Sanghi Industries Ltd
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Sanghi Industries Ltd
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Ladies and gentlemen, good day, and welcome to the Sanghi Industries 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 from PhillipCapital (India) Private Limited. Thank you, and over to you, sir.
Yes. Thank you, Inwa. Good evening, everyone. On behalf of PhillipCapital (India) Private Limited , we welcome you to the Q4 FY '22 call of Sanghi Industries Limited. On the call we have with us Mr. Alok Sanghi and Ms. Bina Engineer, full time Director of the company.
I would like to mention on behalf of Sanghi Industries Limited and its management that certain statements that may be made or discussed on this conference call may be forward-looking statements related to future developments and the 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.
Sanghi Industries Limited and the management of the company assumes no obligation to update or alter these forward-looking shipments, whether as a result of new information or future events or otherwise.
I will now hand over the floor to Ms. Bina Engineer from Sanghi Industries Limited for opening remarks, which will be followed by interactive Q&A. Thank you, and over to you, ma'am.
Good evening, friends. Welcome to the conference call for Sanghi Industries Q4 results. So I'll start with the analysis of numbers first.
So the volume numbers for the quarter was 7,20,000 tonnes, which included about 54,000 tonnes of clinker sale and a majority of the income sale has been on account of export. 6,65,000 tonnes was cement sales. This was almost entirely for domestic market.
For the year of FY '22, we have achieved a sales volume of 2,37,000 tonnes compared to 2,63,000 tonnes. So for the year, we have achieved an improved sales of about 8.5%. And quarterly sales was about 20% better than the preceding quarter of December, and about 4% lower in volume terms compared to the March '21 quarter.
During March '21 quarter, we had done additional clinker shipment. So therefore, the sales grows on the higher side. But if I compare the cement sales, we have done slightly better compared to March '21 quarter in the current quarter. So the domestic cement volume has improved marginally. Export volume was lower during the quarter. And for the year also, the domestic cement volume has improved marginally. And overall volume has also improved by 8.5% because of the export turn in earlier quarters.
In terms of the overall sales value we have done a gross sales of INR 449 crores and net sales of INR 353 crores. So this was better by 8% on a Y-o-Y basis. and about 27% better on an immediately preceding quarter. On 12 months, this is -- the sales has improved by almost 18.5%.
Last year, the sales was INR 1,201 crores, which has increased to INR 1,423 crores in current financial year. on gross basis and on a net basis, it was higher by 20% at INR 1,123 crores compared to INR 936 crores in the FY '21 year. In terms of sales realization, the domestic cement price during the quarter has improved by 8% on a Y-o-Y basis. However, this was 5% lower compared to December quarter of '21.
In terms of the year as a whole, March '21 year, domestic finance prices were INR 292 average realization, which improved to INR 329 in March 22, that is FY '22. So the sales price has improved by about 13%.
The geographical breakup was about 86% sales in Gujarat in the last quarter, which was about 80% on a Y-o-Y basis and around 86% on the immediately preceding quarter. For the -- Sir, as a whole, we have done about 84.5% sales in Gujarat compared to 82% in Gujarat in FY '21. The balance is amongst the states of Maharashtra, Rajasthan and Kerala.
In terms of various expenditure analysis, the raw material costs have moved up marginally. In terms of cost per tonne of sales, there is an increase of about INR 50 in the raw material cost. Most of this has been on account of the switchover of system from chemicals system to mineral system. Chemical system was available and free of charge. But for improving the quality of the blended cement, we have switched over to mineral system, which we are, of course, buying at a cost. And therefore, the impact on raw material is on account of the system purchase, system switchover from chemical to mineral.
The biggest cost jump has happened on account of power and fuel. So power fuel cost has been increasing on account of the higher cost of coal as well as lignite. The coal cost was up from INR 0.91 per calorie to INR 2.40 per calorie between March '21 and March '22 quarters. Similarly, the lignite cost has also moved up from INR 0.78 to INR 1.26 and therefore, for our fuel used in the kiln, the cost of fuel -- blended fuel has gone up from INR 0.87 average to, INR 2.94. So this, in turn, is reflecting in the higher power fuel cost.
On the other hand, on power, also similar increase was there. However, we have done good quantum of lignite mix during the quarter, and that was mainly utilized for power. And therefore, the calorific cost jumps in power is slightly lower than the fuel cost. We have done about 35% lignite mix compared to what used to be around 20% in the earlier quarters. So over a period of time, we have reached over more to lignite compared to coal. However, the coal that we procure continues to come at higher costs and lignite pricing has also gone up a substantial change of about 75% to 80% over last 1 year. And therefore, the lignite cost has also moved up comparatively.
During this quarter, we have also capitalized our expansion unit and the new unit does not have waste heat recovery, which is there in the old unit. And therefore, the power breakup is -- power is mainly coming from the thermal power plant to the extent of 95% and about 4% has come from waste heat recovery. That percentage was better at about 18%, 19% from waste heat recovery in March '21 quarter where we had only 1 unit, which is the first unit where WHRS is installed.
In terms of selling and distribution costs, we have incurred INR 92 crores compared to INR 85 crores in the corresponding previous quarter. That is Y-o-Y basis. This is mainly on account of the retail cost increase. We do about 15% of our transportation by sea route and balance 85% is by way of the road. The other operating expenditure consists mainly of the packing cost, which has moved up slightly, but offsetted by lower stores and spare costs. We have done almost 26.5% sales by way of bulk cement in this quarter, which has been increasing over a period of time and helps us to reduce the packing cost.
On the whole for the quarter, the EBITDA was INR 45.69 crores. EBITDA per tonne, including other income at INR 635. We have made provision of deferred tax and total comprehensive income is about INR 6 crores. I quickly also mention about the annual reflection on the major cost variances. Raw material cost has gone up in a very marginal at 5% to 6%, which is mainly on account of the higher production as well as on account of the discount change [ as we ] mentioned.
The major jump has happened on account of the power fuel which has moved by nearly INR 125 crores. This is a clear reflection of the cost volatility as well as the short supply of coal and several purchases that have to be made in spot rates, et cetera. So that is reflecting in this partial cost.
Selling distribution cost has increased only in line with the increased volume on a Y-o-Y basis. So there is no significant jump in selling distribution costs. For the year as a whole, we have closed the year at net income of INR 1,140 crores, which is 20% better than FY '21. And we have achieved an EBITDA of INR 203 crores despite the cost pressure and EBITDA per tonne for the year as a whole is INR 868.
So I think this is the basic information about the quarter performance and we can answer the questions session.
[Operator Instructions] Our first question is from the line of Kashvi Dedhia from Centra Advisors.
What is the status of our Surat expansion?
So as we have mentioned in earlier calls, we had acquired land and we were proceeding with it as a part of our expansion program. But then because of the COVID and other circumstances, we decided that we should put that unit on hold for the time being. And therefore, we are currently not pursuing. We will review that after about a period of 18 to 24 months once this current stabilities are ramped up.
Okay. And what will be our CapEx plan for the next 1 or 2 years?
There are no -- since we have just completed all the required CapEx and during this expansion as well as earlier, we have done a lot of other marginal CapEx such as installation of cement base recovery plant also in our first line. So we do not foresee any major CapEx in coming 18 to 24 months.
And what is the maintenance CapEx?
Normally, maintenance CapEx is around INR 28 crores to INR 30 crores on an annual basis.
Okay. And now what is our lead distance for transportation?
Our lead distance continues to be in the range of about 450 to 475 kilometers.
[Operator Instructions] The next question is from the line of [ Danesh Shah ] from Dam Capital.
Hello. Am I audible?
No, sir, not clearly audible. Could you please...
Am I audible now?
Yes.
I'd just like to know what is the price increase which you are seeing in the market over the average of Q4 currently?
That was not audible.
Yes. Hello?
Can you repeat your question? Sorry, it's not very audible.
Yes. Am I better now?
Yes, a little better, yes.
Yes. So what is the average price increase, which we've taken over the average Q4 price increase?
So if you ask the price in April and, let's say, 15 days of May, the prices have moved up in Gujarat by an average of about INR 30 to INR 35 for the company. But after the diesel or excise duty cut on region, most companies are passing the benefit back to the consumer. And so we are likely to see a reduction of about INR 10 or so in the market going forward. So if you look at the quarter as a whole and assuming this prices stay, you should look at about a INR 25 increase from the Q4 pricing.
So on average, it will be like a 25% increase from the Q4 average because we're going to be rolling back around INR 10 to INR 15 after the excise cut, which...
Correct. Correct. So the prices have gone up by about INR 30, INR 35 already compared to, but after the excise duty cut, it may be about INR 10 lower. So for Q1, you can expect an average price increase of about INR 25 compared to the Q4 price in Q1.
Got that. Got that. So the other question which I had was what is the demand outlook for us for the Western markets because -- if you could give us a little bit of flavor on that as to how you feel the demand trends would come in the first -- in the first half of this financial year.
Yes. So it's very difficult to estimate the demand right now. In Q4, we saw a little bit of a reduction in demand compared to last year. Last year, as you all recall, the base effect was very low, and so we had very strong demand in Q4 last year. In this quarter, the demand is more or less normalized. So in Gujarat, specifically, you saw more or less about 2% reduction in demand on a Y-o-Y basis. In Q1, which is the current quarter, the demand is continuing to remain strong, but not to the levels what we all anticipated. So because of the high prices, there is a bit of a pressure on demand. That is one.
And secondly, specifically in Gujarat, we had a lot of aggregate and sand mining issues because of which the mining lease holder has gone on a strike for a period of about 15 days. So we have very low demand in the month of May because of the strike issue, which is now resolved. So these are the reasons why we are seeing a lot of volatility even on the demand front.
Correct. So we've been -- we've seen approximately a 2% reduction in demand on Y-o-Y basis for Q4. And currently, the demand has bounced back post the sand mining issue which we faced in the first 15 days. I mean sort of.
Yes.
If I could squeeze in another question. It would be anything on the cost escalations, Q1 coming in, let's say, the first half, what are we seeing as to the coal trends and the pet coke trends, what do you feel -- what our inventory would come at?
So the markets are continuing to remain firm. So the coal prices are not really [ tapered ] off as most people were anticipating. And the excise duty cut on diesel has been a big relief for the industry. Of course, the benefit of the diesel price cut is being passed on to the consumer. But I feel that because of the lower price, it should propel some amount of demand in the market. So I'm not seeing very large green shoots in terms of the cost pressure, at least for Q1. Maybe the situation will improve further in Q2 or Q3.
Our next question is from the line of [ Dharmesh Shah ] from [ MK Global ].
Two questions. One is the -- how many days of inventories we are maintaining because on the balance side, we don't see any material increase on our inventory numbers rather the entire industry is witnessing a significant buildup of inventory? And secondly, on the payable side, also we see a significant increase in the payables. So can you just explain this inventory and payables part?
Yes, I think Bina will take this question.
Yes. Sorry. I think that for coal, our inventory is averaging around about 15 days currently. And therefore, you may not see any additional buildup on coal. In terms of trade payables, apparently, the last 6 months, higher cost of coal has affected the trade payables, and we have negotiated a longer tenure of credit from our suppliers and therefore, trade payables appear on the higher side on a Y-o-Y basis.
[Operator Instructions] I now hand the conference back to Mr. Vaibhav Agarwal. Over to you, sir.
Just one small question I had for you, Alok, you mentioned on the call that we have reduced INR 5 or INR 10 a brand because of the legal impact. So is this as large as INR 10 to [indiscernible] the savings coming to cement manufacturer because the excise duty cut? Or this is more like -- the benefit is more than passed to than you were actually getting.
So actually, we have to look at it for an average rate that the companies are seeing for the market. And for each brand, it may be a little different. But in general, what you are seeing across the country is about INR 10 to INR 15 price cut geography to geography, which I think more than compensates for the excise duty reduction in the market.
Okay. But can you -- even then the impact can be as large as INR 10 [indiscernible] because the benefit or to be sold for in terms of -- on a per ton basis [indiscernible].
I cannot speak for others, but for our company, the benefit was not as large as INR 10 but because generally, the market prices are being adjusted by other brands in the range of INR 10 to INR 15 to remain competitive in the market. We also need to adjust the price by about INR 10 to INR 15.
So is it also true that is it basically is a reduction on the invoice price and the rational response section, some of it if we can go somewhere right on that. Is it also...
I cannot again speak whether for other companies but this is a net reduction.
That's net reduction.
So in Gujarat, we don't have a concept of very high fee or [indiscernible]. And therefore, most of the time when there is a price increase or decrease in our geography, it is more or less net to company.
Thank you, sir and thank you on behalf of PhillipCapital, I would like to thank the managers for the call, and thank you for joining the call. Thank you, sir, and thank you ma'am.
On behalf of PhillipCapital (India) Private Limited , that concludes this conference. Thank you for joining us, and you may now disconnect your lines.