Release Date: July 11, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for Q1 FY25 reached INR5,150 million, up from INR5,050 million last year, driven by strategic market expansion and increased product demand.
- EBITDA for Q1 FY25 stood at EUR438 million, reflecting a 21% increase from Q1 FY24, underscoring efficient cost management and operational excellence.
- Sales volume grew by 10% year on year, reaching 85,674 metric tons in Q1 FY25 compared to 77,342 metric tons in Q1 FY24.
- Quarterly exports hit an all-time high at 7% of total sales, with export sales of 5,970 metric tons.
- The company successfully launched the first wave of backward integration strategy, achieving a milestone of 10,000 tons, enhancing the product portfolio and boosting profitability.
Negative Points
- Competitive intensity in the industry is increasing, which may put pressure on margins and volume growth.
- The integration of Nabha Steel is still in progress, and its full contribution to JTL Industries' revenue and EBITDA is yet to be realized.
- The company experienced a weak quarter in terms of volume growth, partially due to election-related slowdowns.
- Capacity utilization is currently around 55-60%, which is relatively low, raising questions about the timing of further capacity expansions.
- Other expenses have increased this quarter, though specific details were not provided during the call.
Q & A Highlights
Highlights from JTL Industries Ltd (BOM:534600, Financial) Q1 FY25 Earnings Call
Q: Can you provide an update on Nabha Steel and its contribution to backward integration?
A: Nabha Steel is currently in a phase where it is not yet producing the exact products required by JTL. It is expected to do so in about a quarter. The revenue generated from Nabha is included in other income, with a share of profit amounting to approximately INR4 crore.
Q: How do you view the competitive intensity in the industry and its impact on margins and volume growth?
A: We are well-positioned in the market and expect challenges due to increased competition. However, the overall growth story remains intact. We anticipate normalization post-elections and have seen record-high exports. Our strategic positioning in both primary and secondary markets helps mitigate pressure.
Q: Can you explain the changes in product mix and its impact on EBITDA per ton?
A: Despite a decline in the volume of value-added products, we maintained higher EBITDA levels by focusing on smaller gauge and lighter thickness products, which offer higher returns. Our definition of value-added products includes items above INR7,500.
Q: What is the status of the 1 million ton capacity expansion in Maharashtra?
A: The DFT machinery has arrived ahead of schedule and is currently being installed. Everything is proceeding as planned, and we expect the capacity to be operational soon.
Q: How do you see demand shaping up post-elections and what is the current capacity utilization?
A: Demand has picked up post-elections and is expected to further improve after the budget. Our current capacity utilization is around 55-60%, which is standard for the industry given the need to produce multiple sizes throughout the year.
Q: What is the expected impact of the Jal Jeevan Mission on demand?
A: The government allocated close to $7 billion for the Jal Jeevan Mission last year, and we expect a similar or slightly higher allocation this year. This mission significantly impacts our sector, contributing to increased demand.
Q: Can you provide details on the CapEx and the conversion of warrants into shares?
A: A sizable amount of CapEx is still left to be spent on the 1 million ton expansion. The recent conversion of warrants into shares was part of a previously allotted amount, raising a total of INR600 crore.
Q: How is the export market performing and what are the future expectations?
A: We have seen a considerable jump in exports this quarter. With the addition of DFT and increased SKUs, we expect further growth in the export market, leveraging the China plus one model and proximity to Indian ports.
Q: What is the current status of the DFT machinery and its impact on production?
A: The DFT machinery has arrived at the plant and is being set up. We will provide a formal notice once it commences production.
Q: How do you see the demand for scrap-based versus non-scrap-based tubes evolving?
A: There is a clear differentiation in use cases for primary and secondary steel. Secondary steel is preferred for non-load-bearing structures, while primary steel is used for heavier applications. This differentiation is expected to continue, with both segments growing based on their specific use cases.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
