India Cements aims for 9.6MT-plus sales in FY17

Riding on an upswing in the cement demand in the past few quarters, India Cements forecasts volume growth to be in the range of 7-8 percent in FY17.South India is likely to lead the cement demand growth and a good monsoon is likely to trigger the sector's growth, N Srinivasan, Managing Director of India Cements told CNBC-TV18. He expects the company's sales volume in FY17 to exceed 9.6 million tonne it clocked in FY16.Srinivasan said the cement maker's EBITDA/tonne was Rs 900/tonne in FY16 and it expects a stronger EBITDA/tonne in FY17.He said currently, 50 percent of India Cements' sales come from Tamil Nadu and Kerala regions. Karnataka contributes 10-12 percent while Maharashtra and Andhra Pradesh bring in 14 percent and 12-13 percent, respectively.Below is the verbatim transcript of N Srinivasan's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Sonia: What has been the uptick in prices in the southern region and is it backed by demand which is sustainable?A: It is not as if there is a sudden price increase.  Throughout the whole of last year almost if you look at the Tamil Nadu and Kerala prices, they were around Rs 400-410 and Karnataka prices went down to about Rs 320-330 but recovered to Rs 380. It was at Rs 380 earlier and it was only in Andhra and Telangana that in the month of March, there was a slight dip. I would say March-April maybe but that also has been recovered. They have recovered their prices in Andhra Pradesh and Telangana but in all the other three states, they have remained more or less stable for the whole of last year. Therefore, I believe that current prices are sustainable.Latha: Sustainable yes, but will they just sustain at current levels, will they stabilise at current levels?A: Q4 of 2016 saw about 10-12 percent increase in demand in south. If you look at April-May, that is sustaining also, which is what gives us the expectation that the prices will stabilise at these levels.Sonia: Can you do a comparison for us? What are the current prices and what were they in Q4?A: In Tamil Nadu and Kerala, the price is between Rs 400 and Rs 420 depending on which brand, where etc. In Karnataka the prices in Q4 were about Rs 330. Currently, they may have gone up to Rs 380. As far as Andhra Pradesh and Telangana is concerned, towards end of March there was a slippage of price and that lower price range continued in April and parts of May but now it has recovered to its earlier price and Hyderabad is now around Rs 320, which is what it was maybe in December-January.Latha: Can you take us through the sales breakup of the various geographies?A: About 50 percent of our cement is sold in Tamil Nadu and Kerala and we have 1.3 million tonne plant in Rajasthan. So, we sell 10-12 percent in Karnataka, about 13-14 percent in Maharashtra. We sell about 12-14 percent in Andhra Pradesh. We sell in the east also and then we go all the way up to Chhattisgarh, we sell in Rajasthan, Gujarat, Maharashtra as well as parts of Madhya Pradesh.Sonia: Can you give us your demand outlook for FY17 and what is the growth that you are factoring in?A: The last two financial years we have grown around 5 percent. I believe this year we will grow around 7-8 percent. That would be the growth. South is growing strongly now. The monsoon has hit Kerala, there is expectation that the monsoon will be good and therefore we also feel that post monsoon there will be very good demand growth.Latha: Can you give us some guidance on sales volume as well capacity utilisation this year?A: For India Cements, the capacity utilisation in Q4 of 2016 was 68 percent, which is an improvement on the 60 percent at which we were running earlier. In Q1, now we are running at about 64-65 percent.Sonia: What about sales volumes, how much of a growth should we expect realistically in FY17?A: The last financial year was about 9.6 million tonne. I think you can expect that we will grow on last year. We will grow better than we did over the year before last but I am aware of what kind of numbers we are targeting but I cannot share that at the moment.Latha: There is a lot of talk about your land bank. What is the total holding? Can you give us a value for that?A: We have about 26,000 acre. We haven’t valued it yet.