Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IFGL Refractories Ltd (BOM:540774, Financial) reported a 14% growth in the domestic market for Q1 FY 25.
- The company has successfully completed a CapEx of around 175 crore for all three manufacturing units in India.
- The Indian steel industry has shown remarkable growth, with projections indicating more than 8% growth in the near future.
- IFGL Refractories Ltd (BOM:540774) remains net debt-free with a strong balance sheet and cash equivalents of 213.4 crore as of June 30, 2024.
- The company is implementing automation and robotics to reduce costs and enhance operational efficiencies.
Negative Points
- The global steel industry has faced a challenging environment, with subdued performance across key markets.
- Inflationary pressures have made raw material costs unpredictable, squeezing margins across the industry.
- The supply chain has been significantly disrupted, particularly due to the ongoing Red Sea crisis, causing delays and increased costs for shipping and logistics.
- Geopolitical tensions have created an atmosphere of uncertainty, affecting investment and growth across the manufacturing industry.
- The company's EBITDA for Q1 FY 25 stood at 53 crores, down by 11% year-on-year, mainly due to high employee costs and restructuring.
Q & A Highlights
Q: Within the standalone operation, the India business contributes around 67% of our revenue. What's the target for the next three to five years?
A: Currently, we are at 86%. We aim to take it to 70-75% in the next three to five years. (Arasu Shanmugam, CEO and Whole-time Director)
Q: What is the potential revenue post the incremental CapEx from the magnesia brick plant?
A: We are starting with 9,000 tons and will increase to 24,000 tons per year by FY 26 Q2. The plant will start producing from FY 26 Q2. (Arasu Shanmugam, CEO and Whole-time Director)
Q: Does the 14% growth in the domestic market mean we should expect more than 17% growth by FY 25?
A: Yes, we maintain our guidance of 17% growth in the domestic market. (Arasu Shanmugam, CEO and Whole-time Director)
Q: Can you provide some clarity on how the domestic business has performed in terms of margins on a year-on-year basis?
A: Margins are sustaining around 12% level. The export margins are affected due to increased freight costs. (Sikandar Yadav, CFO)
Q: What is the demand outlook for the nonferrous refractory industry?
A: We expect a 6-8% growth in steel, which will drive refractory demand. (Sikandar Yadav, CFO)
Q: How much exposure do we have to Tata Steel and Liberty Steel in Europe?
A: We are cautious with Liberty Group due to liquidity issues. We expect similar turnover in Europe as last year, with a possible 10% variance. (Sikandar Yadav, CFO)
Q: What are the major growth drivers for doubling revenue in the next five years?
A: Greater focus on the Indian market, which we expect to triple in five years, will drive overall growth. (Arasu Shanmugam, CEO and Whole-time Director)
Q: What is the impact of the Red Sea crisis on exports?
A: The unprecedented rise in freight rates has impacted turnover. We expect a 4-5% annual growth in export sales. (Sikandar Yadav, CFO)
Q: What are the utilization levels for domestic operations?
A: Overall utilization is around 65-70%, excluding the new facility at Vijayawada, which has just started. (Sikandar Yadav, CFO)
Q: What is the expected run rate for the remaining nine months from the Vijayawada plant?
A: We plan to achieve around 180 crores in revenue from the Vijayawada plant this year. (Arasu Shanmugam, CEO and Whole-time Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
