Analyst Concall: Ambuja Cement has INR 101 bln cash, may spend it by FY26

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Analyst Concall

Ambuja Cement has INR 101 bln cash, may spend it by FY26

Informist, Monday, Oct. 28, 2024

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--Ambuja Cements: Continue to be debt-free post Orient Cement buy
--CONTEXT: Comments by Ambuja Cements' mgmt in post-earnings analyst concall
--Ambuja Cements: To increase cement capacity to 97.4 mln tn
--Ambuja Cements: Transportation cost declined 7% in Jul-Sept
--Ambuja Cements: On track to achieve 140 mln tn/yr cement capacity by FY28
--Ambuja Cements: Logistics costs down 7% on yr at INR 1,282/tn in Jul-Sept
--Ambuja Cements: Expect cement demand to grow 4-5% in FY25
--Ambuja Cements: Cement ops grew 50% in last 2 yrs, led by inorganic growth
--Ambuja Cements:On track to improve margin led by cost-optimisation efforts
--Ambuja Cements: Cash and cash equivalent at INR 101.35 bln as of Sept 30
--Ambuja Cements: Overall sales volume, including clinker sales, up 9% YoY
--Ambuja Cements: Without clinker sales, overall volumes up 7.5% YoY
--Ambuja Cements: Hands full with buy of Penna, Orient, expansion of 3 kilns
--Ambuja Cements: Expect Penna Cement sales to pick up in Oct-Dec
--Ambuja Cements: Organic volume growth at 5-5.5%, excluding acquisitions
--Ambuja Cements: Expect to consume INR 101.35 bln cash by FY26
--Ambuja Cements: Expect 8-9% growth for rest of FY25
--Ambuja Cements: Will keep buying new assets, expand own assets
--Ambuja Cements: Average price higher due to higher premium pdt sales
--Ambuja Cements: Severe monsoon impacted Sanghi ops in Jul-Sept
--Ambuja Cements: Expect Sanghi clinker output ops at full capacity Oct-Mar
--Ambuja Cements: Expect to spend INR 70 bln in capex FY25
--Ambuja Cements: Have done INR 35 bln of organic capex in Apr-Sept
--ACC: Expect to spend INR 10 bln on capex in FY25
--CONTEXT: Comments by ACC's mgmt in post-earnings analyst concall
--Ambuja Cements: Penna Cement capacity utilisation at 65%

By Akash Mandal

MUMBAI – Ambuja Cement Ltd. has INR 101.35 billion in cash and cash equivalents, the company's management said in a post-earnings call Monday. The management, however, added that looking at its growth plans, this cash may get utilised fully by 2025-26 (Apr-Mar). Even then, the group hopes to remain debt free for its cement business. The group is debt free at present, despite the recent acquisition of Orient Cement, which it plans to fund from internal accruals.

The company's cash and cash equivalents were INR 274 billion in the first half of the current financial year. Of this, INR 50 billion was spent towards capital expenditure, INR 5.6 billion was spent on the dividend, and INR 40 billion was spent as net working capital, the management said. The company also spent INR 78 billion to acquire Penna Cement Industries.

The company said that while it has an appetite for further acquisitions and expansion, it "has its hands full" for now with the acquisition of Penna Cement and Orient Cement. Other than these acquisitions, Ambuja Cement is also building three kilns as part of its expansion plans, with work already having started on two, and one being a part of Penna Cement.

The management, which has more than once stated its objective to have a cement capacity of 140 million tonnes, said it was on track to achieve this goal. Penna Cement will add a capacity of 10 million tonnes, while Orient will add a capacity of 8.5 million tonnes, taking the total capacity of the Adani group company to 97.5 million tonnes.

Ambuja Cement also said the plant of Penna Cement was working at a capacity of 65% within 45 days of the acquisition of the company. The management said that before the acquisition, Penna Cement had a capacity utilisation of 30%. The Penna Cement plant is on track to achieve its target of reaching 80-85% capacity utilisation within three years, it added.

The company said the growth in its volumes is due to both its built-up capacity and the capacities of its acquired entities. The management said the acquisition of Sanghi Cement earlier in the quarter helped boost business-to-business sales. Sanghi Industries now has positive earnings before interest, taxes, depreciation, and amortisation, after several years of having a negative EBITDA, Ambuja Cement's management said. The management expects Sanghi Industries' clinker production to reach full capacity in the second half of the current financial year.

The management also said it is working towards improving margins by enforcing measures to optimise costs. These measures include using green power, C-Logistics, waste heat recovery systems, and alternative fuels. The management said it aims to increase the company's waste heat recovery systems to a capacity of 218 megawatt by March 2025. The current capacity of the system is 196 MW. The company is also building a platform which will 'bring a commendable difference' to the operations of the company, the management said.

In the same call, the management also said that ACC Ltd. will spend INR 10 billion on capital expenditure in FY25. Both Ambuja Cement and ACC are majority-owned by the Adani Group.

Ambuja Cement reported a net profit of INR 5.01 billion for the September quarter on revenues of INR 42.13 billion. ACC reported a consolidated net profit of INR 2 billion for the September quarter on revenues of INR 46.14 billion.

Monday, shares of Ambuja Cement closed 3% higher at INR 569.40 on the National Stock Exchange, while those of ACC closed at INR 2,288.70, up 2.3%. End

Edited by Deepshikha Bhardwaj

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Ambuja Cement has INR 101 bln cash, may spend it by FY26

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