Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- NOCIL Ltd (BOM:500730, Financial) reported a 4% sequential growth in revenue from operations, amounting to INR 371 crores.
- The company achieved a 4% volume growth in Q1 FY '25 compared to the preceding quarter.
- Export business continues to show an upward trend despite challenges such as geopolitical issues, container shortages, and rising freight costs.
- NOCIL Ltd (BOM:500730) has made good progress on its capacity expansion project at Dahej, which is critical to its long-term growth strategy.
- The company is committed to sustainability, implementing initiatives to reduce its environmental footprint and enhance energy efficiency.
Negative Points
- The domestic market faces challenges from aggressive dumping by China and other markets, exerting downward pressure on pricing.
- EBITDA margins for Q1 FY '25 stood at 11%, a decrease from 12.5% in Q4 FY '24.
- Employee expenses increased sequentially due to annual salary revisions and retiral provisions, impacting overall costs.
- The company is experiencing pressure on EBITDA margins due to market conditions and increased raw material costs.
- The domestic tire industry is grappling with high natural rubber prices, affecting overall profitability.
Q & A Highlights
Q: Can the volumes reported in Q1 FY '25 be considered as the base volumes for future quarters? Also, what caused the dip in EBITDA margins this quarter?
A: (V. Anand, Managing Director) Yes, the volumes achieved in Q1 can be taken as the base, and we expect to build on them.
A: (P. Srinivasan, CFO) The dip in EBITDA margins was due to market conditions and front-loading of employee costs and administrative expenses. We expect margins to improve as we ramp up capacity utilization.
Q: Was the pressure on EBITDA due to realization issues or raw material cost increases?
A: (P. Srinivasan, CFO) The pressure was due to both factors. We maintained our pricing despite market conditions and faced some increases in input costs.
Q: What was the mix of export volumes this quarter, and which geographies are showing traction?
A: (V. Anand, Managing Director) Export volumes were around 34%, up from 32%. Growth is coming from Asia and Europe, with continued presence in the U.S.
Q: Are we seeing improvement in European market volumes despite energy cost issues?
A: (V. Anand, Managing Director) The European market is showing slight improvement, particularly in the replacement sector, despite challenges.
Q: Can you provide details on the turbine and green power initiatives mentioned in the AGM?
A: (V. Anand, Managing Director) We have enhanced our cogeneration capabilities and green energy sources. Currently, 60-70% of our power at Dahej comes from these sources, which should increase to 75% with full utilization.
Q: Is it possible to pass on incremental raw material prices to end customers given the current market conditions?
A: (V. Anand, Managing Director) We expect some relief in raw material costs in the coming quarters, which should help us manage pricing pressures better.
Q: How did NOCIL manage to grow export volumes despite container shortages?
A: (V. Anand, Managing Director) The growth in export volumes is due to approvals received in the past quarters and months, despite the challenges in the market.
Q: What is the status of the capacity expansion project at Dahej?
A: (V. Anand, Managing Director) We received Board approval in March and are currently 10-15% into the expansion phase.
Q: Are there any ongoing antidumping investigations or plans to file for them?
A: (P. Srinivasan, CFO) We are evaluating various options and may explore filing for antidumping duties if we find a valid case.
Q: What is the impact of the new turbine on power costs?
A: (P. Srinivasan, CFO) The turbine was commissioned in June and will start contributing to cost savings from Q2 onwards.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
