UltraTech Cement Ltd Q2 FY23 Earnings Conference Call Insights

Key highlights from UltraTech Cement Ltd (ULTRACEMCO) Q2 FY23 Earnings Concall

Q&A Highlights:

• [00:14:52] Sumangal Nevatia of Kotak Securities enquired that on a consumption basis, how is power and fuel cost shaping up. Atul Daga CFO answered that the company believes July-September quarter was the peak cost and a marginal reduction should be seen in the company’s consumption cost in the next two quarters.

• [00:15:40] Sumangal Nevatia from Kotak Securities also asked about the inventory days ULTRACEMCO is carrying. Atul Daga CFO said that ULTRACEMCO’s normal norm is about 45 days and in the current quarter it has consciously gone up to 55 days. And this is the reason working capital also increased.

• [00:17:04] Sumangal Nevatia from Kotak Securities enquired that given the market share, what inorganic growth appetite can be seen for ULTRACEMCO. Atul Daga CFO answered that the company is open to consolidate through inorganic routes. And as and when some opportunity arise in any part of the country, it will be examined.

• [00:19:39] Ritesh Shah of Investec Capital asked about the company’s plans on distribution. Atul Daga CFO replied that the company doesn’t own its own fleet.  ULTRACEMCO’s transporters continuously add fleet wherever it is required. The goal is to continuously improve, increase the penetration in terms of dealer network.

• [00:26:25] Prateek Kumar from Jefferies asked about region wise utilizations. Atul Daga CFO answered that on region wise utilizations, North was nearly 85%; Central 70%; East 90%; West more than 60%; and South more than 75%.

• [00:27:12] Prateek Kumar from Jefferies also asked about pricing and grey cement realization region wise. Atul Daga CFO said that East was the least impacted, North saw a decline; North and Central were the leaders in decline and East was better placed, while West was neutral.

• [00:27:54] Prateek Kumar from Jefferies enquired if preponement of maintenance had any impact on cost. Atul Daga CFO clarified that the company’s maintenance costs were higher than planned by about INR80 crores due to preponement.

• [00:30:10] Pinakin Parekh from JPMorgan enquired that in the context of de-growth in Chhattisgarh and Orissa due to sand mining bans, how the demand in East market will turn out in future. Atul Daga CFO answered that East will the best-performing market in terms of demand. Also, underlying capacity utilization in the East was the highest in 2Q23 and ULTRACEMCO expects to see good capacity utilization in the East.

• [00:36:01] Indrajit Agarwal from CLSA asked that CY23 being the pre-election year, if the company is seeing any bump up in infra activity yet. Atul Daga CFO replied that it’s not seeing it yet. ULTRACEMCO is expecting more than what is happening. There is a positive direction in order flow and cement consumption, which would result in infra activity going further.

• [00:37:14]  Navin Sahadeo of Edelweiss Securities enquired about profitability region-wise broadly. Atul Daga CFO said that looking at prices, south would be leader in profitability, followed by West and North catches up. East is the least. Central and North would be behind South and West.

• [00:45:27] Ashish Jain with Macquarie asked that on growth plans outside organic plans, what specific region the company would explore in terms of M&A. Atul Daga CFO said that the company will be interested in India where it won’t have any regulatory issues in any geography in the country.

• [00:46:24] Ashish Jain with Macquarie queried about share of trade cement in 2Q23 and in which segment chemical revenues come in. Atul Daga CFO answered that trade cement was 68%. And chemical revenue is part of cement segment.

• [00:47:16] Girish Choudhary of Spark Capital asked about the industry’s supply dynamics.  Atul Daga CFO said it expects that all the organic supply that comes in will get absorbed easily. The company added that as long as there is growth potential, additional capacity will get absorbed.