 "cement, construction, infrastructure, realty")
Companies in the cement and aluminium sectors are showing a divergence in their capital expenditure plans for the current financial year (FY23). While firms such as UltraTech, ACC and Ambuja remain committed towards their annual capex activities despite cost pressures, the aluminium division of Vedanta has revised its capex guidance for the year by 40 per cent.
Vedanta's investor presentation for the September quarter (Q2) shows that the company has trimmed its capex guidance for the aluminium and power division from $1 billion indicated earlier to $0.6 billion now. This has impacted its overall capex guidance for FY23, which is down by 20 per cent, from $2 billion announced earlier to $1.6 billion now. Hindalco will release its September quarter results on Friday.
UltraTech, the country's largest cement producer, on the other hand, has said that it is on track to reach 131.25 million tonnes per annum (MTPA) of capacity in India by the end of FY23 from 115.85 MTPA at the end of Q2. UltraTech's executive director & CFO, Atul Daga said that by 2025-26 (FY26), the company was looking to touch 153 MTPA in India, as part of its phase-2 expansion plan.
This comes even as high energy prices have taken a toll on profits of both cement and metal firms in the July-September period. While management commentary of most firms suggests that the second half of FY23 could be better than the first half in terms of cost of production, the ongoing Russia-Ukraine war and its impact on supply chains offers little respite, experts said.
The Adani group, which completed the acquisition of ACC and Ambuja Cements last month, proposes to take its overall cement capacity to 140 MTPA over the next five years from 67.5 MTPA now, its investor presentation for the September quarter shows. It proposes to do this through a mix of organic and inorganic growth, the group said.
B Sridhar, whole-time director & CEO, ACC, said, "We have aggressive growth plans and our capacity expansion initiative through our new green field projects at Ametha, Madhya Pradesh is progressing well and is expected to be commissioned by March 2023."
In its call with analysts recently, Vedanta's CEO Sunil Duggal said that the company was on course to touch an overall aluminium capacity of 3 MTPA by the second half of FY24 from 2.4 MTPA now. He pointed to an expansion of 1.8 MTPA that the company had recently completed at its Jharsuguda aluminium unit in Odisha to drive home the point of steady capacity enhancement by the firm.
However, analysts point to the volatility in global aluminium prices for the revision in capex plans by the company this year. The price of aluminium, for instance, has come down from highs of $4,000 per tonne in March 2022 to $2,300 per tonne now, which is a slide of 42.5 per cent, according to data sourced from the London Metal Exchange (LME).
Vishal Chandak, research analyst at Mumbai-based brokerage Motilal Oswal, says that the challenging macro environment globally is likely to weigh on overall aluminium prices. "A slowdown in China does not bode well for commodities, while fears of recession in Europe will only compound the problem," he said.
Vedanta indicated in its recent call with analysts that it saw cost of production for aluminium reducing in the second half of FY23 by 13-18 per cent to levels of about $2,150-2,250 per tonne from $2,541 per tonne seen in the first half of the year. This would come on the back of better coal linkages, which would bring down energy costs for the company.
