AMBUJACEM - Ambuja Cements Ltd. Share Price

The management of Ambuja Cements provided an outlook indicating a focus on disciplined execution and operational streamlining for FY '27, despite a forecasted industry growth of 5% to 5.5%. The company targets a sales volume growth of approximately 8% to reach around 80 million tonnes, mainly supported by stabilizing its acquired assets and expanding existing capacities.

Key forward-looking points highlighted by the management include:

1. Capacity Expansion: Ambuja aims to increase its cement capacity to approximately 119 million tonnes by the end of FY '27, with a gradual approach influenced by new railway policies and existing capacity optimization.
2. Cost Management: The average cost for FY '26 was reported at INR 4,400 per tonne, which is higher than the targeted INR 4,000 per tonne. For FY '27, management expects to reduce average costs by INR 250 per tonne, targeting INR 4,250 by end of the fiscal year.
3. Sales Strategy: Shift towards premium products will continue, with premium cement sales constituting 36% of total trade sales in Q4 FY '26.
4. Utilization Targets: Expected utilization levels for acquired assets: Sanghi at 65%-70%, Penna at 55%-60%, and existing Ambuja and ACC assets at 75%-80%.
5. Challenging Environment: The company acknowledged a potential for softer demand due to inflation and weak monsoons, thereby prioritizing internal factors over external ones for growth.

These insights reflect Ambuja's commitment to improving operational efficiencies and enhancing market presence while navigating industry challenges.

Question 1: Can you provide insights on volume growth and its impact on your FY '27 guidance of 80 million tonnes given the industry is expecting softer growth?
Answer: Yes, I acknowledge the FMG's muted quarter. However, I anticipate volume stabilization from acquired assets, alongside new capacity coming online by September. Although the industry may face headwinds, our outlook remains positive due to these factors, expecting roughly an 8% growth to about 80 million tonnes.

Question 2: When will we get clarity on your long-term capex plans? Are you still prioritizing organic growth?
Answer: Our priority is organic stabilization of current expansions instead of accelerating capex immediately. Thus, revised targets may extend to FY '30. We believe that optimizing existing capacity will yield significant growth without rushing into new projects.

Question 3: What are your expectations for clinker capacity this year?
Answer: Currently, our clinker capacity is at 69 million tonnes, with an addition of 4 million planned this year at Maratha. The total is expected to increase significantly in the next phase of our growth.

Question 4: What was your average cost for the March quarter compared to full-year figures?
Answer: For Q4, the average cost reached about INR 4,500 per tonne due to various pressures, while the full-year average cost was INR 4,400 per tonne, influenced by unexpected increases in maintenance and freight costs.

Question 5: How do you anticipate costs and prices moving forward, especially with potential cost inflations?
Answer: We expect front-end price pressures to continue, but with improved raw material and energy efficiencies, I anticipate achieving about INR 150-200 in cost savings. We are focused on our internal efficiencies to mitigate this.

Question 6: Can you clarify your expected EBITDA per tonne in FY '28? What are the cost-saving measures in place?
Answer: It's challenging to give precise EBITDA guidance, but we're targeting INR 250 cost reductions this year and next, driven by operational efficiencies and premium product sales, intending to stabilize margins progressively.

Question 7: Can you discuss the impact of recent conflicts on your operational costs?
Answer: The geopolitical tensions have significantly affected freight and input costs, pushing up our quarterly expenses. However, I project that March represented a peak, and alongside operational improvements, we hope to see stabilization ahead.

Question 8: What's your current branding and advertisement spend for FY '26?
Answer: Our branding expenditure for FY '26 is approximately INR 70 per tonne. We are heavily investing to promote premium products and enhance trade sales, which we believe will yield long-term benefits.

Note: The specific details may need to be checked for the accuracy of numbers and names as it pertains to financial reporting and projections. Please refer to official documents or financial releases for the most precise and current data.