The company held its conference call on 12 Feb 2019 and was addressed by CFO Mr. Vallinath
Key Highlights
10% drop in cement asbestos volumes for the company as compared to a 0-2% industry growth in Dec 18 quarter.
Though the drop looks big but it's a seasonally weakest quarter. On an annual basis, more or less things get make up.
Inventory got built up at company's end while with few competitors inventory would have been at dealers end.
7% growth in asbestos roofing segment on 9 mths basis.
Asbestos volume stood at 145000 tons in Dec 18 quarter. 30000 tons volume in Boards & Panels
No growth in B&P segment now since past 2 qts as the company is operating max possible 90% capacity utilization at its 2 plants.
The Jhajjar plant, Haryana got delayed due to issues with environment clearance. Finally as compared to earlier date of Aug 18, the plant will commercialize from Mar 19 onwards. This will add the much need capacity in B&P segment for the company.
B&P segment EBIT margin stood at 4% in Dec 18 qtr as compared to 7% for 9 mths ended Dec 18. The pulp prices finally is coming down, as compared to its peak price of US $ 955, its currently around US $ 800 per ton. Expects prices to come down further. The Dec 18 qtr also saw Ad sales promotion expenses of Rs 3 crore in Dec 18 qtr towards B&P which was not there YoY. So all these along with low volumes hurt the margins.
Some pricing power will be back to the industry
B&P will end the year FY 19 with volume of around 1.1 lakh tons. For FY 20, management expects sales volume in upwards of 1.35 lakh tons.
Asbestos roofing remains around 65% of total sales while rest is from B&P.
Asbestos roofing Ebidta was down due to drop in volumes and increase in raw material costs due to forex movements. 3.5% drop in margin is due to raw material costs increases due to forex lead movements.
Expect normalcy of volume growth and price hike in coming months will lead to good growth going forward.
Atom plant just got commercialized and reported loss of Rs 80 lakh at Ebidta level in Dec 18 qtr. Also jhajjhar plant had some expense of Rs 1.45 crore towards salary, admin, travel etc which got booked in the Dec 18 qtr and no revenues booked so far from this plant.
With higher inventory of roofing material, working capital cycle went up from 100 days to 120 days. Rs 42 crore net debt increase due to increase in working capital
Spinning division did well and will continue. Expects good margins to continue in FY 20 with better ROE and ROCE.
The company will bounce back in the coming quarters
Vnext margin will be in double digits by end of FY 19. As the new Haryana plant comes in, there will be advantage of low freight costs and others. Further Atom plant has higher margins and better realisation which will all lead to better margins going forward.
Working capital days have come down from Mar 18 of 103 days to 81 days as on Sep 18.
Interest is expected to come down further.
Election benefits so far is not visible.
|