HM Bangur, Managing Director, Shree Cement, spoke to CNBC-TV18, says expect 9-10% growth in volume terms as the economy is doing good.
Latha: Can you give us the power earnings as well? What is the breakup between cement and power, we don’t have that at the Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) level?
At the EBITDA level, 95% or so comes from cement. Power now is not earning so much. So power earning will be around Rs 15 crore EBITDA out of the total EBITDA.
Sonia: Can you also tell us what exactly were the cement sales volume in this quarter and what is the expectation from FY19?
Cement sales were increased by 9% and prices increased by 5% giving a total turnover rise of around 15%. This year also, the economy is doing good and backlog of demand is there. We expect 9-10% growth for Shree Cement in volume terms and prices in commodity cannot be said, but I am bullish and I expect prices to rise in future.
Latha: Would you also not be encountering higher power and fuel cost and therefore if realisations are only jumping by 5% then you may be having to take a little bit of margin pressure?
Power and fuel cost have peaked out. Suddenly, some petroleum coke crisis have come. So whatever stock of pet coke we had was not usable and we had to purchase in emergency coal from the nearby sources from traders, so the power cost increased tremendously. World power cost is falling down. So I don’t think this quarter or this year as a whole compared to last year, the power cost will be higher. They have peaked.
Anuj: What are your targets for FY19 in terms of sales, in terms of realisations?
Realisation, I will not be able to say, but sales target we expect 10% increase in volume. This year, by September or so south Indian plant also will be commissioned and east and north are doing normally good so 10% volume growth.
Latha: What is the capacity utilisation?
Capacity utilisation is 81%. But as we are adding more capacity, in immediate future, the capacity utilisation is expected to come down, though volumes will increase by 10%.
Sonia: You did mention that prices in Q4 have gone up by 5% and you expect them to rise further? What is the average rise in prices that one can estimate in the first half of FY19 and what will all of this do to your EBITDA per tonne? Where does it stand at now and what is the forecast?
Price increase I will not be able to say, but cost will be almost fixed as power and fuel cost, logistic cost everything has peaked. So what I expect is whatever is the price rise will add 90% of it or more of it will add to EBITDA. In general, we can say that the present prices are unsustainable for any new company. So naturally the prices has to go up.
Sonia: What is the EBITDA per tonne that you are working with right now?
A: Right now it is around Rs 1,100.
Latha: When is the next hearing on the petroleum coke issue? Are you expecting any trouble there? Would you be changing fuel or anything?
No trouble. Supreme Court has considered that cement industry is one unit which takes away all the sulphur as it is burnt with the lime. So there is no problem as far as pet coke is concerned.
Latha: So, legally that issue is sorted out?
Latha: What about sand that was a bit of a deterrent for growth not anymore?
It's not yet totally clear, but at a higher cost now, sand is available. Somehow the sand problem is being sorted out automatically.
Sonia: Will there be a large divergence in terms of regional trends for cement demand I mean how do you see it playout in southern India and where do you think the growth could be the strongest?
India in general will be having similar growth pattern. Because of the low base, I feel growth in eastern India maybe little better as per capita consumption is lower and now eastern side is catching up.