. 491/t y-o-y to Rs. 1169/t Reasons Reasons Reasons • Additional royalty impact • Increase in pet coke • Increased diesel prices cost ~ 11% • Increased additive prices • Poor availability of rakes • Impact of currency reduced share of rail depreciation against USD dispatches Increase in costs was partly offset with enhanced efficiencies Moderation in pet coke and crude prices should benefit Q4 FY19 onwards Grey cement costs
UltraTech Cement Limited L O G I S T I C S C O S T T R E N D S 16 Q-o-Q Costs increased 1% Logistics Cost (Rs/t) 1169 Applicability Effective diesel Benefits from of 15% busy consumption relaxation of axle 1155 season surcharge prices higher load norms of the Indian ~ 3% (~ 2% of road 1127 Railways (Impact: ~ freight) and amounting Rs. 10/t) Lead optimization (Impact: Rs. 40/t) ( ~ 2%) Q3 18 Q2 19 Q3 19 Logistics Costs v/s Diesel Prices Y-o-Y cost increased 4% 168 149 137 Increase in diesel Reduction in rail 138 Average lead 134 prices ~ 21% share ~ 3% reduced ~ 6% 112 108 100 (Impact: Rs. 35/t) 107 104 Q1 Q3 Q2 Q3 17 18 19 19 Crude Prices Diesel Prices (index) Logistics Cost (index) Grey cement costs
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