Bad mkt conditions hurt capacity utilization: Mangalam Cement

Mishra added that the company’s “long-term contracts” with suppliers would shield its EBIDTA margins from rising petcoke prices.

The company which has a 3.5-million tonne (MT) capacity will infuse another 0.5MT with addition of another plant in Aligarh by the end of second quarter.Below is the transcript of Yaswant Mishra’s interview with Nigel D’souza on CNBC-TV18. Q: It was good improvement that we saw coming in. Want to get a couple of details, what exactly were your sales volumes in the past quarter and also, could you tell us what are your capacity utilisations? I think you have been selling close to around 0.6-0.65 million tonne approximately on a quarterly basis. A: Our capacity utilisation for the year is not very good. It is only 68 percent. It is not as per our expectation. Our expectation was around 75 percent, but we could do only 68 percent during the year. Q: Correct and in the last quarter? A: Last quarter, it is 73 percent. Q: Do you see that your capacity utilisations will move higher going ahead. Also could you give us a sense about realisations? How much was I in the last quarter? A: Last quarter it was around Rs 3,500. And we expect that the capacity utilisation should go further higher because we have registered a growth of around 27 percent last year. And we could sustain that growth during the year also. But due to bad market conditions in the last 8-9 months, we could not utilise further and our capacity utilisation stood only at 68 percent. Q: Also, could you tell us your earnings before interest, taxes, depreciation and amortisation (EBITDA) per tonne. It has shown a good improvement if I look at it in comparison to the last few quarters. Could you give us that number that what exactly was it and we are aware that prices in North India has been moving higher. So, do you expect your EBITDA per tonne to improve further from here? A: We always expect some good results to come. Our EBITDA per tonne during the quarter is Rs 610 compared to the overall during the year EBITDA of Rs 207 only. So, we are expecting that if this trend continues, we will be having some better EBITDA during the next 2016-2017. Q: Could you repeat that number? EBITDA per tonne for the last quarter was Rs 610 you are saying? A: Rs 610, yes. Q: And for the year it was? A: It was only Rs 207. Q: And you see this number improving going ahead? A: Yes, it has already improved because last six months it was very bad for the industry as a whole and North India, we struggled a lot. But now prices have already started improving. A little bit of demand also has improved. Q: Also, could you tell us what exactly is your fuel mix? All the companies that have come out, they are telling us that you are using more pet coke and that is what really is giving them lower cost and that is what is helping them at least expand their EBITDA per tonne. What is your fuel mix, how much of pet coke you are using? A: That is right, everybody is right. We have started using 100 percent pet coke in our kiln last year only and this year we have started using 100 percent pet coke in our captive power plants (CPP) and that has given us a good benefit in terms of around Rs 2,300 per tonne of cost benefit. Other cost control measures also have been taken by the company which has helped the company to take this result. Q: But we have seen that pet coke prices are up by 20 percent from the 2016 lows. Could you tell us exactly whether this EBITDA per tonne of Rs 600 per tonne, can you maintain it with your pet coke prices already moving up in the last couple of months? A: Yes, you see, we have a long-term contract with some suppliers of pet coke. So, we do not see our pet coke price moving that much compared to other players in the market, because the long-term contract always helps. As well as other cost control measures which we are taking at the plant level and our technical department is working. That will also help us to get some better results. Q: Also, could you tell us what is your current geographic breakup. How are you selling your cement? How much in Madhya Pradesh, how much in Rajasthan? And also, I think your total capacity is currently around 3.25 million tonnes. You are looking to up that? And when exactly could we see that? How exactly would you do it? Organic, inorganic route? A: We have already informed our investors earlier that we are already setting up one plant in Aligarh, one grinding unit of 0.5 million tonne. That is expected to be commissioned in the second quarter, by the end of second quarter and that will virtually take our capacity to 4 million tonne per annum. And this sales mix, which at present we are doing, in Rajasthan, as we are getting the sales tax benefit, we have started selling more and more in Rajasthan as well as we will be selling more in Uttar Pradesh and National Capital Region (NCR) after our Aligarh is commissioned. So, at present we are selling around 30-33 percent in Rajasthan which we want to expand it to around 40 percent in Rajasthan from the Morak plant. Q: Give us your sales volumes guidance for FY17 and there is so much of buzz whether or not there is going to be that big Birla Group consolidation. Have you heard anything on that front? We are talking about, there is a lot of talk about UltraTech Cement and all the Birla companies coming under one umbrella. Have you heard anything on that front and also, give us your sales volumes guidance for the next fiscal. A: We expect to increase our growth in terms of volume and we are expecting that next year we should get at least Rs 1,200-1,300 crore of turnover. Regarding your other question, practically, this is their family matter, we cannot comment anything on that.