Release Date: May 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RHI Magnesita India Ltd (BOM:534076, Financial) reported an 8% increase in Q4 FY24 revenue compared to Q4 FY23, reaching INR943 crores.
- EBITDA margins improved to 16.2% in Q4 FY24, driven by operational efficiencies and profitability from new customers.
- The company achieved a 39% year-on-year increase in revenue for the full year, reaching INR3,781 crores.
- Net debt levels were significantly reduced by INR857 crores, ending the period with a 0.6x net debt to EBITDA ratio.
- The company has successfully integrated its M&A activities, leading to improved margins and operational efficiencies in acquired entities.
Negative Points
- Global demand for refractories has been subdued, impacting global pricing levels.
- Export markets have been relatively weak, affecting overall demand.
- The company faced challenges in maintaining margins due to global pricing pressures and overcapacity in the market.
- Finance costs increased due to higher forex losses from rupee depreciation.
- Capacity utilization at the Dalmia plant remains low at 54%, indicating underutilization of assets.
Q & A Highlights
Q: How do you foresee the current year's growth, and why has the profit before tax for standalone entities gone down?
A: The growth is sustainable despite global pricing pressures. We are working on cost reduction to maintain margins. The acquired business margins have improved significantly, almost doubling within a year. The finance cost increase is due to forex loss from rupee depreciation against ECB loans.
Q: What is the expected volume growth for FY25, considering peers' revenue growth?
A: We expect an 8% volume growth for FY25. Comparisons with peers are not straightforward due to different business focuses. We have recovered lost volumes from Dalmia and are optimistic about future growth.
Q: What is the CapEx plan for the next year, and what will it be spent on?
A: The CapEx for next year will be around INR70-80 crores, with half for maintenance and half for modernization. We may increase CapEx for iron-making initiatives.
Q: What is the targeted working capital intensity for the next one or two years?
A: The goal is to achieve a working capital intensity of 25-26%, but realistically, it will be around 30%.
Q: How is the company addressing competition in the flow control market?
A: We are confident in our capabilities and are expanding into new areas like slab caster and twin slab caster. We have also brought in new technology to improve margins and reduce working capital.
Q: What is the current status of the Dalmia and Hi-Tech acquisitions, and when will they be fully utilized?
A: The Dalmia plant is currently at 54% capacity utilization, and we aim to reach 75-80% in the next four to five years. The Hi-Tech plant is integrated into RHI Magnesita India, and we are working on improving its performance.
Q: What is the company's strategy for exports given the current global scenario?
A: The export market is currently weak due to reduced steel production globally. We do not expect a revival in the near term but are prepared to push for exports when the market improves.
Q: What are the plans for future acquisitions?
A: We are not actively looking for large acquisitions but are open to opportunities that fit well with our strategy. The focus will be on filling product gaps rather than acquiring technology or capacity.
Q: Can you provide guidance on EBITDA margins and volume growth?
A: We aim for sustainable EBITDA margins of 14-15% and an 8% volume growth. Revenue growth will depend on market pricing and conditions.
Q: How is the company managing its working capital and inventory levels?
A: We have reduced inventory by 12% and are cautious with receivables. We aim to maintain current levels in the short term and improve them in the medium term.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
