Thanks Sri Krishna. In Q1 capacity utilization was around 60-65% so I am a little surprised now with Q2 results where the utilization was higher. Is it solely due to lower realizations like other boarders have mentioned??
Secondly, as per debt covenants they were not allowed to expand capacity. They are not out of CDR yet. How is it they are going for expansion now? Also I believe the cycle of expansion for south Indian cement companies was over. Issuing NCDs for the same can disturb the balance sheet and demand/production balance. Now these cement companies in the south work as a cartel. How will this expansion impact it?
Can fellow boarders help me understand this please? Am I missing out on something? TIA
Okay. So I believe the increase in other expenses was due to that maintenance costs? Also any idea how much of the NCDs will be used for repayment vs capacity expansion?
There was a research report that I read by Motilal Oswal where it said that south indian cement companies will not be expanding capacity thereby increasing their utilization rates. The reason why the prices are higher in South India is because of the production discipline and capacity expansion in line with demand which is followed by all the companies together.
With 72% capacity utilization in the current quater and the demand slowing down in Andhra region, I am trying to understand if the capacity expansion makes sense
I had a talk with CFO of panyam cementsâŚhe agreed that the cartel is thereâŚand it will sustain over years nowâsâŚthey have seen the situation they face by competing each otherâŚthe reason he told for low performance is monsoonâŚtill today rains are heavy in those areasâŚnow the demand will pick up in next 20daysâŚonce rain gets overâŚhe told the performance of the 3rd quarter would be better than the second oneâŚbut might not be better than the 1st quarterâŚthis can be a hint that the demand in south is lowâŚbut again there was an article sharedâŚthat there Is a temporary pause In the developmental activitiesâŚthere I a delay in the activitiesâŚthe story In onâŚwith some delays due to monsoons and other delays in construction activityâŚso guys chillâŚand stay investedâŚ
This is not a issue to be taken lightly.It has happened before. Please check the below link. The companies involved in the cartel suffered after this.
I am rather shocked that a CFO would admit to this in public. How long do you think its going o take somebody ,for taking it to the court or commission??
This present cement cartel wonât need the BAI to bust it. Govt would by itself tale action if inflation starts increasing. Nonprofit bodies taking on unfair trade practices too have evolved over this period.
If locally elected govt too is part of this cartel. Thatâs a different story all together.
A note to VP members : Had this been 2008-09, these issues would have been discussed first before price projections.IMHO we are too drunk with mutibaggers and have lost that cynicism, thatâs our first line of defense.
Possibility of a cartel has already been discussed in this thread, so such panic is unwarranted.
If you wouldâve read the first 10 posts in this thread, you wouldâve understood that most boarders are here for opportunistic gains with an understanding of risk factors and are not chasing a multibagger blindly.
I know new members like me are not even half good as core VP members but we try to do our bit. The least I expect is that you read our posts before passing judgment.
S P Tulsian discusses effect of completion of railway siding at Vijayawada. He says that it will increase NCLâs reach which shall increase itâs sales subsequently.
The Andhra Pradesh government has decided to buy 36 lakh tonnes of cement every quarter for various government works!!!
Should be a huge positive for NCL Industries and other andhra based cement companies
Total cement capacity in andhra pradesh is around 50MT per year , as per the news report above total demand just from the government is around 43MT per year! . Thus capcity utilization levels are set to touch higher levels and capex plans by NCL industries , funded through private placement , can be a lucrative decision from shareholder perspective . ALL in all south based cement companies are set to go through an exciting period atleast for next few years.
NCL Industries Ltd reported QoQ decline in operating profit due to seasonal volatility seen in cement prices. Demand across the Southern region continued to remain weak but price discipline is still followed by cement producers in the markets.
1. Revenue during the quarter increased by ~8% QoQ which is led by higher capacity utilization at 65% in Q2FY16 from 60% in Q1FY16. NCL continued to register healthy sales volume growth of ~7% QoQ and ~31% YoY to 2,41,396 Mnt. Though, we believe there is further scope for improvement in utilization rates, which will led by pick-up in demand in its markets would drive the volumes going ahead. However, we have assumed 65% of capacity utilization for full year, any improvement on this would be an upside opportunity for our numbers.
2. EBITDA had declined by 18% QoQ to Rs. 32cr due to higher freight cost (Rs. 27crs in Q2FY16 vs Rs. 22crs in Q1FY16) and drop in cement realization at Rs. 6572 in Q2FY16 vs Rs. 6746 in Q1FY16. The decline in realization was due to seasonal declining in its key markets, where cement prices has seen correction of Rs.50 per bag. Cement EBITDA/tonne fell sharply by ~36% QoQ to Rs. 727/tonne from Rs. 1136/tonne in Q1FY16. General Administrative expenses increased by 85% QoQ to Rs. 14crs in Q2FY16 from Rs. 7.6crs in Q1FY16 which includes onetime expenses also increases in some variable expenses. We expect, it to get normalize from Q3 onwards.
3. Freight/tonne had increased by ~24% QoQ to Rs. 849/tonne from Rs.735/tonne in Q1FY16 due to company entering new location which have lower realization and high lead distance.
Discl: Invested from much lower levels (10% of portfolio at present). As disclosed in Deccan Cements thread earlier, I had sold 1/3rd of my holdings in NCL at 160+, reason being portfolio top slicing from an allocation pov.
Note: I have just pasted the analysis of numbers selectively from the report. Report is in public domain and can be found here ([Nirmal Bang NCL Q2FY16 Result Analysis][1]).
This is the recent interview link of NCL Industries MD where he mentioned the FY16 revenues would be around 900cr!! ,
First half revenues are around 320cr and FY 15 revenues are around 535cr . Which means a significant growth in second half?? or is it a mistake frm his side?
One thing I would like to point out is the Cement Bonded Particle Board they are making. It can be the replacement for Asbestos sheets and is growing at a healthy rate of 20% CAGR in India. They are using the technology from Bison Werke Germany and after browsing the internet, it looks like that NCL is the sole company to sell this type of board in India. EBITA of this division looks closer to 25 cr this year and the capital employed for this division is just 50 cr. My question for senior boarders is that can we hope that in coming 2-3 years the valuation of this hidden division would become more than the cement division? Also, if somebody can get the insight from the company about confirmation of the trend for Cement Bonded Particle Board (Ncl uses Wood particles instead of Asbestos)
Why there is a huge drop in PAT in Q3 compared to Q2. It was announced that in Q2 maintenance was undertaken and plant was shutdown for that.There was a huge price hike of Rs.75/- per bag of cement in telangana and AP during Nov 15. see the article below:
Despite that the revenue as well as PAT is less in Q3 than Q2. Can Any body throw light on that?. Please hurry up need to take a decision tonight whether to hold on or sell it off. I have huge stocks in my books.
