Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Standalone total income increased by 7% to INR1,243 crores in June 2024 quarter compared to June 2023 quarter.
- Standalone profit before tax increased by 42% to INR111 crores in June 2024 quarter compared to June 2023 quarter.
- Consolidated total income increased by 11% to INR1,549 crores in June 2024 quarter compared to June 2023 quarter.
- Consolidated profit before tax increased by 33% to INR96 crores in June 2024 quarter compared to June 2023 quarter.
- Net borrowing improved significantly, with standalone net surplus of INR133 crores compared to net borrowing of INR356 crores in June 2023 quarter.
Negative Points
- Philippines project faced temporary shutdown due to deficiencies in effluent treatment and disposal pointed out by local authorities.
- Consolidated borrowing remains substantial at INR491 crores as of June 30, 2024.
- Order booking for consolidated orders decreased slightly to INR1,124 crores in June 2024 quarter compared to INR1,152 crores in June 2023 quarter.
- Industrial projects business margins remain low at around 4% to 5%, with challenges in improving these margins.
- Losses in the Philippines project include a significant foreign currency mark-to-market loss of INR29 crores.
Q & A Highlights
Highlights of ISGEC Heavy Engineering Ltd (BOM:533033, Financial) Q1 FY25 Earnings Call
Q: How is the captive power market in India, and what is the outlook for waste heat recovery plants?
A: The demand for captive power plants remains robust due to the need for steam in process industries. The market for waste heat recovery boilers is also expected to stay strong as industries move towards decarbonization. (Aditya Puri, Managing Director)
Q: What is the profit of the subsidiaries, and how do we move from standalone to consolidated profit?
A: The standalone profit includes INR21-22 crores of dividend from subsidiaries. Profits from subsidiaries include INR20 crores from (inaudible), INR5 crores from Isgec Hitachi Zosen, and INR9 crores from Eagle Press & Equipment Co. There is a loss of INR29 crores in Isgec Investments due to foreign currency mark-to-market loss. (Kishore Chatnani, CFO)
Q: What steps are being taken to improve margins in the industrial projects business?
A: The strategy includes focusing on shorter duration projects with less civil and site work, and more technology-led projects. This should gradually improve margins, although double-digit margins in project business are challenging. (Aditya Puri, Managing Director)
Q: What is the sustainability of the current margins in the manufacturing segment?
A: The margins in the manufacturing segment, which are around 13.5%, are expected to be sustainable. Investments in capacity expansion for certain products are contributing to these margins. (Aditya Puri, Managing Director)
Q: What is the status and future outlook of the Philippines project?
A: The plant has produced 3.5 million liters of ethanol and is expected to operate at full capacity from mid-November, generating about INR500 crores in revenue with 23-24% EBITDA. The current losses are mainly due to foreign currency mark-to-market adjustments. (Kishore Chatnani, CFO)
Q: What is the order inflow for Isgec Hitachi Zosen and the status of CBPI Philippines?
A: Isgec Hitachi Zosen had an order inflow of INR71 crores this quarter, with a total order book of INR1,022 crores. The CBPI Philippines plant has started operations and will run at full capacity from mid-November. (Kishore Chatnani, CFO)
Q: What is the revenue guidance for the full year and the expected margins for the industrial project business?
A: The revenue is expected to grow in early double digits. The manufacturing segment margins are expected to remain in double digits, while the industrial project business margins will be around the same level as the current quarter. (Aditya Puri, Managing Director)
Q: What is the CapEx guidance for this year and the next?
A: The CapEx for this year in the engineering business is about INR60 crores. Some of this may spill over into the next year. (Aditya Puri, Managing Director)
Q: What is the outlook for the sugar business in India?
A: The outlook depends on the cane price policy. Agroclimatic conditions are currently good, and the cane crop is slightly less than last year but in better condition. (Aditya Puri, Managing Director)
Q: What is the expected net debt position by the end of the year?
A: The standalone company will be debt-free by the end of the year. The overall debt on a consolidated basis will be lower than the current level, but the company will not be completely debt-free. (Kishore Chatnani, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
