Detailed Narrative
Q3 FY25 Financial and Operational Performance
Dalmia Bharat reported a challenging Q3 FY25 with revenue declining by 12% YoY to INR3,181 crores. Overall volumes de-grew by 2% YoY to 6.7 million tons, though sales from Dalmia plants showed a 3.7% YoY growth. EBITDA decreased by 34.5% YoY to INR511 crores, resulting in an EBITDA/tonne of INR765, primarily due to weak cement prices. Raw material costs marginally declined by 2% to INR765 per ton, and power and fuel costs decreased by 9% to INR1,005 per ton, while logistic costs increased by 2.7% to INR1,120 per ton.
Capacity Expansion and Growth Outlook
The company is on track to achieve 49.5 million tons of cement capacity by the end of FY25. A Phase 2 expansion targeting 75 million tons by FY28 is planned for announcement within the next six months. Management anticipates cement demand to grow at 6-7% YoY in Q4 FY25 and 6-8% in FY26, driven by government spending and infrastructure development. The strategy focuses on investment-driven growth and fiscal consolidation.
Cost Reduction and Renewable Energy Initiatives
Dalmia Bharat aims to achieve cost savings of INR150-200 per ton by FY27 through internal measures, with INR100-125 per ton from variable costs and INR50-75 per ton from logistics. The share of renewable energy (RE) in the power mix improved to 33% in Q3 FY25 and is targeted to reach 40-45% by the end of FY25. Fuel consumption cost was $96 per ton in Q3 FY25, down from $122 per ton in Q3 FY24.
Debt Management and Capital Allocation
Gross debt stood at INR5,457 crores and net debt at INR1,242 crores as of December 31, 2024, resulting in a net debt-to-EBITDA ratio of 0.55x. The increase in net debt was attributed to IEX price movements and capex not fully covered by internal accruals. The company expects net debt not to increase by the end of FY25, excluding new capacity expansions. Capex for FY25 is projected at INR3,000 crores, with INR1,000 crores expected in Q4, and FY26 capex is estimated between INR2,500-3,000 crores.
Market Dynamics and Pricing Environment
Cement demand growth in India fell short of expectations in Q3 FY25 due to lower government spending, state elections, and unseasonal rains. While prices saw some improvement in December, competitive intensity is expected to cap significant gains. The company noted that the East market has grown better than the South market so far. Management anticipates heightened competitive intensity in South India, potentially leading to lower prices in that market.
JAL Acquisition and Strategic Presence
The NCLT process for acquiring JAL cement assets is progressing, with NARCL identified as the undisputed bidder, and the transition of loans expected in 1-2 months. Dalmia Bharat remains hopeful of acquiring JAL assets and continues to maintain its presence in markets serviceable from its East region profitably, despite these sales having lower margins than core operations. The company's long-term strategy involves investing in a strong brand and retail distribution.
Safety and Operational Excellence
An accident occurred at the captive power plant in Rajgangpur, leading to its temporary shutdown. While this will not impact production, it may slightly increase power costs due to reliance on grid power. Management emphasized a strong commitment to safe working environments, zero tolerance for incidents, and continuous learning from such events, with safety initiatives integrated into performance metrics for unit heads.