Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated revenue from operations increased by 37% year-on-year to INR445 crore.
- EBITDA increased by 76% year-on-year to INR24 crore, with EBITDA margins improving to over 5%.
- Finance costs decreased by 38% year-on-year, contributing to a 216% increase in consolidated PAT to INR13 crore.
- Capacity utilization for both lead and plastics showed an upward trend, with lead production increasing by 38% year-on-year.
- Strategic acquisition of 123-acre land in Mundra, Gujarat, to enhance export potential and geographical presence.
Negative Points
- The company does not provide specific guidance on revenue or earnings, making future performance uncertain.
- Challenges in procurement and pricing of raw materials due to market fluctuations.
- Dependence on a few key customers, with the top 5 customers constituting 40% to 50% of total revenue.
- Potential impact on volumes from key customers like Amara Raja, who are backward integrating.
- Aluminum segment faced challenges, with the company needing to review and potentially shift to value-added products.
Q & A Highlights
Q: How do you see the acquisition of the 123-acre land in Mundra, Gujarat, impacting your strategic positioning and export potential in the coming years?
A: The acquisition is strategically important for geographical presence and accessing global markets. Proximity to the port offers economies of scale in costs for imports and exports. POCL will be positioned to source from the Western region and cater to international markets. Currently, we are focusing on developing the Thervoykandigai land in Tamil Nadu, with Mundra following in strategic execution for future projects. (Piyush Dhawan, President, Commercial and Strategy)
Q: How will the new Thervoykandigai plant's advanced automation and low carbon footprint contribute to your long-term operational efficiency and sustainability goals?
A: The plant will expand lead production and contribute to higher operational efficiencies and better margins through automation and technological upgrades. We plan to use alternative fuels, reducing operational costs and carbon footprint, progressing towards sustainable manufacturing practices. (Vijay Balakrishnan, Chief Financial Officer)
Q: What are your long-term plans for the new R&D facilities, and how will they drive innovation and value-added product development?
A: We are moving towards a lean, smart, and low carbon footprint plant. Our diverse portfolio includes plastics, copper, and aluminum, with plans for stabilization and exploration of value-added products. We continue R&D initiatives for future expansion in areas like lithium-ion and rubber. (Piyush Dhawan, President, Commercial and Strategy)
Q: How do you plan to maintain or adjust the sales mix balance between domestic and export markets in the future?
A: The sales mix between domestic and export markets remained stable at 35% and 65%, respectively. We expect this ratio to remain similar with a variation of plus or minus 5%. (Krishna Moorthi Kumaravel, Director - Finance, Company Secretary)
Q: What steps will you take to continue reducing consolidated net debt, and how will this improve your financial health moving forward?
A: The current debt equity stands at 0.5, and we do not expect a significant increase as the expansion is funded through proceeds of preferential issues and internal accruals. We aim for an ideal mix of debt and equity to maintain a lower weighted average cost of capital. (Vijay Balakrishnan, Chief Financial Officer)
Q: Your purchases are in multiple currencies, and your sales are mostly in INR. How do you deal with currency fluctuations? Also, any views on the risk of availing raw materials since you don't have your own yards?
A: We hedge our currency risk through natural hedges and forward contracts, minimizing P&L impact. For raw materials, we follow a multi-sourcing strategy, procuring from 70+ countries with a supplier base of 270+, ensuring consistency in supplies. (Vijay Balakrishnan, Chief Financial Officer and Piyush Dhawan, President, Commercial and Strategy)
Q: What is driving the volume growth and any analysis on Union Budget related to your products? Can you give us some idea whether we can continue the current performance for the next two to three years?
A: The global lead market is growing at 6%-7%, and India at 12%-13%. The budget is positive, removing duty on rare earth metals and ores. We expect 15% volume growth, 20% return on capital employed, and EBITDA margins of 7%-8% in the coming years. (Piyush Dhawan, President, Commercial and Strategy)
Q: What is your lead production target for FY25 and FY26?
A: For FY25, we are targeting 110,000 to 115,000 tons, reaching about 204,000 tons with our expansion plans. (Piyush Dhawan, President, Commercial and Strategy)
Q: It seems the availability of scrap has increased in the domestic market. Should we see better margins in coming quarters?
A: Domestic scrap availability reduces the cash conversion cycle, providing an advantage. We see potential with BWMR and EPR increasing demand for lead acid batteries in India. (Piyush Dhawan, President, Commercial and Strategy)
Q: What is the smelting capacity addition for the new Thervoykandigai plant, and what will be the total smelting capacity post completion?
A: The existing capacity is about 80,000 metric tons. With the new plant, it will increase to 160,000 metric tons in two phases. (Vijay Balakrishnan, Chief Financial Officer)
Q: Why has our EBITDA per ton reduced in the last three years in the lead vertical? What can be a sustainable number going ahead?
A: EBITDA should be viewed in percentage terms, remaining constant at 5%-6%. With new projects, EBITDA in both percentage and absolute terms will be higher. (Krishna Moorthi Kumaravel, Director - Finance, Company Secretary)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
