Key Takeaways from the Call

During the quarter, Consolidated Net sales decreased by 11% y-o-y to Rs 278.7 crore primarily due to slow inflows in the heavy engineering segment. Apart from the heavy engineering segment, the consolidated net sales grew by 13% to Rs 265.9 crore on y-o-y basis on improved sales from Pre-Engineering segment (PEBS). Consolidated net profit declined by 32% to Rs 13.5 crore on lower EBITDA, higher depreciation and increased interest expenses.

Standalone Net sales declined by 22% to Rs 217.6 crore and recorded a Net profit of Rs 11.2 crore, lower by 39% on y-o-y basis in the quarter ended December 2011.

In Q3 FY12, engineered products segment net sales grew by 9.4% to Rs 54.1 crore on increased price realizations for higher valued products including CDW Tubes.

During the quarter, Cold Rolled Steel Strips' (CRSS) net sales decreased by 5% to Rs 67 crore on continuous shift of capacity utilization for higher value added products.

Heavy engineering net sales crashed by 83% to Rs 12.8 crore largely due to slower off-take from the railway industry. The EBITDA of the segment declined by sharp 82% to Rs 2.4 crore but the EBITDA margin enhanced by 116 bps to 18.8%.

The Railway business has shown improvement in January 2012 and the segment is likely to gain momentum and contribute significantly in the coming quarters.

The Company expects railway budget 2012-13 to announce order of 18,000 railway wagons, as there is a shortage of wagons.

Infrastructure segment net sales grew by 3% to Rs 73 crore but the EBITDA margin slipped by 186 bps to 12.5% on yearly basis due to change in sales mix though significant volumes from solar and sheet piles moderated the fall

The Company has successfully leveraged its engineering platform to enter into the solar PV structurals business and has executed large orders. The division has generated a strong order book of Rs 90 crore. In the solar structural business, Company generally design, manufacture and supply the framework for the panels.

It has received orders for supply of solar structures worth Rs 36 crore with its customers. The orders relate to supply of materials for the mounting structures for solar projects that are being executed in Gujarat, Orissa and Rajasthan. The projects are expected to be executed by January 2012.It has also received an order for Sheet Piles towards Chennai Metro Rail worth Rs 8 crore.

The Company expects to attain revenues of Rs 120 crore from the solar structures stream and EBITDA margin of 15-16% in the next 7-8 months.

Pennar Engineered Building Systems (PEBS) contributed about 22% to total consolidated sales and grew by healthy 75% to Rs 61.6 crore on robust volume growth and higher price realizations in Q3 FY 12. The PEBS net sales volume increased by 68% to 8,884 MT and price realizations increased by 4.3% on y-o-y basis. PEBS EBITDA margin declined by 156 bps to 9.7% in the quarter ended December 2011 on higher raw material costs.

PEBS received a number of orders from new customers including SVC Projects, Jampana Constructions and Gammon India and repeat orders from Indian Logistics, Ultrateh Cements and L & T. The order book as of now is over Rs 215 crore.

As on December 31, 2011, consolidated total long-term debt is Rs 73.9 crore and Working Capital debt is Rs 137.5 crore and Net Worth is Rs 325.9 crore.

The Company has completed the first phase of capacity expansion project at Isanpur and Tarapur plants resulting in increase in the capacity at these plants by 12,000 MT to 82,000 MT. The expansion involved new capacity of CDW tubes and expansion of capacities for electro static precipitator electrodes and precision tubes for automobiles. The second phase of this expansion project of another 12,000 MT is moving as per schedule and is likely to be completed by Q1 FY 2013.

The company expects the gross consolidated sales to grow by over 2% to over Rs 1,400 crore while the net profit to fall by 15% to Rs 63 crore in FY 12.

The company has earmarked capex of Rs 45 crore for FY 2013.

The company achieved a certification for providing military and defense products. Considering this, Company expects good number of orders from this area in the near future.