Financial Capital

Solid Strength. CAN
TAKE CARE OF LIQUIDITY.

Ambuja Cement’s robust liquidity position was by design and not chance. It is the result of daily application of the

spirit – going the extra mile, and identifying opportunities, especially in a crisis.

COVID-19 presented a multi-pronged challenge. Generating and protecting cash was one of them.

Working capital woes could potentially impact business continuity, if not resolved expediently. We got to work, with urgency, and a solution-centric approach.

With little time on hand, meant action had to happen at the speed of thought.

We quickly developed a cash dashboard that allowed us to track daily liquidity scenarios. Next, we initiated steps to shorten inventory cycles and rigorously followed up on payments. By doing this daily, and repeatedly, we were able to achieve faster cash conversion and reduce our daily sales outstanding. At the same time, our treasury function moved to deploy cash in highly secured instruments to protect investments. Lastly, the capex plan was reoriented to focus on critical and quick payback projects.

Keeping a tab on the
daily liquidity scenario

Inventory cycles expedited for faster capital conversion

Capital channelised on quick return projects

We strive to optimise returns for providers of our financial capital. We invest our surplus in attractive growth opportunities in our core market. Financial capital is generated annually from surplus arising from current business operations and through nancing activities, including raising debt and equity aligned with market conditions and internal strategic planning.

We ensure that the regular operations are at an optimum level. Our operational KPIs are compared with internal and external benchmarks to achieve, higher productivity and yields. Our innovative marketing initiatives and various ongoing digital programmes provide better customer connect and reach, and higher realisations. This operational ef ciency enables us to generate positive cash ows from operations. We have a robust nancial planning process that assesses the requirement of funds for sustainable business operations as well as for investments towards present and future business sustainability and growth opportunities.

During 2020, we performed exceedingly well on most parameters. We streamlined our operations to achieve better ef ciencies and moderated our operating costs. The bene ts thus accrued have been deployed in relevant growth areas.

SDGs impacted

2020 Highlights:
Strengthening fundamentals,
enhancing returns

KEY INPUTS

  • `25,481 crores worth total assets
  • `20,316 crores of total equity
  • `1,645 crores of retained earnings

KEY OUTCOMES

Revenue from
operations (` crores)
11,372
Operating EBITDA
(` crores)
2,647
Operating cash flow
(` crores)
2,606
Profit after tax
(` crores)
1,790
Impact on other capitals
Human capital

Invested in talent management, learning and development

Manufactured capital

`985 crores spent towards capex

Intellectual capital

Investments in innovation and digital transformation

Relationship capital

`64 crores spent on promotional and branding exercises

Social capital

`53.97 crores spent on
CSR activities

Natural capital

Emission and resource optimisation initiatives helped in strengthening profitability

Stakeholders impacted

  • Shareholders and investors
  • Employees
  • Dealers
  • Suppliers
  • Community and NGOs

Material issues addressed

  • Marketing communication and reputation
  • Economic performance
  • Procurement practices

Key risks addressed

  • Maintaining market position
Overview

Despite the challenges posed by COVID-19 resulting
in a decline in topline, Ambuja Cement strengthened
its profitability and cashflow from operations.

Our balance sheet continues to be strong with a net worth of `20,316 crores. Our cash and cash equivalent amounted to `2,717 crores as on December 31, 2020 vis-à-vis `4,512 crores in 2019.

Our effective utilisation of capital and strong EBITDA helped us post 200 basis points increase in return on capital employed over 2019.

*In 2020 cash and cash equivalents decreased, mainly on account of interim dividend given @ `17 per share

Ambuja Cement reported a 2% decline in sales from `11,353 crores in 2019 to `11,175 crores in 2020. The decline was largely owing to the loss of sales during the last weeks of March and the entire month of April owing to the lockdown imposed by the government to contain the COVID-19 spread in the country.

However, in the subsequent months, our sales picked up substantially, led by strong rural housing construction activities. We reported 23% growth in EBITDA and 17% growth in Net Profit over 2019, owing to lower input cost as well as stringent cost-management initiatives. As a result, our EBITDA margin and PAT margins improved by 480 basis points and 260 basis points, respectively over 2019.

The post-lockdown period saw the firming of cement prices, resulting in a per tonne realisation of `4,930 in 2020 against `4,718 in 2019 (including special products). The realisation strengthened across regions with North India witnessing significant growth.

Cost control was our primary focus area and total cost per tonne of cement produced reported 3% decrease during the year. This was driven primarily by stringent cost-management initiatives as well as lower input costs.

Our power and fuel cost, comprising 24% of the total cost, reduced 8% per tonne for the full year largely due to favourable market trends and efficiency gains. Our Master Supply Agreement (MSA) with ACC has started providing many benefits for Ambuja Cement and logistics was one part of it.

Freight and forwarding cost per tonne reduced by 2% over 2019, owing to better logistics efficiency and results of the MSA. The use of wet fly ash, lower cost and better raw material mix helped us save 7% in raw material cost over 2019. Other expenses per tonne also dipped by 8% for the year due to constant focus on fixed cost optimisation and operating leverage.

To counter the adverse impact of the pandemic and maintain liquidity, we ensured cash conservation was a part of our strategic priority.

Our cash flow from operating activities increased to `2,606 crores vis-à-vis `2,484 crores in the previous year.

Cash used in investing activities declined to `641 crores (2019: `737 crores).

Net cash balance decreased by `1,796 crores, mainly on account of a interim dividend (@ `17 per share) given to all shareholders (in 2019, there was an increase in net cash by `1,359 crores).