Century Enka Limited (CENTENKA) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to the Q4 and FY '23 Conference Call of Century Enka Limited. [Operator Instructions] I now hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.

Good afternoon, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Century Enka Limited. On behalf of the company, I would like to thank you all for participating in the company's fourth quarter of FY '24 earnings conference call. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's con call may be forward-looking in nature. Such forward-looking statements are subject to risk and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now let me introduce you to the management participating in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Suresh Sodani, Managing Director; and Mr. Krishna Gopal Ladsaria, Chief Financial Officer. Without any further delay, I request Mr. Sodani to start with his opening remarks. Thank you, and over to you, sir.

Thank you and good afternoon, everyone. I welcome you all to our Q4 FY '24 earnings conference call. Let me first brief you on the operational highlights for the fourth quarter of FY '24, after which our CFO, Mr. Ladsaria, will brief you on the financials. The overall demand for NTCF shows slight improvement, but growth remains muted. The demand for 2-wheeler tyres in India is improving. In contrast, demand for commercial vehicle tyres remains flat, and tractor tyre demand is declining due to subpar monsoon in the last year. While tyre exports are rising, they are still lower than past levels. We are observing an increasing trend of radialisation in commercial vehicles. Overcapacity in China is leading to dumping into China -- into India, impacting demand and margins. Post-Diwali, there has been a pickup in demand for NFY. However, concerns remain due to overall lower textile demand, especially in rural areas and overcapacity in China, leading to dumping into India, which affects local demand and margins. Despite these challenges, the focus remains on increasing the share of value-added products in the portfolio and reduce cost to improve competitiveness and profitability. On the raw material front, caprolactam prices were consistently around $1,690 per metric ton, whereas electricity rates remain at an elevated level. Now to update you on our CapEx projects. For the financial year FY '24, there has been a total cash outflow of INR 115 crores towards ongoing CapEx programs, spinning capacity of polyester yarn for PTCF commissioned in March '24. With this, we have completed all major CapEx projects. We will now initiate the process for PTCF approval with the tyre companies. I now hand over to Mr. Krishna Ladsaria to brief you on financial performance.

Thank you, Sodani ji. Good afternoon, everyone. Let me start with financial results for fourth quarter of financial year 2024. The operating revenue stood at INR 469 crores, remained flattish on year-on-year basis. EBITDA for the quarter stood at INR 34 crores, which grew by almost 49% year-on-year. EBITDA margin were reported at 7.21%. Profit after tax was around INR 20 crores, representing an increase of 40% year-on-year. PAT margins were at 4.33% for the quarter. NTCF sales for Q4 FY '24 decreased by around 13% year-on-year to INR 216 crores, while NFY sales was up same period increased by 14% year-on-year to INR 238 crores. Now coming to the results for the financial year '24. The operating revenue stood at INR 1,744 crores, which decreased by almost 16% year-on-year. EBITDA stood at INR 83 crores, which declined by around 42% year-on-year. EBITDA margin for the same period was 4.75%. Profit after tax was INR 43 crores, which declined by around 53% year-on-year, and PAT margin was reported at 2.45%. The NTCF sales for this period decreased by 22% to INR 827 crores, while NFY sales decreased by almost 7% to INR 850 crores. With this, we open the floor for questions and answers.

[Operator Instructions] We have the first question from the line of Faisal Hawa from H.G. Hawa and Company.

Sir, what is the -- our estimate for coming year...

Mr. Faisal, we request you to kindly go off the speakerphone. We cannot hear you very clearly.

Just a minute. What is your estimate for the coming year revenue growth? And what is the kind of movement you see from the tyre companies this year as regards to new approvals and new revenue coming in? And secondly, do we have any kind of surplus land, which we may be given to Century textiles for any kind of redevelopment, et cetera?

So coming to the first question, while we do not give any forward-looking statements, we expect revenue growth of about between 10% to 15%, maybe if the markets are good, even up to 20%. But that will depend on how the markets behave for the entire year as also the pressure from -- of imports from China in both the segments. So we are optimistic about the revenue growth, and we'll see how it progresses quarter-on-quarter. As regards to the second question, we do not have any surplus land, which has been given to any other company for development. Our land at Bharuch is on ownership basis, and it's being utilized only for our manufacturing activities. Our land at Pune is only for -- on lease basis and also again utilized only for manufacturing activities.

We have the next question on the line of [ Vipulkumar Shah ] from Sumangal Investment.

So my question is when will this expanded capacity will come into production? Can we -- I mean, what type of production increase can we expect over next financial year or in this financial year? So if you can throw some light, it will be very helpful.

So our new capacity of our expanded capacity of Nylon Tyre Cord Fabric has already been -- is being utilized fully. We have only adjusted it with stopping some of old facilities to get better efficiency gains as well as better quality products. And if the volume and if the markets do improve, which we are hopeful of, the capacity is at -- the idle capacity will also increase, will be utilized. For the Polyester Tyre Cord Fabric, we have just commissioned at the end of March. And as informed earlier, this being a very technical product goes through a rigorous approval process from the tyre company. So in the interim, before we get approval from tyre companies to do commercial supplies, it will go through a process of supplying them [ tyre ] lots, which will be converted into tyres. And then that goes through a very rigorous approval process. We'll be selling yarns in the market in as polyester yarn in the interim. So we hope to utilize that facility completely during the next FY '25. So approximately, it would be -- again, we do not give any forward-looking statements, but assuming that the markets are good, close to between 5% to 10% volume growth can be expected.

From Polyester Cord, it will line, right?

I mean we -- on the total volume growth.

Total volume growth. So for Nylon Tyre Cord what is the capacity addition? And what was the capacity utilization last year, sir?

We report our results only as synthetic yarns. And for competitive reasons, we do not give the volume breakup. We have already -- only give the revenue breakup as an additional information. So we will only be talking about the total capacities.

Yes. So what was the total capacity utilization last year, sir?

It was close to around 80%.

80%. And we have added roughly 30% extra capacity, right?

80% is on the added annualized capacity. So we -- I mean capacities have increased over various quarters. Some have commissioned in the last year, some has commissioned in the current financial year. So when we say 80%, it is on the average capacities of the -- of all the 4 quarters for FY '24.

It is little bit confusing. So what is -- as on today, what is our total installed capacity after these new lines have become operational?

It is about 92,000 tons per annum.

92,000 tons per annum. So if -- hypothetically, if demand is there, we can sell up to 92,000 tons, right, sir?

Yes, yes. If the markets are good, we can go up to the entire 92,000 tons per annum.

And this -- what is the status of your demand for antidumping duty?

No, there is no antidumping duty on either of the products.

But we have returned to the government? I think we have initiated the process or not?

We keep following up and we -- through our associations, we keep representing. But the revenue -- I mean the department -- or the finance department has not been responding positively even after the DGTR recommendation not only in our case, but in many other cases as well. So we keep pursuing it, but there is no antidumping duty as of now.

And sir, my last question is regarding your notes of this -- reversal of electricity charges of INR 5 crores. So would you elaborate? It will be -- means I didn't understand.

So Maharashtra, we have electricity subsidy of INR 2 per unit. And in the Maharashtra textile subsidy, which was for the period '23 to -- 2023 to 2028, in the new policy, they restricted the total subsidy to INR 40 lakh per month. So they kept INR 2 limit -- INR 2 per unit but restricted it to INR 40 lakh per month. Subsequently, in the month of March, they revised the policy and they restored the subsidy back to INR 2 per unit without any cap on the total subsidy. Because of that, in December quarter, when this policy came in, we reversed INR 5 crore, which was subsidy accounted for. And the same subsidy was restored back to our account in March. So in March quarter, we have this additional profit of INR 5 crore, which pertained to the period up to December.

So that INR 5 crore will not be in current year, right?

So on year-on-year basis, there is no change. So there was a charge in Q3, and there was a reversal in Q4. On year on basis or full year basis there was full subsidy, which was there at INR 2, which was accounted in our books.

[Operator Instructions] We have the next question from the line of [ Pradeep Rawat ] from Yogya Capital.