Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EBITDA increased by 35.53% year on year to INR 206.65 crore in Q1 FY25 compared to INR 152.47 crore in Q1 FY24.
- EBITDA margin improved to 18.12% in Q1 FY25 from 12.93% in Q1 FY24.
- The company reported a PAT of INR 505.20 crore in Q1 FY25, including an exceptional gain from the sale of land.
- PVC Resin segment revenue increased significantly to INR 548.23 crore in Q1 FY25 from INR 359.41 crore in Q1 FY24.
- The company has a strong balance sheet with a net cash surplus of roughly INR 2,400 crore as of 30 June 2024, compared to INR 1,650 crore in the previous year.
Negative Points
- Total income from operations decreased by 2.67% to INR 1,140 crore in Q1 FY25 from INR 1,179.17 crore in Q1 FY24.
- Pipes and Fittings revenue decreased by 2.67% year-on-year to INR 1,123 crore in Q1 FY25.
- Volume in the Pipes and Fittings segment decreased marginally by 1.69% year on year to 90,620 metric tons in Q1 FY25.
- The company faced supply constraints in the first two months of the quarter, affecting pipe volume growth.
- There were no significant inventory gains for the quarter, and the company expects continued volatility in the resin segment.
Q & A Highlights
Finolex Industries Ltd (BOM:500940, Financial) Q1 FY25 Earnings Call Highlights
Q: In terms of pipe volume growth, peers reported around 20% growth. What went wrong for us?
A: We had good growth in the plumbing and sanitation segment but faced supply constraints in the first two months of the quarter, resulting in low volumes. However, our profitability per kg for the Pipes & Fittings segment has improved significantly. - Ajit Venkataraman, Managing Director
Q: What was the quantum of inventory gains for the quarter?
A: There were no significant inventory gains for the quarter. - Ajit Venkataraman, Managing Director
Q: What kind of pipe volume growth do you expect for FY25?
A: We maintain a 10% to 15% volume growth forecast for the year. - Ajit Venkataraman, Managing Director
Q: Could you divide the volume growth between agri and non-agri for this quarter?
A: We don't typically release that split, but we have seen significant growth in the plumbing and sanitation non-agri segment compared to agri. - Ajit Venkataraman, Managing Director
Q: What was the utilization rate we were operating at, and how do we plan to avoid supply constraints in the future?
A: We were operating between 80% and 85% capacity. We are planning incremental capacities in existing facilities and long-term capacity expansions. - Ajit Venkataraman, Managing Director
Q: What's the PVC EDC and VCM price for this quarter versus last year?
A: PVC price in Q1 FY24 was $805, and in Q1 FY25, it was $855. EDC was $337 in Q1 FY24 versus $322 in Q1 FY25. VCM was almost the same at $672 and $671. - Ajit Venkataraman, Managing Director
Q: What are the drivers for the strong margin gains despite no significant inventory gains?
A: Operational efficiency and controlled discounts in the market contributed to the margin growth. - Ajit Venkataraman, Managing Director
Q: What is your call on the growth of PVCO pipes, and are you focusing on that segment?
A: We are currently focusing on UPVC and CPVC. PVCO pipes are lighter but have taken a long time to gain traction in the market. - Ajit Venkataraman, Managing Director
Q: What is the status of the antidumping duty on PVC?
A: It has been implemented for CPVC, but for UPVC, it is expected around August-September, depending on whether it will be implemented or postponed. - Ajit Venkataraman, Managing Director
Q: What are the current credit days for the non-agri and agri sectors?
A: For the non-agri sector, it is between 60 to 70 days, and for the agri sector, it is zero credit days. - Chandan Verma, Deputy CFO
Q: What is the peak volume you can achieve given the current capacity?
A: Our capacity is approximately 30,000 metric tons per month for pipes and about 3,500 metric tons per month for fittings. - Ajit Venkataraman, Managing Director
Q: Are there any plans for inorganic growth, or will it be completely greenfield CapEx?
A: It will be organic growth only; we are not looking at inorganic growth. - Ajit Venkataraman, Managing Director
Q: What is the tax rate on the sale of lease land?
A: It is at the long-term capital gain tax rate, 20% plus surcharge. - Chandan Verma, Deputy CFO
Q: What are the general levels of channel inventory as of now?
A: Channel inventory levels are normalized at this point, and Q2 is typically a weak quarter. - Ajit Venkataraman, Managing Director
Q: What is the EBIT per kg for pipes, and what are your thoughts on this?
A: With the product mix improving, the current range is INR 14 to INR 15 EBIT per kg, and it will be range-bound here. - Ajit Venkataraman, Managing Director
Q: What is the volume mix between agri and non-agri for this quarter?
A: For this quarter, it is 70% agri and 30% non-agri. - Ajit Venkataraman, Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
