December Despatches - Strong results continue
NOTES FROM EDELWEISS CONFERENCE - 01-FEB-18
The beneficiary of demand recovery in Andhra Pradesh: According to Sagar Cements (SCL), cement demand in Andhra Pradesh/ Telangana (a key market with 55% sales exposure) has been growing at over 15% YTD in FY18 and is expected to continue growing at similar pace at least for the next two years.
Irrigation and housing are driving demand growth. 9mFY18 volumes for SCL grew a robust ~23% YoY (aided by demand recovery in AP and benefits of acquisitions) and the company remains confident of similar growth for FY18. At all-India level, SCL expects demand to clock 6.5-7.5% CAGR over the next five years.
Capacity expansion provides further volumes growth visibility
SCL is expanding its cement capacity at V izag from 0.3mtpa to 1.5mtpa (by September 2018) aiding visibility of a strong volume growth over FY19 and FY20 as well. The company estimates huge demand potential in Vizag where it plans to produce only slag cement. The unit will also aid savings in logistic cost with reduction in lead distance. While Vizag expansion will take its capacity to 5.5mtpa, SCL also has planned to add another 0.5mtpa at its plant in Gudipadu, which will take its capacity to 6mtpa by FY20.
Captive power capacities to yield significant savings
SCL has recently commissioned 6MW of waste heat-based power plant in Matampally, which the company plans to increase to ~8.5MW by Q1FY19. It is also installing an 18MW thermal CPP by March 2019. Collectively, both the power plants will help save the company INR400mn p.a. (~40% of FY17 reported EBITDA).
Debt level to remain same despite capex
Despite incurring total capex of INR3.5bn towards various projects, SCL expects debt to stay flat at current level of ~INR5bn.
Prices may remain firm, but difficult to comment
SCL expects cement prices to remain firm in the near term due to the busy season. However, given capacity additions by some players in an already low utilisation market of South, the company does not want to comment over the outlook from a medium to long term perspective.
Q1 results: Significantly poor results.
Investor presentation - https://www.bseindia.com/xml-data/corpfiling/AttachLive/275165b1-315a-4933-960a-3d4a59f82bff.pdf
Q1 FY 19 Concall details:
Demand in South especially in Andhra Pradesh and Telangana remain strong. Realizations as well improved marginally on a sequential basis on a back of steady demand. Moving onto the West, pickup in infrastructure projects and lower base have been improving the demand in the region. Prices as well moved in sync with the demand improving on a sequential basis.
Commissioned the expanded capacity of our grinding unit located at Bayyavaram, Vizag, ahead of schedule
Work on the captive power plant is progressing smoothly and we expect to commission it by March 2019
Operating margins for the quarter stood at 13.5%, margin compression was largely owing to higher input prices, slightly lower realization, and at the same time shutdown of the wastage recovery plant for upgrading purposes.
Average fuel cost remained inched up a bit higher as it stood at Rs. 878 per ton for the quarter as against Rs. 923 per ton of clinker during Q1 FY ’18 and stabilization of Gudipadu plant resulted in lower fuel cost on a consolidated basis. Freight cost for the quarter on a consolidated basis stood at Rs. 793 per ton as against Rs. 805 per ton during Q1 FY ‘18.
Mattampally plant operated at 65% while SCLR operated at 80% during the quarter.
The gross debt as on June 30, 2018, on a standalone basis stood at Rs. 312 crore out of which Rs. 174 crore is the long-term and the remaining constituted the working capital. While on a consolidated basis, debt stood at Rs. 550 crore of which Rs. 370 crore is a long-term debt.
There is strong demand in AP. Demand from Tamil nadu and Kerala also picked up. Pricing was weak as supply was moreas demand expectation was high. Price will not improve before mid-Q3.
Transport cost is likely to reduce due to the new axle load regulation
Sep 2018 Despatches: