Nuvoco Vistas Corporation Ltd Q2 FY2024 Concall Summary

Key Takeaways

• EBITDA surged 73% YoY as value-led pricing and cost control offset a seasonally weak quarter, though planned shutdowns and a one-off clinker purchase weighed on margins.
• North is the growth engine: volumes grew ~14% YoY, while the core East market stayed subdued, with management betting on a post-festival demand pickup from November.
• Shutdowns are done, cost relief is promised: five of six kilns completed annual maintenance and debottlenecking, setting up Q3 for lower power and fuel costs and a return to normative other expenditure.
• Debt reduction unlocks the next growth chapter: management will announce expansion plans only when net debt falls to ₹3,500–4,000 crores, a milestone it hopes to reach in early FY25.
• What to watch next quarter: whether East demand actually revives post-Chhat Puja, the pace of the promised Q3 cost unwind, and any concrete signal on the Rajasthan brownfield expansion.

Demand & Volume Dynamics

• North delivered, East disappointed: North volumes grew ~14% YoY on robust demand, while core East markets of West Bengal and Bihar saw subdued growth for a second straight quarter, a softness management calls temporary.
• The post-festival bet: With monsoons and festivities ending, management expects the market to open up from November, calling it a "home stretch" to March 31 once Chhat Puja passes.
• PMAY tailwind in the East: ~33 lakh houses are pending completion in the East, including ~14 lakh in West Bengal, suggesting significant latent cement demand if government spending accelerates.
• Capacity utilization to snap back: Q2 ran at 75% due to shutdowns, but management expects a rapid return to the company's historical Q4 DNA of 90% utilization.

Jayakumar K: "Come Q4, our old DNA of the company is operating at 90% capacity utilization. So, you will see us go back very quickly from a test match to an ODI to a T20 mode very quickly."

Pricing & Realization

• Value-led growth in action: Revenue per ton improved 6% YoY, driving a 7% revenue increase on just 1.2% volume growth, consistent with the stated strategy to prioritize value over volume in the East.
• East pricing held through volatility: An exit-to-exit ~7% increase in the East came from a September price hike; October saw natural blips but November pricing stabilized at October levels.
• Q3 realizations to improve: Management confirmed Q3 realizations will be better than Q2, though it declined to quantify the expected increase when pressed on a ₹10–15 per bag uplift.
• Concreto commands a wide premium band: The flagship slag cement variant carries a premium of ₹15 to ₹35 per bag over the base product, varying by state and competitor product.

Jayakumar K: "Suffice to say, the November pricing is almost equal to October pricing so as of now we are able to hold prices in this quarter."

Cost Structure & Shutdown Impact

• Shutdowns distorted the quarter: Planned annual maintenance and debottlenecking across five of six kilns inflated power cost, raw material cost, and other expenditure, creating a one-off cost bulge that will reverse in Q3.
• Power cost spiked on grid dependence: Power cost rose ₹52/ton QoQ to ₹421 as shutdowns at Risda and Nimbol forced the company to shut WHR and CPP units and buy grid power, a temporary effect expected to reverse.
• Fuel cost fell on efficiency gains: Fuel cost dropped from ₹850/ton to ₹798/ton QoQ, driven by kiln efficiency programs, specific heat consumption reduction, and AFR usage rising from 11.2% to 14.3%.
• One-off clinker purchase hit raw material cost: Raw material cost per ton rose 12% QoQ, partly because ~50,000 tons of clinker was purchased in the North to sustain double-digit growth during the 45-day Nimbol shutdown.
• Other expenditure to normalize: The ₹150/ton QoQ increase in other expenditure was entirely shutdown-related; with shutdowns largely complete, this line item will return to normative levels in Q3.
• Freight cost levers in motion: Distribution cost fell 6% QoQ on lower clinker road movement and absence of Busy Season Surcharge; lead distance was reduced by 8 km, with a medium-term target of a 10 km reduction in the East and a long-term ambition to shift 75% of dispatches to the SO route, unlocking ₹50–60 per ton.

Expansion & Capacity Build-Out

• Bhiwani grinding unit nears commissioning: No-load trials are complete; the mill will run at full speed by end-Q3 FY24, with packing lines ready by December–January, taking overall capacity to 25 MTPA.
• Debottlenecking adds clinker capacity: Risda is now at 12,000 TPD and Nimbol at 6,000 TPD, with both projects completed during the quarter's shutdowns.
• Rajasthan brownfield under evaluation: Two models are being studied for a Chittor expansion, a 6,000 TPD or 8,000 TPD line, with a split grinding unit in western MP or western UP depending on fly ash sourcing; engineering design is underway but no decision is imminent.
• Railway siding projects progressing: Track laying is underway at Odisha (Jajpur) and Sonadih; Odisha operations are expected to commence from Q4 FY24, improving logistics efficiency.
• East growth is second priority: Management was explicit that growth projects in the East will take a back seat to expansion in the North and West.

Balance Sheet & Capital Allocation

• Debt reduction is the top priority: Management reiterated that net debt reduction remains the immediate objective, with the next phase of growth to be announced only when debt falls to the ₹3,500–4,000 crore range.
• Timeline is 6–8 months, fingers crossed: The best-case scenario for hitting that debt threshold and announcing growth plans is early FY25, contingent on market conditions.
• Trade payables to rise with volumes: Trade payables will not decline to the ₹1,100 crore level in Q3 and Q4 and may increase as volumes pick up.

Jayakumar K: "I am really looking at debt reduction in this period of six months to eight months and when the debt comes down hopefully, fingers crossed, we will come back and announce our growth plans."

Premiumization & Product Strategy

• Premium mix deepening in the East: In Bihar, Bengal, and Jharkhand, premium products now account for 65–68% of the mix.
• Concreto UNO and Duraguard F2F extended to Jharkhand: The two premium variants, previously available in Bihar and West Bengal, have now been launched in Jharkhand.
• Duraguard Microfiber patent secured: A 20-year patent was received on the fibre-reinforced cement composition, branded as Duraguard Microfiber Cement, effective from the date of application.
• No Concreto for the North: Concreto is uniquely a slag cement product tied to the East; the North premium play is Duraguard Microfiber, the newly patented product.
• RMX and MBM businesses growing: Ready-mix revenues grew 11% YoY with value-added products at 34% of the sales mix, and four new RMX plants were commissioned, taking the tally to 55. The construction chemicals and tile adhesives business also saw sales improvement.

Guidance & Commitments

Key Metrics