Ambuja Cements Ltd (BOM:500425) Q3 FY25 Earnings Call Highlights: Strong Revenue Growth Amid ...

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31-01-2025

Revenue: INR9,329 crores for Q3 FY25.
EBITDA: INR1,712 crores with a margin of 18.4% for Q3 FY25.
EBITDA per Tonne: INR1,048 for Q3 FY25.
Operational Costs: INR4,618 per tonne for Q3 FY25.
Energy Costs: Reduced by 7% due to better fuel management.
Transportation Costs: Declined by 6% to INR1,239 per tonne.
Cash and Cash Equivalents: INR8,755 crores as of December 31.
Net Worth: Approximately INR63,000 crores, up by INR12,000 crores since April.
EBITDA Margin for Nine Months: 16.3% with EBITDA of INR4,103 crores.
Ready-Mix Plants: Eight new plants commissioned, reaching 100 total.
Limestone Reserves: 631 million tonnes secured in Q3 FY25.
Green Power Share: Increased to 21.5% from 15.8% in power mix.
Lead Distance: Reduced by 4 kilometers to 85 kilometers.
Warning! GuruFocus has detected 4 Warning Signs with BOM:500425.
Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Ambuja Cements Ltd (BOM:500425) achieved a revenue of INR9,329 crores in Q3 FY25, driven by strong market management and expansion of its dealer network.
The company commissioned a 200-megawatt solar power project in Gujarat and secured 631 million tonnes of new limestone reserves.
Operational costs decreased due to a 7% decline in energy costs and a 6% reduction in transportation costs.
EBITDA stood at INR1,712 crores with a margin of 18.4%, supported by cost improvements and increased direct dispatch to customers.
The company is on track to expand its cement capacity to 140 million tonnes by FY28, with several new facilities and expansions underway.
The operating performance was weaker than expected, with EBITDA per tonne dropping to INR537 when adjusted for incentives.
Realization per tonne decreased sequentially, despite industry-wide price hikes in December and January.
The newly acquired assets, Sanghi and Penna, are still underutilized, operating at sub-40% and sub-50% capacity, respectively.
There was a significant increase in other expenses, partly due to higher consumption of stores and spares for maintenance.
The company faces challenges in ramping up the newly acquired assets to full operational efficiency, impacting overall cost structures.
Q: Why has the operating performance dropped significantly, with EBITDA per tonne only at INR 537 after removing one-time incentives? A: Ajay Kapur, CEO, explained that while volume growth was strong at 16.7%, the inclusion of Penna and Sanghi volumes, which have higher cost structures and lower capacity utilization, impacted overall costs. Additionally, several plants were under maintenance, affecting inventory and costs. These are expected to stabilize in the next financial year as utilization improves.
Q: Can you explain the sequential drop in realization despite industry-wide price hikes? A: Ajay Kapur noted that 1.4 million tonnes of sales came from markets with depressed prices, particularly in the South. The price increases in December will reflect more in Q4 results.
Q: What is the current cost differential for Penna and Sanghi compared to traditional capacities? A: Ajay Kapur stated that both Penna and Sanghi have costs about 10% to 15% higher than Ambuja's traditional costs. Initiatives are underway to reduce these costs, with expectations of significant improvements as capacity utilization increases.
Q: How does Ambuja plan to achieve the targeted cost reduction to INR 3,650 per tonne? A: Ajay Kapur outlined several initiatives, including increasing green power usage, optimizing logistics, and improving operational efficiencies. These efforts are expected to progressively reduce costs over the next few years, with significant savings anticipated from captive coal mines and other projects.
Q: What is the expected timeline for receiving the INR 4,500 crore in incentives? A: Ajay Kapur mentioned that these incentives are expected to be received over the next seven to nine years, with an annual addition of approximately INR 500 crores on top of the current INR 600 crores from expanded capacity.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.