Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AIA Engineering Ltd (BOM:532683, Financial) reported a strong EBITDA of INR 372.32 crore and a profit after tax of INR 259.588 crore.
- The company announced a brownfield expansion at their GIDC Catarina factory, adding a composite mill rubber composite liner, which will enhance their product offerings.
- AIA Engineering Ltd (BOM:532683) has approved a buyback of INR 500 crore, reflecting confidence in their financial stability.
- The company is actively working on converting mining sites from using traditional grinding media to their high Chrome solutions, which offer significant operational benefits.
- Despite logistics challenges, the company remains optimistic about their long-term growth opportunities in the mining sector, particularly in copper, gold, and iron ore.
Negative Points
- The company experienced a significant reduction in tonnage, with 60,592 tons this quarter compared to 74,000 tons in Q1 of the previous year.
- Logistics issues, including container shortages and higher shipping costs, have caused delays in shipments and increased transit times.
- Working capital has increased due to higher receivables and stock levels, reflecting lower sales and timing adjustments.
- The company is facing challenges in providing clear volume guidance for the year due to ongoing logistics uncertainties.
- There are ongoing geopolitical and trade issues affecting the supply chain, adding to the uncertainty in the business environment.
Q & A Highlights
Q: Can you elaborate on the reason for the miss in terms of the lower volumes during the quarter? Is it due to logistics issues or production costs?
A: Yes, the lower volumes are primarily due to logistics challenges, including container shortages and increased transit times. This has caused delays in shipments, impacting our volume growth targets. We are evaluating the situation and will provide clearer guidance after the next quarter. (Sanjay Majmudar, Non-Executive Independent Director)
Q: Is there a possibility of investing more in warehousing capacities to mitigate these logistics issues?
A: We are seriously evaluating various options, including warehousing, but we need more time to come up with a concrete plan. We are considering both short-term and long-term solutions to address these challenges. (Kunal Shah, Executive Director, Corporate Affairs)
Q: Can you provide more details on the new rubber and composite mill liners? How competitive are they in terms of cost?
A: Our rubber and composite mill liners are designed to offer significant operational benefits, such as improved throughput and reduced power consumption. While there are other offerings in the market, our focus is on providing unique process benefits that competitors cannot match. (Kunal Shah, Executive Director, Corporate Affairs)
Q: Any updates on the ongoing litigation in the US and Brazil?
A: In the US, we are fully cooperating with the investigation and providing all required information. In Brazil, the dumping duty has been terminated, and the countervailing duty is under sunset review. We expect to hear the outcome in the next two months. (Sanjay Majmudar, Non-Executive Independent Director)
Q: How are things currently with the container availability issue?
A: The situation remains uncertain. Containers booked for earlier months are arriving late, and the supply chain is still disrupted. We are closely monitoring the situation and adjusting our plans accordingly. (Kunal Shah, Executive Director, Corporate Affairs)
Q: Is the delay in shipments impacting production at the customer level?
A: Not significantly. We have adequate stock to manage the delays, and while new customer conversions are slower, existing customers are not facing serious issues. (Kunal Shah, Executive Director, Corporate Affairs)
Q: What is the status of your subsidiary Welcast Limited? Are there any plans for merging or increasing sourcing from there?
A: The delisting attempt did not succeed, so the status remains unchanged. We continue minimal sourcing from Welcast, and any future corporate decisions will be communicated in due course. (Sanjay Majmudar, Non-Executive Independent Director)
Q: How does the increase in gold prices benefit AIA Engineering? Can you share the revenue bifurcation under mining?
A: We do not provide specific revenue bifurcation, but all three metals—gold, iron, and copper—are equally important. The price movement of these metals does not directly impact our demand; our focus is on converting mines to our high Chrome solutions. (Sanjay Majmudar, Non-Executive Independent Director)
Q: What is the addressable market for rubber and composite mill liners?
A: The addressable market for rubber and composite mill liners is significant, potentially around 1 lakh tons. However, our current focus is on a subset of this market where we can offer the most value. (Kunal Shah, Executive Director, Corporate Affairs)
Q: What are the long-term demand scenarios and key geographies for mining products?
A: The mining market is more than 3 million tons annually, with significant opportunities in North America, Latin America, Africa, Australia, and CIS countries. We are present in over 30-35 countries and are actively working on new site conversions. (Sanjay Majmudar, Non-Executive Independent Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
