Mangalam Cement Ltd

NSE:MANGLMCEM

Earnings Call Analysis

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, good day, and welcome to the Mangalam Cement Q4 FY '22 and FY '22 Conference Call hosted by PhillipCapital (India) Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Vaibhav Agarwal of PhillipCapital (India) Private Limited. Thank you, and over to you, sir.

[Vaibhav Agarwal, analyst]

Thank you, Aman. Good evening, everyone. On behalf of PhillipCapital (India) Private Limited, we welcome you to the Q4 FY '22 and FY '22 call for Mangalam Cement. On the call, we have with us Mr. Yaswant Mishra, President Corporate and CFO of the company.

I would like to mention on behalf of Mangalam Cement and its management that certain statements that we make or discuss on the conference call may be forward-looking statements related to future developments and current performance. These statements are subject to a number of risks, uncertainties and other important factors, which may cause the actual developments and results to differ materially from the statements made.

Mangalam Cement Limited and the management of the company assumes no obligation to publicly update or alter these forward-looking statements, whether as a result of new information or future events or otherwise. I will now hand over the floor to Mr. Mishra for his opening marks, which will be followed by interactive Q&A. Thank you, and over to you, sir.

[Yaswant Mishra, executive]

Good afternoon to all. This year, after just when COVID happened and we all recovered practically by God's grace and industry was doing good and we did much better in this year on all parameters. We, at Mangalam Cement, also have done our best. Just to inform you few things that we have done highest ever sales at Mangalam Cement during this year.

We got a growth of 18% from last year. We have dispatched the highest ever PPC cement of 22.17 lakh tonnes in this year, highest ever collection also more than INR 2,000 crores, around INR 2,047 crores. And we have started dispatching maximum quantity. We have dispatched around 50,000 tonnes from Aligarh unit also. Because we were not getting fly ash earlier, now we've already started getting fly ash, the unit is running, plus 1 new unit, which we bid 3 years before, has started functioning, and we shall be getting fly ash from that unit also at Aligarh. So availability of fly ash is not a concern right now.

In fourth quarter of last financial year, '22, we have sold highest ever quantity of 9.66 lakh metric tonne out of our capacity of 10 lakhs metric tonne per quarter. So these are the highlights of our working. Plus, whatever has happened, we have improved because of our efficiency and cost reduction or cost saving at all levels, we will tell you, because price realization did not happen as desired.

Cost of power and fuel, we have paid around INR 135 crores additional compared to last year only in power and fuel. Everybody has paid and we have also paid, but we have been able to maintain our profitability a little bit here and there. Rest all the details are with you. If you have any specific questions on any of the points, I'm here to answer all the questions raised by you people. Thank you very much. Please.

[Operator]

[Operator Instructions] The first question is from the line of Keshav Lahoti from HDFC Securities.

[Keshav Lahoti, analyst]

Just wanted to know whether this quarter you have faced any issue with respect to linkage coal?

[Yaswant Mishra, executive]

Linkage coal?

[Keshav Lahoti, analyst]

Yes.

[Yaswant Mishra, executive]

We are not getting linkage coal for last 2 years. Our linkage coal for CPP is pending for 22 months, which they are not giving because of sometimes coal not available, sometimes they are not able to give the rigs. But 22 months spending, and at present, you people are aware that Coal India and Railway have issued circulars not to give any coal to help any industry other than power. So rigs are also not available. So cost increase has to be on that front and we are also suffering because of that.

[Keshav Lahoti, analyst]

Yes. Okay. And sir, what's the business outlook for timber business?

[Yaswant Mishra, executive]

Timber business outlook is very nice. We have started production in the month of February. In the month of April, we have produced more than 1,700 tonnes, whereas our capacity is 3,000 tonnes per month. And we shall be producing around 2,200 plus in May. And most probably by June end, we shall be using our 100% capacity to produce. And as the market is good for timber, MDF industry, we hope that this year timber division should give profit to the company.

[Keshav Lahoti, analyst]

Okay. And what is the annual production and sales number of cement?

[Yaswant Mishra, executive]

Annual number you see, our production of cement is 33.37 lakh tonnes and clinker is 23.96 lakh tonnes. Utilization is 83.43%. We have sold around 33.54 lakh tonnes, giving a growth of 18.18% compared to last year.

[Keshav Lahoti, analyst]

Okay. And last question on the pricing front. How has been the pricing in Q4 and the early trends of April and May?

[Yaswant Mishra, executive]

Can you repeat, please? It was echoing.

[Keshav Lahoti, analyst]

May I know how was the pricing in fourth quarter for you? And how has been the prices in April and May month so far?

[Yaswant Mishra, executive]

It's good only. There is no issue. We are able to sell the maximum quantity, but rates are here and there, but we are able to sell our maximum quantity. You see in fourth quarter also, we have sold 9.66 lakhs of tonnes of cement, and our capacity is 10 lakh tonnes. So maximum, we are able to -- there is no issue in our any of the market.

[Keshav Lahoti, analyst]

Sir, the question is with respect to pricing realization, how has been the cement prices?

[Yaswant Mishra, executive]

You see realization depends on market to market. Somewhere it is good, somewhere it is bad. But yes, when you can sell your maximum product due to demand or something here and utilizing your capacity, realizations will not be much better. It has to go as per market. But nontrade segment has a little bit slided down by 5%.

Earlier, we were saving around 65 -- 70% plus. This quarter, we have sold around 65% plus. So 5% makes a little difference. So realization was a little bit lower side.

[Operator]

[Operator Instructions] The next question is from the line of Shouvik Chakraborty from Dolat Capital.

[Shouvik Chakraborty, analyst]

Sir, I would like to know the paid and nonpaid...

[Operator]

Shouvik, could you use the handset, you're not very clear.

[Shouvik Chakraborty, analyst]

Now?

[Yaswant Mishra, executive]

Yes.

[Shouvik Chakraborty, analyst]

Yes. So I was saying that can you please mention the trade and nontrade mix for this quarter?

[Yaswant Mishra, executive]

Yes, yes. 65 and 35, I said. I just mentioned, if you are listening.

[Shouvik Chakraborty, analyst]

Yes. I actually missed that. And then can you just tell like in quarter 4, what was the pricing scenario, like how much price hikes were taken by you considering the majority of the companies have not taken...

[Yaswant Mishra, executive]

Yes. There were a price hike around INR 15 to INR 20, it happened, but didn't happen for the whole quarter.

[Shouvik Chakraborty, analyst]

For the whole quarter, okay. And any further price hikes like in this April and May month that you have taken?

[Yaswant Mishra, executive]

Yes. May month also some price hikes taken. I don't know. Market is not taking that very seriously or positively, because discounts have also increased in the market. So if everybody increased discounts, we also have to give some more discounts. So price hike will not be that much positive for the company in comparison to the cost increase. Obviously, price hike is there.

[Shouvik Chakraborty, analyst]

Okay. Sir, and on the costing side, like, how are you saving the cost per tonne, let's say? And like are the realization...

[Yaswant Mishra, executive]

We have done lots of work on cost savings -- improving our efficiency and cost savings. Last year, we installed our WHR, which has given a very good performance and results, 11 megawatt of WHR we are working.

We are using 1 of our power plant in place of 2 power plants because now we are getting from WHR and the cost of WHR operation is very low. We have been getting fly ash at low cost at Aligarh started taking, and we are getting fly ash at Jhalawar also at low cost near our Rajasthan unit.

And we have done a little bit of cost reduction in our contract levels at all fronts that is also -- you see our employee cost more or less remains same. So on each and every stage, we have improved our efficiency. And it is being seen also in the result. Except power and fuel, you will not find anything which has increased. And power and fuel increase itself is INR 135 crores, more than 55%.

[Shouvik Chakraborty, analyst]

Sir, and also, can you please share the fuel mix for this quarter?

[Yaswant Mishra, executive]

We have done that also, but as I informed that 22 months of linkage coal is pending, means linkage coal is not given by the colliery for 22 months. If that would have also come, it would have saved at least INR 30 crores, INR 40 crores, which is the difference in profitability compared to last year. So just getting the linkage coal would have saved us INR 30-plus crores. That has also not come up. So those, when it will start coming, that time it will have impact on profitability and profitability will increase.

[Operator]

Ladies and gentlemen, that was the last question. I now hand the floor back to Mr. Vaibhav Agarwal. Thank you, and over to you, sir.

[Vaibhav Agarwal, analyst]

Sir, I have a couple of questions, if I may. Sir, 1 thing is that on the realization front, for Mangalam Cement in particular, the number appears to be a little subdued versus the industry peers in terms of expectations, what we are expecting. So...

[Yaswant Mishra, executive]

Yes. That is -- you are correct on your view, Vaibhav ji. The thing is like this that you are not taking that other income in consideration, whereas we are a single segment company. We are not having another thing. And this other income is not from our scrap sale or something else. These are the income which fund we have invested in the mutual fund or some other form of investment FDs or something else.

So if this would not have been invested there and we would not have got that other income, it would have reduced my cost of borrowing also a little bit. So these are those income, which we could include in our profitability.

And if you include you shall be seeing our INR 100 increase per tonne and that will give more or less comparable results. If you see [ SEC ] last quarter, it was 700 tonnes or INR 772 per tonne. And we were higher than that. But this quarter, because everybody got it, we have also got it.

And because if you are not including that other income, which is only 1 segment and interest income from our investment, we are also comparable at par.

[Vaibhav Agarwal, analyst]

Right. No sir, what I was coming to is basically, you mentioned during the call that industry has given higher discounts. So there's no...

[Yaswant Mishra, executive]

That is for the price increase. You see, if we have gone into following everybody, we'd not have been able to sell 9.66 lakhs out of 10 lakhs in the market. So we know how to sell our products, and we have sold that also. And in future also, we shall be selling our best quantity.

[Vaibhav Agarwal, analyst]

Sir, my second question was regarding your power and fuel cost. So in Q3, our fuel costs were abnormally high at about INR 1,560 per tonne, and you had rightly guided that in Q4, it will come up and it has come up to INR 1,345 per tonne on an average. But is this a number that we are sustaining for even today or this number is still like averaging to a INR 1,300 or INR 1,200 a tonne? If you can give some guidance there in terms of...

[Yaswant Mishra, executive]

You see power and fuel, especially pet coke, has gone very high, even coal has gone very high. At present what is hovering in the market is around $250 imported. And the Indian suppliers also match to their prices.

So until unless this Ukraine crisis is sorted out, I think some uncertainty shall be there. But in my opinion, if this crisis is sorted out, we should improve on cost front and cost would reduce.

[Vaibhav Agarwal, analyst]

So INR 1,345 is a number which probably can sustain...

[Yaswant Mishra, executive]

More or less, I mean, [Foreign Language]. If government starts giving that linkage coal after June, because then some power requirement in the country shall also get reduced, and we get our linkage coal, then obviously this will reduce by more than INR 200 or INR 300.

[Vaibhav Agarwal, analyst]

And sir, my last question is that we are about to hit our optimum capacity almost in terms of volumes. So any plans that it will be coming to like now...

[Yaswant Mishra, executive]

100%, we have planned, but it will be announced by the Board very soon, if they agree.

[Vaibhav Agarwal, analyst]

Aman, you may now conclude the call. On behalf of PhillipCapital, that concludes the call.

[Operator]

Thank you very much. Ladies and gentlemen, on behalf of PhillipCapital India Private Limited, that concludes today's call. Thank you all for joining us, and you may now disconnect your lines.