Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue in the core wire rope segment increased by 7.5% year on year, and revenue in the wire segment increased by 8.9% year on year.
- Operating EBITDA margin improved to 18.6%, up from 17.9% in Q1 FY24.
- Net debt reduced significantly to INR73 crore as of June 30, 2024, down from INR124 crore at the end of March '24.
- Revenue from international markets accounted for 56% of total revenue, indicating strong global demand.
- The company has introduced value-added plasticated LRPC products, which are expected to positively impact the LRPC segment.
Negative Points
- Notable decline in the LRPC segment, both in terms of volume and revenue.
- Despite overall revenue growth, the consolidated net revenue from operations only increased by 1.5% year on year.
- Employee benefit expenses increased significantly from INR109 crore to INR126 crore quarter on quarter.
- The company faces challenges in ramping up volumes due to macroeconomic and geopolitical factors.
- The LRPC segment remains highly sensitive to steel price fluctuations, impacting overall margins.
Q & A Highlights
Highlights of Usha Martin Ltd (BOM:517146, Financial) Q1 FY25 Earnings Call
Q: How big is the opportunity for Usha Martin in the Parvatmala project announced by the Indian government?
A: Shreya Jhawar, Member, Strategy & Growth: The Parvatmala Pariyojana project plans about 250 ropeway projects over the next five to seven years. Usha Martin is well-positioned to capture these opportunities due to its focus on Make in India and collaboration with its Global Design Center in Italy. This should contribute positively to the company's performance over the next few years.
Q: What is the potential for the Galfan wire in addressing landslides in mountainous areas?
A: Rajeev Jhawar, Managing Director: The Galfan line is set to be commissioned in the next three to four months, presenting a significant opportunity. Usha Martin is partnering with Geo Group of Switzerland to build this industry, which has strong demand in Europe and is expected to grow in India.
Q: How is Usha Martin planning to expand its capacity in Europe amidst the current economic slowdown?
A: Rajeev Jhawar, Managing Director: Despite the economic slowdown, the demand in the oil, offshore, and wind energy sectors remains strong. The company is expanding its capacity in these areas, with a strong order pipeline expected to support the ramp-up of production by the end of the year.
Q: What is the outlook for the elevator rope market in India and internationally?
A: Rajeev Jhawar, Managing Director: The elevator rope market is strong both in India and internationally. With the growth in Tier-2 cities and high-rise buildings, the demand is expected to grow by 10% to 15% per annum. The company's joint venture with TESAC is also performing well, contributing to this growth.
Q: Can we expect value-led volume growth in the coming quarters?
A: Shreya Jhawar, Member, Strategy & Growth: Yes, the focus remains on value-led volume growth. A 10% increase in volume in the rope and wire segment is achievable. The LRPC segment will focus more on value-added products rather than volume.
Q: How does Usha Martin manage its EBITDA margins amidst fluctuating steel prices?
A: Rajeev Jhawar, Managing Director: The company maintains its EBITDA margins by focusing on a strong product mix of value-added products. Despite volatility in steel prices, the business model ensures stable EBITDA margins through strategic product portfolio management.
Q: What are the future growth prospects for Usha Martin's specialized products?
A: Rajeev Jhawar, Managing Director: The company is expanding its product portfolio with plasticated and galvanized LRPC, which are higher value-added products. This is expected to improve margins and contribute positively to growth in the coming quarters.
Q: How is Usha Martin performing in international markets, and what is the outlook for new customer acquisition?
A: Rajeev Jhawar, Managing Director: The company has made significant inroads in the oil, energy, and mining sectors in Europe, the Americas, and Latin America. The focus on specialized products has led to repeat orders and strong customer relationships, contributing to positive growth prospects.
Q: What is the impact of the synthetic slings facility on Usha Martin's future growth?
A: Shreya Jhawar, Member, Strategy & Growth: The synthetic slings facility in Brunton Shaw, UK, is expected to go live within the year. This product line, complementary to steel wire ropes, has strong growth potential in the oil and gas and wind energy segments, contributing positively to the company's future growth.
Q: What is the company's strategy for maintaining and growing its market share in key geographies?
A: Rajeev Jhawar, Managing Director: Usha Martin is focused on increasing its market share in specialized segments by leveraging its R&D capabilities and building strong customer relationships. The company is also diversifying its presence in new geographies, which should help sustain and grow its market share.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
