Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ion Exchange (India) Ltd (BOM:500214, Financial) reported a consolidated operating income of INR5,676 million for Q1 FY25, marking an 18% year-on-year increase.
- The company's EBITDA for the quarter was INR641 million, representing a 31% year-on-year increase, with an EBITDA margin of 11.29%.
- Net profit for the quarter stood at INR448 million, a 35% year-on-year increase, with a PAT margin of 7.89%.
- The Chemical segment saw a revenue increase of 36% year-on-year, with EBIT also increasing by 36% year-on-year.
- The company is optimistic about future growth, with a robust domestic enquiry bank and expectations of finalizing large value opportunities in the coming months.
Negative Points
- The Consumer division reported a loss of INR34 million for the quarter, compared to a loss of INR15 million in the same period of the previous year.
- The UP contract execution faced delays due to elections and related cash flow issues, impacting the overall execution pace.
- The legacy project continues to affect the overall engineering margins, with its adverse impact expected to continue into the next quarter.
- The company is not immediately focusing on achieving EBITDA positivity for the Consumer segment, instead prioritizing reinvestment into growth, which may delay profitability.
- The Sri Lankan project execution remains muted due to funding issues, with only small portions invoiced in recent months.
Q & A Highlights
Q: On the engineering side, the order book has slightly decreased. How do you see the order execution for the year?
A: The order book position remains strong, and we expect good order flows in the coming months. Execution and invoicing should improve in the subsequent quarters, especially for the UP contract, which faced some delays due to elections. The second half of the year is expected to be significantly better.
Q: Will the UP order be executed by the end of this year?
A: The UP contract should be substantially executed by the end of this year, depending on fund releases and government approvals. We are hopeful that a significant portion will be completed.
Q: Regarding profitability, there was a cost overrun in the previous quarter. Has this issue been resolved?
A: The cost overrun from a legacy project will continue to impact the next quarter but should taper off after that. Despite this, other contracts have supported decent margin levels, maintaining overall stability.
Q: What is the outlook for the chemical segment for the full year?
A: The chemical business is performing well, and we expect the growth momentum to continue. Margins should remain robust if input prices, foreign exchange rates, and supply dynamics do not change significantly.
Q: Can you provide more details on the management change planned for October 1, 2024?
A: We appointed a CEO last year, and this is a planned move to hand over operating functions to professional management. The CEO will take over as MD, and I, along with Mr. Dinesh Sharma, will become Non-Executive, Non-Independent Directors. We will remain involved to support the company's growth.
Q: How do you see the future of the chemical segment, especially in international markets?
A: We are positive about the chemical segment and have initiated capacity expansions targeting international markets. With improvements in European and North American markets, our exports have increased. We continue to invest in R&D and value-added products to maintain a competitive edge.
Q: What is the expected revenue contribution from the chemical segment's CapEx?
A: The current CapEx at Roha is expected to start commercial operations next financial year, reaching optimum capacity utilization in three to four years.
Q: What is the outlook for the engineering business in Saudi Arabia and UAE?
A: We are seeing improved customer relationships and increased opportunities in these markets. We expect substantial revenues from this geography in the next couple of years.
Q: What is the status of the Sri Lankan order?
A: The pace of execution remains muted due to funding issues. We have seen some fund releases from the Sri Lankan government, and we hope to close the remaining portion within the current financial year, depending on further fund arrangements.
Q: Can you provide more details on the recent acquisition of MAPRIL and its impact on profitability?
A: The increase in the chemical segment's top line and profitability is due to the consolidation of MAPRIL, acquired in June 2023. We expect MAPRIL to contribute to a 15% growth in turnover this year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
