Release Date: February 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales turnover increased to INR 968 crores in Q3 FY '24 from INR 880 crores in Q2.
- CapEx program is progressing as planned, with the pulverized coal injection (PCI) expected to be completed this quarter.
- Long-term loans are controlled at around INR 800 crores for the quarter.
- The company is running all three blast furnaces, with a potential liquid metal production of 1,65,000 metric tonnes per quarter.
- The company is making significant strides in green energy, with plans to commission a 17-megawatt solar power plant and additional wind power projects.
Negative Points
- Sales realization of pig iron dropped by INR 2,000 per tonne compared to Q2.
- The castings realization also decreased to INR 1,24,000 from INR 1,26,000.
- The iron and steel industry is under pressure with respect to margins due to high coal prices and increased iron ore prices.
- Global demand for iron and steel remains under pressure, with oversupply issues exacerbated by the restored supply chain from Ukraine and Russia.
- The tractor industry, a significant market for castings, is experiencing a drop in demand, affecting overall casting sales.
Q & A Highlights
Q: Sir, my first question is regarding the industry scenario, in particular, for the tractor industry and MHCV segment, as compared to Q3, how the Q4 is going for us, sir?
A: Thank you very much. I think actually in the Q4 for the tractor sector is the preparation for the season. Typically, April, May are the season for the tractor. If I look at the kind of demand which used to go up, I don't see that kind of demand going up. But if you ask me the schedule for the casting in January and then in February and March, they are better than December. And -- but I'm not sure whether we will really see the sales will pick up for the tractors and thereby the tractor castings will it come this year and how much will come, but the schedules are slightly better compared to December.
Q: And sir, how about the other auto segments apart from the tractors like MHCV and all?
A: In case of KFIL, I would say all products. Other sectors have supported quite well. I would say that auto as well as off-highway, earth-moving equipment, stationary engine, all we have done and that's why we still have a ray of hope that we can reach overall the kind of casting volumes what we did last year. It's not growth, at least try and avoid the degrowth. So it's all because of the other sectors doing well.
Q: Sir largely, we are complete in terms of our mostly backward integration projects for the pig iron segment. So what is stopping us to achieve 18% to 20% our target EBITDA margin? Is it weak demand or weak realization or there's anything else that we are missing on this?
A: I just mentioned we have done what is required to be done in case of pig iron manufacturing process to become cost competitive to achieve the level of productivity which support better cost structure. If at all anything left out, I would say that full and proper utilization of power plants connected to the coke oven, maybe there's still some delta x improvement possibility. Plus, we are not using PCI, which is also important in pig iron and steel making, and we are getting ready in this month of February itself we will start with the pulverized coal injection.
Q: Sir, what is the volume ramp up coming in tube segment as well as in the steel segment. Our target was to reach 1 lakh in steel segment, particularly, how is that going on, sir?
A: We have progressed and we will have growth on tubes both in terms of volume as well as in terms of value. Whereas in steel sales, as I mentioned, steel has gone down, I don't think we will have a major growth in steel, whereas tube we have growth.
Q: Sir, some more comment on the opportunity which is opening up from large-size casting from India, because we are also planning to set up at Solapur this facility. I think Caterpillar is very keen to come to India for manufacturing base. So some comments on those lines will be very helpful.
A: No, the casting demand I agree. It is in almost all segments. Large casting segment is one which has been growing very rapidly. Because of the wind, they're doing well also, the windmill castings. And also the off highway, the foundries, which happen to be less mechanized and they are difficult to be made in Europe and America, and they are looking for the sources from India.
Q: Sir, I just had 1 question that regarding in this quarter, all major steelmakers have said that they felt the pressure of high coking coal. And I believe Kirloskar Ferrous also would agree on this. So considering the fact that in fourth quarter, we have the pulverized coal injection coming in. So can you just throw some -- a little bit of light on what was the actual coking coal cost in 3Q? And considering the advantage of PCI coming in 4Q, where would the coking coal cost be for the next quarter?
A: See, this coking coal prices, what we consume or what we use is the blended, we make use of 4 types of coal. And -- if I just mentioned that over the last 1 year, this blended coal price has gone up anywhere between $30 to $40 per tonne of coke -- per tonne of coal. And this is also a substantial impact dollar at INR 83.
Q: Sir, my next question is regarding the volume side. So you just mentioned on casting side, we will be -- there will be no growth on the casting side. But on the pig iron, we have full capacity available of 1.65 lakh metric tonnes. So what will be our margin for Q4 and for the whole year and next year guidance as well?
A: I think this year, we are likely to reach of 5,30,000-something liquid metal, not the pig iron and we'll have to calculate the pig iron. And our own consumptions are about 25,000 to 30,000 tonnes. So we will have hopefully 1,65,000, somewhere around that for quarter 4.
Q: Sir, on the tube segment, do we have any orders coming in from the oil companies or any customer in pipeline for oil companies?
A: No, I think we have been participating in tenders. We are winning tenders. Both on the volume and the margin front in tubes is well supported by the oil and gas sector, and we are not only doing regular, but we have also started doing the premium couplings, which is at much higher price than margins.
Q: Sir, one of the question is due to the PCI injection. Can you like quantify what will be the benefit in the cost with the PCI coming in and the oxygen enrichment that you're expecting from June, July onwards?
A: No, what I mentioned is to start without oxygen enrichment, we may be in the 50 to 60 kg per tonne of hot metal and benefit is 40% of that on coke sales. And once we get into oxygen enrichment, then we can go up to 100 to 120 kg and then the benefit will double. So we expect this a very potential cost saving area, and we can in today's conditions, because PCI is relatively cheaper compared to the prime coking call, and it's very conducive for PCI. And benefit is very, very attractive. CapEx are fairly low. So we expect that it should, to some extent, help us in managing the margins, yes.
Q: Sir, my question is with respect to alloy steel plant. Let's assume we get an easy clearance soon
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
