India Cements Ltd (INDIACEM) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to Q2 FY27 earnings conference call of UltraTech Cement Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. I now hand the conference over to Mr. Atul Daga, Chief Financial Officer of UltraTech Cement Limited. Thank you and over to you, sir.
Atul Daga (UltraTech Cement Limited): Hi, good afternoon, good evening, everybody, ladies and gentlemen. Thank you for joining our second quarter '27 earnings call. The September quarter is always the one where monsoon writes part of the script. This year, it brought a different twist, a weak monsoon that kept construction going alongside a West Asia conflict that flared up again and pushed fuel costs higher. Time and again, we keep hearing chatter about cement prices, which is on everybody's mind, and that's where I want to start first. In a normal year, cement prices slip during July and August as rains slow site and dealer dealers chase volume. This year, the industry largely avoided that. Pan-India average trade prices for Q2 was stable in line with Q1, with the quarterly average 1%-1.5% lower mainly because of a soft August. In the second half of September, prices turned firmly upwards. Trade prices must have risen 7 to 10 10 per bag month-on-month, and non-trade non-trade prices even higher. We exited September in trade at least about 3% above the Q1 average. The quarterly average is weighed down by a soft August. The run rate we take into Q3 is materially better. One more thing I want to clarify here for ourselves, UltraTech. We take a view on price changes with demand and macroeconomic trends. It's not a rocket science. If demand overshoot supply, it leads to price improvements. If there's a structural change in cost for the industry, ultimately the end customers will have to bear the cost. Given the spread of the industry in the country, prices rise always with the lag to catch up on cost. This is nothing new. This is an age-old phenomena. As for UltraTech, despite increase in costs, the company has achieved an improvement in operating performance, higher capacity utilization on a higher base, higher or stable realizations, improvement in efficiency and a 21% increase in net profits.
Atul Daga (UltraTech Cement Limited): for your benefit, have risen substantially in the month of October and continue to stay high. My sense is that there is more price improvement that will happen in the near future, in the next couple of months, that is to say. If you were to split the realizations by zone for the quarter, West, the prices were steady through July and August, stepped up in September with Mumbai being the biggest market moving strongly up by 3% to 4% per bag for both bag and bulk. Rest of Maharashtra, a small dip in August was followed by a big increase in September. Eastern markets, rains disruption pushed prices down during August, but we have seen prices playing a catch up across most of the states in the eastern corridor since since early October. South, north and central, south has been the strongest momentum in prices, volume and capacity utilization. South markets are transforming. South markets are transforming. Mark my words. You might remember something which I had spoken to you a few quarters a- ago about the Southern markets. North held steady. New prices have been absorbed, while Central has played a muted game. Into October, we are seeing continuous increase in prices. The festive weeks may slow down how and how quickly these prices are absorbed. So, we expect the full benefit of these price increases to reflect in the Q3 earnings, rather than immediately. So that's about prices. Three points stand out. Realizations in the previous quarter were essentially stable, so prices was not the cause of any decline in performance. Fuel cost and raw material cost rose about 13% or 3% quarter-on-quarter. Fuel cost have risen from ₹45 a bag to 51.5 per bag. That is the contribution of fuel cost YoY as a fuel rates climb to about 2.09 per kcal. This is the West Asia effect. West Asia crisis effect, which we can discuss separately. Third, other fixed costs per ton were 6% lower for us than the last year, even after absorbing new capacity, because absolute fixed cost grew only 4%, well below the volume growth of 13.8%. This is the operating leverage working for UltraTech as intended. September month has given a glimpse of what comes next. That is an internal number. But as volumes remain strong, price increases have been coming through. When we look month-to-month performance, September was higher than the Q2 average. Let me get to the next element of our industry, which is demand. Industry estimates put cement demand to grow closer to 10% year-on-year. Our growth of 13.8% this quarter is comfortably ahead, which means that our presence in the market is continuously increasing. North markets grew in high double digits. We have grown more than 20% in the northern markets, in the range of 15% to 20% in the southern markets, East around 5%, West around closer to 10% as well as 10% in the central market. Our capacity utilization was 71%, better than 66% last year on a higher base. We could have grown more. We could have sold more cement if additional capacity was available, and that's why we are excited about our next phase of growth, which is around the corner. Capacity utilization, people often ask me. Let me give you the numbers up front. North North markets were upwards of 70% capacity utilization. North and South, both were upwards of 70%. West was a close second to about 70%. Central and East East because of prolonged monsoons
Atul Daga (UltraTech Cement Limited): and heavy monsoons in the Eastern markets. Till two or three days ago also, I believe West Bengal was raining. That's why the capacity utilizations were a shade around 60. This quarter, we have commissioned a greenfield cement capacity in the Southern markets. Demand is growing in South, prices are improving, and we are in a happy place in the Southern markets. Housing market, individual home builder markets, a backbone of retail demand, kept buying through the quarter helped by fewer rain lost days. Public CapEx, Central Government CapEx was very strong through July. Road construction, though road construction has been weak, however, we we are seeing new awards have picked up, which will result into higher demand in the following quarters or in the next couple of years. The project pipeline keeps growing. I believe there were 100 announcements worth about 13.4 lakh crores by early September, which include Tamil Tamil Nadu's 55,000 crores power plant, 65,000 crores Gorakhpur Industrial Park, Assam's 50,000 crores five-year infra program, Odisha's coastal highway, Metro 1 in Thiruvananthapuram and the Bawal-Behror RRTS. Power, industrial parks, data centers, all are growing and all are cement intensive. In the states of Bihar, West Bengal, we are waiting for demand to unleash. There are multiple projects in pipeline which will boost capacity utilization for us in this in the Eastern corridor as well. Looking ahead, most estimates put industry should grow very strong. We expect to grow stronger, supported by our capacity addition and market reach. Activity typically picks up mid-November or, as you are all aware, after what is called Chhath Puja, after all the festive season is over and monsoons out of the way completely. We've already seen good signs of strong momentum in demand. Much has been talked about monsoons, let me not shy away from that. Monsoons were very weak this year since 2015 and I guess, I'm told, it's the fourth lowest since 2001. But India has seen four very good preceding years with good monsoons, which which is a very positive sign. There are drought situations in some part of the country, which I'm sure you are all aware of. How does it impact us? Fewer rain lost days kept sites working and made the usual usual seasonal dip in volumes much lower. This is one of the reasons why industry would be growing very close to 10%, which is in a quarter, which is normally a weaker quarter. East was the exception because East had torrential rains, local spells in July and August, heavy rains, flooding, disrupted construction, and pulled down both volumes and prices in that region. Weak monsoon can hurt farm incomes, and with a lag, rural housing. But an important point to keep in mind is that Indian economy has been evolving. There are several non-crop activities which are contributing to almost 40% of rural economy with the help of MSME, non-agri sectors growing, mushrooming everywhere in the country. Besides, as I mentioned, last four years of good monsoons will also help or act as a cushion. We expect rural demand might soften in some areas while urban housing, infrastructure, private sector CapEx will continue to grow very strongly. West Asia crisis, last quarter, we were expecting a de-escalation, crude prices falling and things becoming normal. But a candid acceptance from my end, predicting a role of a dice is easier than what will be the outcome on the West Asia crisis. How it is impacting us? Petcoke prices have shot through the roof.
Atul Daga (UltraTech Cement Limited): trading around 170, 180 per ton. As I last checked, petcoke, what we have done is we have reduced our dependence on petcoke. Since the last quarter, today we are down to about 25% of petcoke consumption in our overall mix. Coal, power plants are being required to blend imported coal. Coal India is giving priority to the power sector, which tightens the domestic availability for the industry. Industrial diesel prices have been continuously increased by the government. I believe they are at a all-time high as we speak, which impacts the raw material cost vis-a-vis the mining cost or the transportation cost. These cost pressures, as we speak, we don't know what will happen. As I mentioned about the West Asia crisis, are here for some more time. That's all I can imagine. So far, we have not seen any direct impact on cement demand. Our volumes show that very clearly. The indirect rise are risks are higher inflation, tighter monetary conditions, and less fiscal room if fuel tax, fuel and tax relief do not, fuel does not come down in terms of costs. We are watching all the three elements. Our response follows a strategic plan: price discipline, product mix and premium products, and relentless cost work across fuel sourcing, power, and logistics. Our growth plans is the next topic which I want to touch upon. We commissioned 4.6 million tons of capacity in the month of September, taking our domestic cement capacity to 204.7 million tons, which includes the 3.6 million tons greenfield capacity at Pettikota in Andhra, and a million ton of debottlenecking at three other units. During the quarter, we also added 116 megawatt of renewable power, 10 megawatt of waste heat recovery. So our green power index keeps on rising. 47% of our power needs were met from non-fossil fuel sources. We have also achieved a unique status of having 2 gigawatts of renewable, green power for captive consumption as a manufacturing sector. We've commissioned AFR system at two plants, taking our thermal substitution rate to about 7.2%. We are on track to reach 240 million tons of capacity, as planned, without any surprises. UltraVolt. On 3rd September this year, we launched our wires and cables business under the brand UltraVolt. We already have a huge channel partner force in place. The investment of 1,800 crores, which has been planned, we have spent 1,000, around 1,100 crores till date, and the balance will get spent in the next few, maybe two quarters. This is the first month of launch or first month of operation. Not even full month, maybe 27 days or 25 days of operation. Please have patience. We will deliver an electrifying performance. UltraTech has helped build walls, and now we are getting behind the walls. We have started with wires and light-duty cables. It appears to be a very exciting space, and we are confident of growing rapidly. Currently dealers, distributors, retailers, builders, contractors, electricians, and all EPC firms and panel builders are all getting on board. More than 1,500 UltraTech, UBS channel partners have signed up to become dealers for, our Ultra- UltraVolt as a brand. A retail reach has already crossed about 80,000 points, and growing very rapidly. Supply chain is in- chain is in place. We have a mother plant at Jhagadia in Gujarat, one main warehouse with five regional distribution center
Atul Daga (UltraTech Cement Limited): and 16 odd branch warehouses. Production and sales of house wire, panel wire and multi-core cable has already started. Remaining power and control cable lines will be commissioned through the second half. Our focus for this quarter shifts from building the network to stabilizing it. That means custom consistent fill rate at the counter, reliable replenishment from warehouse to dealers, credit discipline, tracking of secondary sales. The aim is that every new partner sees the business turnover steadily, not just one-time large stock. As we are building this business, our performance will speak. To sum up, cement is our core. We are growing very strongly in cement and as alluded to, we are looking forward to our next phase of growth which will take us way beyond 240 million tonnes of capacity. Cement demand is resilient and we shall keep growing very strong. Prices have held through the monsoons, are turning up at the exit and seem to be holding. Cost remains a challenge while West Asia situation unfold on a everyday basis. We are entering now the strongest season of the year with a better price run rate, more capacity, and cost structure that improves with scale. I won't pretend that second half will be free of cost pressures. What I can promise is that we will manage it much better than anybody else under the sun. And you will see similar performance from UltraTech quarter after quarter. Thank you, as always, for trust in UltraTech. And over to you for questions.
Moderator: Thank you very much. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Indrajit Agarwal from CLSA. Please go ahead.
Indrajit Agarwal (CLSA): Hi. Thanks for the opportunity and congratulations on a strong volume growth. A couple of questions. First, if we were to take spot costs across all front, fuel, industrial diesel etc, what kind of variable cost inflation can we see in the second half from the current levels?
Atul Daga (UltraTech Cement Limited): Yeah, right. You tell me what is Mr what is in the mind of Mr. Trump and I'll tell you what kind of inflation we'll see. Cost, as I mentioned, Indrajit, are already elevated. And whether they have peaked, it's I'm not an authority to comment on that. So, really don't know. Sorry, I don't have an answer to that, Indrajit.
Indrajit Agarwal (CLSA): Sure. Where I was actually coming from if I take today's cost as it, as is mentioned, pet coke is at $180 today. If I extrapolate that, yeah, if I extrapolate that
Atul Daga (UltraTech Cement Limited): $180, yeah. Yeah, so if you extrapolated that, as I also mentioned, the cost of fuel has gone up from 45 a bag to 51 a bag. Rs 6 per bag is an in- an impact of fuel fuel increases. Maybe, but that is. Just 1 second, Indrajit. That is in the last quarter. There might be some more increase that might happen.
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