J.K. CEMENT LTD — Call Transcript 2022

Nov 23, 2022

JK Cement Ltd. Cl N : L1 7229UP1 994P1C0171 99 Registered Office

fr Kamla Tower, Kanpur-208001, U.P., lndia (} +91 -512-237 1478 to 85 €i +91 -512-2999854 I shambhu.singh@jkcement.com @ www,jkcement.com

15.tt.2022

The Bombay Stock Exchange Ltd.	National Stock Exchange of India
Corporate Relationship Department,	Ltd., Exchange Plaza, Bandra Kurla
Phiroze Jeejeebhoy Towers,	Complex, Bandra (E), Mumbai-400051
Dalal Street, Fort, Mumbai-400001	Scrip Code: JKCEMENT (ISIN.INE
Scrip Code:532644 (ISIN.INE 823G01014)	823G01014
Through BSE Listing Centre	Through: NEAPS

Dear Sirs,

Sub: Transcript _of fnvestor CaIt on the Company,s e2 Fy22-23 Earnings. fi:fi,*T.']f;, il;:tJl;*1"*F'u oLLIJi, and Discrosure Requiremenis)

The Investor call/Earning call was held on l4.ll.2022after declaration of result for the euarter ended september' 2022'Please n"o "tttrrtra^,rt. ti*rrrnoi"rtr* said Investor call. prease take the ffi :i'""1?:'i$:'i#'iJn:lT,fij,,ilyil;ffi;euproaded,r,,Jatranscript;;;;

Sincerely

$l*""r \r

Shambhu Singh Vice President (Leeal) & Company Secretary FCS No. 5836 SHAMBH U SINGH Digitally signed by SHAMBHU SINGH Date: 2022.11.23 12:42:17 +05'30'

Corporate Office

• e Padam Tower, 19 DDA Community Centre Okhta, Phase - 1, New Dethi - 110020, lndia re +011-49220000
• O admin.padamtower@jkcement.com

@ www.jkcement.com

Manufacturing Units at : Nimbahera, Mangrot, Gotan (Rajasthan) | Muddapur (Karnataka) Jharli (Haryana) | Katni (M.P,) | Atigarh (U.P.) | Batasinor (Gujarat)

"JK Cement Ltd. Q2 FY23 andHl FY23 Conference Call"

M,q.NacnMENT: MR. Amy KUnnnn smlocr-Dnpurv MANlcrNc
Drnncron & CFO, JK Cnvrr'nT LrD'
MR. Sumwsn KlunonlwAl -Dnpurv CFO' JK
CnunNr LrD.
Mn. Pn q,sHANT Snrn - PnnsrpnNr (BusrNns-s
InronvrauoN AND Ixvnsron RrlnrroNs)' JK
Cnunnr LrD.
MOnfnaTORS: MR. VmnUnV AClnWlr' - PHrr'lrpClnrAr' (Innm)
Pmvarn LrurrnP

JK Cement Ltd. Ltd. November 14,2022

Moderator: Ladies and gentlemen, good day and wolcome to the Q2 FY23 ard Hl FY23 Call of JK Cement hostedbyPhillipCapital(India)PrivateLimite,d.Asareminder,allparticipantlineswillbein the listen only nrode. And there will be an opporhrnity for you to ask questions aftor the presentation concludes.

Should you need assistance during the conference call, please signal an operator by pressing "t ' then.0'onyourtouchtorrephone.Pleasenotethattlrisconferenceisbeingrecorded,

InowhandtheconferenceovertoMr.VaibhavAgarwalfromPhillipCapital(India)Private Limited. Thank you and over to you Sir'

Vaibhav Agarwal: Thank you Steve. Good evening, everyone. on behalf of phillipcapital (India) Private Limited, IwelcomeyoutotheQ2FY23andHlFY23CallofJKCementLtd..onthecall'welravewith us Mr. Ajay Kumar Saraogi -Deputy Managing Director and CFO' Mr' Sumnesh Khandelwal -DeputyCFoandMr.PrashantSeth-President@usinesslnformatiorrandlnvestorRelations).

IwouldliketomentiononbehalfofJKCementLtd.andanditsmanagementthatcertain statementsthatmaybemadeordiscussedorrtheconferencecallmayboforwardlooking statern€nts related to future developments on the current economy. These statements are subject to number of risks, uncertainties and other important factors which may cause the actual developments and the results to difier materially from the statements made' JK cement Ltd' and the management of the company assnmes no obligation to publicly alter thsse forward-looking statenentswhetherasaresultofnewinfornationorfutureeventsorotherwise.

I will now hard over the floor to the management of JK cement Ltd' for their opening remarlis which will be followed by interactive Q&A' Thank you and over to Saraogi Sir'

Ajay Kumar Saraogi: ThankyouVaibhav.GoodeveningandwelcometoQ2results.Theboardofdirectorsmeton l2th of November to review the working of the results for the Qurter entled 30th Se'ptember 23 and for halfyearly and then Septernber 22'

The majorhighlights:

TherevonuefromoperationsduringthisquarterwasZ,ll}croresasagainstl'836croresan increaseoflT%,otherincomewaslowerat23croresasagainst43crores.Theoperating expenses were higher by 22o/o atl,846 crores as against 1'507 crores'

Theprofitbeforeta)(was16Tcroresasagainst24gcrores.Theprofrtafterta:(wasl35crores asagainst16gcrorosadropof'26Vo.TheEPSwasRs.16,16paisaasagainstRs.2l.85paisa. TheEBITDAduringthisquartgrwas303croresasagainst35gcroresinthepreviousyear' EBITDA margins was 14.49% as against 19 95% last year'

Ifyoulookattheperfonmanceforihe6montlrsApriltoSepxembertherevenuefromoperations hadinoreasedby24Yoat4,3[scroresasagainst3'46gorores.Theotherinoomewaslowerat45

crores as against 75 crores. The operating expenses lvas higher at32o/oat 3,61 I as agutstzJ4l crores. The EBITDA was 707 crores as against 761 crores. The profit after tax was 306 crores asagainst3TTcrores.TheEPSforthe6monthswasRs.3g.60paisaasagairrst4S.4S.The EBITDA margins for the 6 montls was 16'8% as agunst22'38o/o'

Thegrossdebtasat30thSeptemberstoodat2,6S6croresasagainst2,s50croresason3lst March 22 and the net debt was 1,70g crores as against 1,606 crores. The not debt-to-equity was 0.3g rvhich was same as last year. The consoliilated gross debt was 3B53 crores as against 3'434 crores and the consolidated net debt was 2B39 crores as against 2,150 crores' The board also approvedincreaseinthecemerrtcapacitiesby5.5milliontonsovernexttwoyears.Thiswasby adding grinding capacitres of 5'5 million tons by revamping the ginding capacrty of oristing units as Mangalwar, Muddapur, Jharli and Aligarh which would result in increase of 2 million tons by setting up a Greenfield cement grinding capacity in Ujjain at Madhya Pradesh with a capacityofl.5milliontonsandalsotosetupaC'reenfieldgrindingcapacityinUPatPrayagraj of 2 million tons besides increasing the clinker capaoity at Panna for presont 8,000 TPD per day to10,000TPDperday.Thiswouldbeatatotalcapitaloutlayofl,16lcroresatabout$26per ton.

Tlresearethemajorhighlightsifyouhavoanyquestionspleaseletusknow'Thankyou'

Moderator: Thankyouverymuch.Wewillnowbegirrthequestion.and.answersession.Thefirstquestion is from the lino of Shravan Shah from Dolat Capital' Please go ahead'

Shravan Shah: Sir the first question is on the pricing front on the gray realizations we are seeing close to 6'87o QoQdeclineinthisquarter,myspecificreasonwhythedeclines@mstobesliglrtlyonthe lrighersideversusthepeersandpostSeptemberhowdowoseetheinoreasehowmuchincrease we have seen in our regions where we operate?

Management: So,ifyoulookattheprioingseomoretheprioingintheNorthhasbeenunderpressureas compared to other regions' Since major of our exposure is in the North wo are seeing a nrargirrallyhigherdipintherealizations.AsregardspostSeptembertherehasbeensomeprice increase in the Southern region and the western region. However, there was no increase in the pricing in rhe Nordrern tegion up tilt october, some prico increase has taken place in the North now only two, three days back and we have to see whether the prices are sustained or not'

Shravan Shah: Broadly if we want to quanti$ in terms of how much hike rvould have been?

Management: SouthisaboutRs.15toRs.2QabagandWesternregionisforRs.l0andsoistheNorthern regiorr,butforNorlhwehavetowaitandseewhetherweareabletosustainthepricoinNorth.

Now,ourPannawouldbestartingso2MTPAwestartedandrostolinkerand2MTPAwillbe startingbythisquarter,sohowdoweseeintermsofthevolumefronrthis4MTPApartioularly in third and fourth quarter and the nextyear in terms of the rarnp up? Shravan Shah:

Management:	we have already planned the ramp up and as a part of the existing we had opened up the variousmarkets which are to be served from Panna and started supplying those markets from North. So,partoftlrevolumesNorthalsoincludedsomesalesintlreNortlrofParrrramarketsandwearehopefulthatwewouldbeabletormrpuptlriscapacityovernext6togmonthstimeandinitiallyyeswewillstartmaybearountlimmediatelyafterthemonthorsoaround15,000'16,000tottsmonthlyandgraduallyrampupadditionalvolumesaswegoouteaohmonthincludingsomesale in the nongacle segment. so, gradually the volumes would pick up' we are oonfident aboutthat we have alroady done our all-initial working with respect to the market, appointnrent ofdealers etcetera that has been done'
Shravan Shah:	And this new 5.5 MTpA we have mentioned everything in terms of the where capacities willcome, but in terms of the broad deadline in terms of the strting though we are mentioning twoyears,butifyouwanttoquantirybyFY24,soalldebottleueckinglikelytobestartingbynextyearFY24?
Management:	So,the2milliondebottleneckwhichisattheexistingplantsthatwillgetcompletedbyMarch23itselfandthenelvgrindingunitofUjjainthatslrouldcomesomewherebyMarch24andthegrindiryatPrayagrajsometimebytheardoffirstquarterortlresecondquarterofFY25,
Shravan Shah:	In terms of the CAPEX then last time we mentioned tlris yoar around 1,700 odd crore and nextyear 1,100 crore' so now in the second half how much in the next year and maybe in FY25 youcanbroadlyguideintermsoftheCAPEXanddebtlevelpreviouslylvernentionedthatintermsof the dobt 3,300, 3,400 crore that we look at' so how do we see that?
Management:	So,CAPEXthisyearwillbenowincreasedtol,g00croresinnextyearalsowillbel,400croreslooking to the investrnent in these grintling units and we have already done this year like aroundl,000ororesinthePannaexpansionplusthenormalCAPEXsol,200croreshavealreadybeenspentandasregardstheborrowingwehaveachievedthepeakborrowinglwelbyMrchorsayJurrenextyearandthatwillremainbecausewewilltakesomefreshbonowingsforthesegrinding units, but repayments will be there' So' peak level will remain at that level'
Shravan Shah:	So, that number would be how much 3'500 odd crores?
Management:	Yes within that.
Shravan Shah:	LastlyonthedatapointsonthefirelmixKcalcostofthepowerandfuelforthisquarter,loaddistance, rail road mix?
Management:	Forthefuelmixourpetcokeconsumptionwas50%intermsofthevolumeandontheKcalbasisour fuel cost has gone up by around 20% from the previous quarter
Shravan Shah:	So, this quarier it would be?

Management:	This quarter it was close to Rs. 2.40 paisa and the lead distance was 477 kilometen and what
	else you asked.
Shravan Shah:	Road rail mix?
Management:	'It was 19% rail.
Shravan Shah:	so post this Panna once it will become fully operational so sffucturally can we se'e in terms ofthe lead distance can signifioantly c.m come down by let us say FY25?
Management:	So, lead distance will come down once the Panna is firlty operational because some of themarkets this will help us we will save some markets will be set from Panna' So, we are expectingthat there should be an overall reduction in the lead distance after Panna comes in aild after thenew grinding units evon at Ujjain.
Shravan Shah	And the power and fueI cost in the third quarter can we see firrtlrer marginal reduction?
Management:	Very diffrcult to say I mean because there is some fuel saving, but again the percoke prices areagain on the increase. So, it could be some marginal variation, but we do not going to see that inthethirdquartertherewillbearysavirrgintermsofpowerandfuelbeoausestillwehaveamixture of some old inventory of petcoke. So, any saving in power and fuel would only be visiblein the last quartor and that too it depends on going forvvard there is no substantial increase in thepetcoke pricing.
Moderator:	Thankyou.ThenoxtquestionisfromthelineofKeshavLshotifromHDFCsecurities.Ploasego ahead.
Keshav Lshoti:	So,justwanttoundentandthisquarterUAEperformancehasimprovedsowhathasledtothisperformance and how should we see the UAE business going forward?
Management:	There is marginal improvement in the uAE perfornoance in this quarter and going forward weare hopeful of improved performance on account of the various initiatives that we have taken bysettingupthefacilitiesintheAfricaandtappingtheAfricanmarket.so,becarrseoftheCoVlDactually all those efforts could not fructify and now we are hopeful that in the coming monthsthose things are on traok, demand is good and we are able to supply also now because in thepreviousquartersbecauseoftheveryhighcorrtainerfreightandallwewerenotabletofeedthedemand was there. So, this is something positive about the UAE business'
Keshav Lshoti:	And what is the update ou pairrt business, lrow is it going, is it running as per the plan?
Management:	So,weareplannirrgoutalltheactivitiesforthepaintbusinessandbymaybewithinthiscalendaryemwowillbeabletohaveadefuritetimeframeforenteringthepaintbusinoss'

Keshav Lshoti: one last question from my side earlier you have guided for l0% volume growth in FY23 still it holds same guidance? Management: Yes that we have alreacly we have avolume grorvth of first 6 months in the same region and we expect that to continue. Moderator: Thankyou.ThenoxtquestionisfromthelineofAmitMurarkafromAxisCapital.Pleasego ahead. Amit Murarka: Management: Amit Murarka: Management: Management: Amit Murarka: Just on the capacity expansion announcemont so with this 5.5 million ton expansion our capaoity will increase to close to around lthir*.24.2million tons whereas the clinker will be like 14'1 million tons so that implies about l.7x cement clinker ratio and oapacity whereas on volumes our ratro is I believe 1.5 to 55x, so how do we kind ofreconcile this gap is there a plan to add a further clinker capaclty later on as well or do you think you can reach that kind of a blending ratio in terms of volumes? No see we can reaoh because we havo run an upgradation in the kiln capaclty at Nimbahera and as a result and because of other efficieilcy improvements of the clinker factor has also been booked'Wearepresentlyseeingthatwearenotinapositiontooperatetwoofourkilnsona regular basis because wo have sufiicient clinker available with us and the idea to ensure that we maintain the market share we are increasing the grinding capacity as we have already sufficient clinker available and in case of Panna to meet out the additional cement grinding oapaclty we are increasing tho clinker capacity from 8,000 tons to 10,000 tons with the kiln has that potontial to go up to 10,000 tons. No after taking all that the clinker capacity will be 14' l million ton right? It will be close to 14.5 million tons and Amit if you see the overall because capacity the actual production remains in the range of say 85% to 90o/o ofthe capacity so that will meet our thought ard as a part of our ESG initiatives we are continuously working on reducing the clinker factor also. So, we are hopeful that in the next two years' hme with more split grinding units will have the better clinker factor. So, we can produce around say 22 million tons fromtheit 22'23' Whathappensactuallyyoualwayskeepclinkerthecemerrtgrindingcapacityfortheoptimal demand and to have an average capaclty utilization ofsay 85%you need to operate in certain nrorrthsatfiIYocapacityandifyouilonothavethatcapacityyouwillnotbeabletogotan averageofS5%'WehavebeenoperatingatS5TotoSs%to89%,butthataverageiscomingit is an average ofthe whole Yoar' NowthatweareclosetocommissionofPannalikebywhenyouthinkwecanachieveoptimal utilization of let us say 7 5t/o, 80% of that plant? It is a Greenfield plant it will take two ysars because trade market we are broadly working on the trade market it takes timo as it happe[s the fust year of operations of ovory plant is around Management:

JK Cement Ltd. Ltd. November 14,2022

50%, 55% so tho firstyear of full oporations would be in that region may be we can reach up to 60% if we are very successful, but it would be we will not give any picture that in first year and yes by end of second year the exit should defiritely be close to 75Vo,80o/o'

• Amit Murarka: And in the initial period is it fight to think that nontrade will play a bigger part in the ramp up phase?
• Management: No, nontrade would be there, but this will not play. We are concentrating on lhe tade, fade is our plan, but definitely as you know even the incremental demand is coming in the nontrade segment. So, nontrade would remain, but our major portion and our major sales and as we have atarget to maint ainabove 65o/oand close to 700lo as fiade, nontrado ratio we will try and maintain that ratio across whole company.
• Moderator: Thank you. The next question is from the line ofYash Patil from Choice Equity. Please go ahead'
• Yash Patil: Sir just a small question can I know the sales volume number for this quarter?
• Management: Sales volume number

Yes.

• Yash Patil:
• Management: It is 36.44 lakhs.
• Moderator: Thank you. The next question is from the line of Shravan Shah from Dolat Capital' Please go ahead.
• Shravan Shah sir, just wanted to clarifr this Panna subsidiary in terms of the merging with the standalone entity so in the last time we talk about that it will be done, so just wanted to know by March this year will it be merged?
• Management: In all probabilities the matter is pending before NCLT, and we have a hearing so we are pursuing it and we are hopeful that within this fiscal the merger shoukl take place.
• Shravan Sbah Second Karnatak4 Muddapur 20 megawatt wHRS so that would be commissioned by when?
• Management: By March 24.
• Shravan Shah And in terms of this post this on a maintenanco CAPEX you mentioned the 1,900 and 1,400 crore CAPEX for this year and nextyear just fying to undentand in ienns of the FY25 number so maintenance CAPEXwould be 300 crore?
• Management: It would be in the range of 300 crores.
• And in terms of the rupees basis fuel consumption cost last time was 10,000 per ton Kcal you mentioned 2.4, but on rupees basis what was the number for this quarter? Shravan Shah:

Management:	So, it is 20%.
Shravan Shah	So, around 12,000?
Management:	Yes.
Shravan Shah:	So, anything you want to mention so this Panna for this quarter third and fourth quarter so itwould be now in the phase of stabilization, so how do we look at in terms of tho extra cost thatbecause once it is in the stabilization mode normally we see the higher cost, so how do we seethat either in terms ofthe absolute or per ton basis, how one should factor?
Management:	So, initially yes stabilization course the first full quarter would be the January, March for Pannaand yes it will have fust because the plant would be operatrng at a lower capacity as the marketseized up things get stabilized the way power plant will only conrmission as end of Marc orsomething. So, with all those means the potassium cost would definitely be higher I mean forthe frst quarter I mean January, March as well as even though April reduce, but even in theApril, June quarter the cost should be higher as compared to what a day should normalize in thefirst quarter of next fiscal and thereafter we should see tlte cost advantage also coming fromPanna.
Shravan Shah:	And in white cement this time we have seen a sizable increase in terms of the realizationparticularly so for this number is it susiainable in the third quarter also because fiis time theDiwali was in October normally this time it is in November, so how do we see this numberparticularly on a whito cement realization is it sustainable or can we see some dip in this quarterparticularly?
Management:	No, we should not see a major dip yes there is tough competition. We are trying to pass on thecost increase and it would be marginally lower because again Septomber month was the bestmonth in terms of closure io the festival that is a peak month, but we are still hopeful that broadlywe should be able to compare to the second quarter'
Moderator:	Thank you. The next question is from the line of Mudit Agarwal from Motilal Oswal FinancialServices. Please go ahoad.
Mudit Agarwal:	Sir I just have a one question regarding the cash flow from operafion our cash flow fromoperahon in the standalone is around 1.46 billion while in the consolidated it is around 2.8billion, so there is a difference of around 1.9 billion, can you throw some highlights like what isleading the later difference beoause in the- last year during the same period the difference wasnot as high as compared to this year?
Management:	You check the number I think the difference should be on account of the inves0nent in fte Pannawhich we have done from JK Ce,lnent which is to the tune of 200 crores in this quarters'
MuditAgarwal	But that should be in the CAPEX part sir I was asking about cash flow from oporations?

JK Cement Ltd. Ltd. November 14,2A22

Management:	We will cheok and revertto you the numbers'
Moderstor:	Thank you. The next question is from the line ofTejas from Citigroup' Please go ahead'
Tejas	In oarlier calls you had mentioned that there are some additional mafteting expenses becauseyou are servicing the market that will be service by the Panna plants from your existing plattsright now' so could you quanti$' how much cost benefit can come once the plant is finallycommissioned?
Management:	So, if you see the cost benefit will come in terms of early seating of the market why we havei'cu:red and we have to have one finance. So, this sale of demand going forward will be underone brand only. so, yhatever we have done the seating from the existing plant of the newmarkets that wilt help in early setti[g of the Panna plant odrerwise when we havo justcommissionedtheplantsweshouldbeabletoevenintradesegmentirrtlrenonnalmonthwoshould be able to get a volume of 40,000 tons, 50,000 tons' So, that would nothave been possibleif we are not seated ths market.
Tejas	so, what would bo tho additional expense that is there on a quarterly basis on account of thatright now?
Management:	Wecansayyesmaybearoundseomarketingexpensesandofficetotalitmaybearoundl0crores a quarter
Tejas	And lastly on the paints business, has there been any CAPEX that has been spont so far in thisfiscal and what is the target for this entire fiscal?
Management:	No major CAPEX has been done till now and we are analyzing everything and the major CAPEXand the total plan would be in the last quarter only'
Moderator:	Thank you. The next question is from the line of uttam Kumar srimal from Axis Securities'Please go ahead.
	Uttam Kumar Srimal: My question has already been answered'
Moderator:	Thankyou.ThenextquestionisfromthelineofParllrBhavsarfromlnvesteclndia.Pleasegoahead.
Parth Bhavsar:	Sir, I had just one question that you have earlier mentioned ftat this 3'5 Greenfield expansionthatyouhavearrnouncerlatUjjainandPrayagraj,soyousardthatitwouldhaveasufficientclirrker that you will be able to supply in the cfinker rmit would operate at 80%, 85% utilization'but still wanted to have some ideathat at Panna we have like 2'5 million tons of clinker capacitycurrently which would like go and increase to 3.2 and we aro announcing 3'5, so how are wegoing to manage the 3'5 incremental?

Management:	Panna expansion is not 3.5, Panna expansion is only 2 million tons further expansion. The Ujjain
	grinding of 1.5 million will come from the existing plant because Uiiain is spreacl from
	Nimbahera, Mangalwar and not from Panna.
Pnrth Bhavsar:	So, it will come from Nimbaher4 Mangalwar and the UP front will be service from where?
Management:	The Hamirpur will be serviced from Panna and Prryagraj also will be serviced from Panna.
Moderator:	Thank you. As there are no furdrer questions I nolv hand the conforence back to Mr' VaibhavAgarwal for closing comments. Over to you, Sir'
Vaibhav Agarwal:	Thank you very much. On behalf of PhillipCapital I would like to thank the management JKcement for the call and many thanks to the participants joining the call. Thank you very muchsir. Steve you may now conclude the call. Thank you.
Moderator:	Ladies and gentlemen on behalf of Phillipcapital (India) Private Limited that concludes thisconference. we thank you all for joining us and you may now disconneot your lines.