NCL Industries is targeting a capacity utilisation of 75 percent in FY17, said NGVSG Prasad, Executive Director and Chief Financial Officer at the cement firm.In an interview with CNBC-TV18, Prasad said that the company's FY16 capacity utilisation stood at 68 percent, it had gone up to 80 percent in the March quarter.Rising demand, capacity expansion and increasing cement prices are likely to help NCL Industries increase its gross turnover to Rs 1,200 crore in FY17 from Rs 994 crore in FY16. Below is the verbatim transcript of NGVSG Prasad's interview with Reema Tendulkar & Nigel D'Souza on CNBC-TV18.
Nigel: Could you confirm, in the last one month, in fact we had said that prices in south India were hiked by around Rs 40-50. Could you confirm that from May onwards what have been the price increase and how many price increases have you taken. Report suggests two-three price increases?
A: In the last one month there are couple of increases and net realisations have improved by Rs 40-45 a bag in the states of Andhra Pradesh and Telangana.
Nigel: What is the total price increase?
A: It would be roughly to the extent of Rs 60 per bag. However, taking out tax and duties, there is an improvement in net realisations to the extent of Rs 40-45 a bag. Reema: In percentage terms, if you could tell us what would Rs 40-45 per bag be?
A: As of now we are getting about Rs 200 net realisations. Earlier we were getting only Rs 170-180. During Q4 there is a pressure on prices. The prices have dropped in Q4 and there is an improvement in last one month's time.
Reema: You are saying your net realisations would go up by 20 percent; Rs 40 on a base of Rs 200?
A: Yes, Rs 200 is a net realisation as of now.
Reema: What will this mean in terms of your Q1 margins in your Q1 performance?
A: The Q1 results are expected to be good, volumes are increasing and we are operating at 70 percent capacity now. This year we are targeting capacity of 75 percent.
Nigel: You are saying that you are targeting a capacity of 70-75 percent or thereabouts. In the final quarter of FY16, what exactly was the capacity utilisation at that end and also guide us, for FY17 what kind of sales volumes could we see?
A: In Q4 we have utilised a capacity of 80 percent and for the year as a whole, we have utilised a capacity of 68 percent and this year we are targeting 75 percent and in April and May we have operated at 70 percent. However, 75 percent in terms of volume, in specific terms, will be about 15 lakh tonne. Our capacity is about 2 million tonne, so we will be operating at 1.5 million tonne per annum for FY17.
Reema: You said in Q1 your volumes have gone up. Could you tell us by how?
A: Last year we were operating at about 65 percent level and that has gone up to 70 percent.
Nigel: What exactly was your EBITDA per tonne in the last fiscal year? There was a big improvement in it in comparison to the last few years. What is your targeted EBITDA per tonne?
A: We cannot have any target because the prices are driven by the market conditions. Last year we had EBITDA of 600-700 per tonne. However, we cannot have any target for this year but we want to increase our sales volumes by spreading our dealer network in neighbouring states like Karnataka, Tamil Nadu, we are concentrating more on that.
Reema: Do you believe these increased prices will sustain?
A: We are optimistic about that because demand is also improving and the state governments particularly Andhra Pradesh and Telangana have started consuming cement, so prices are likely to continue. Reema: What will all this mean in terms of your FY17 performance? In FY16 you had revenues of nearly Rs 660 crore and profits of Rs 53 crore, any sense in terms of numbers, how FY17 will shapeup for you considering prices have gone up, the demand is looking up and your capacity utilisation will improve to 75 percent. What will revenues and profits look like?
A: Last year it was Rs 994 crore of gross turnover and net turnover of about Rs 660 crore. This year we are targeting about Rs 1,200 crore gross turnover and net turnover will be Rs 800-850 crore.
Nigel: Could you tell us about your expansion plans. Currently you are a 2 million tonne plant. Could you confirm for us, for this year you are looking at 1.5 million tonne of sales volume for FY17?
A: Correct.
Nigel: You will be increasing your capacity to about 3 million tonne. Could you tell us by when will this happen?
A: We have taken up two expansion projects. One is in cement division and that we are increasing from 2 million tonne to 2.7 million tonne cement capacity. The other is bison panel, cement bonded particle board. We are increasing it from 60,000 tonne per annum to 90,000 tonne per annum. We have taken up two capex programmes; both the projects are expected to be completed by March '17.
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