IFGL Refractories Limited (IFGLEXPOR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day and welcome to IFGL Refractories Limited Q2 FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kamal Sarda, CEO and CFO, IFGL Refractories Limited. Thank you, and over to you, sir.

Yes. Thank you. So good evening, ladies and gentlemen. I thank you for joining us on the IFGL Refractories Limited Quarter 2 FY '21 Earnings Conference Call. I hope and everyone around you is safe and in definitely in a good health. Along with me, we have on call, Mr. Rajesh Agarwal, our Company Secretary; and SGA, our Investor Relations Advisors. We have uploaded our results presentation on the stock exchange and our website. And I hope you all have got a chance to go through the same. Let me give you a very brief on economy and business. So quarter 2 witnessed a very strong recovery in business as government released lockdown restrictions on business operations and movement of people. And this was all across the globe too, other and except the last part of the quarter 2. Our manufacturing facilities continued to operate smoothly during quarter 2 adhering to the guidelines issued by the respective governments. As you know steel industry has witnessed one of the sharpest and V shaped demand recovery. This recovery was led by strong pickup in all the industries, especially the auto and real estate where the highest amount of steel is consumed. Based on various other factors led to -- I'm happy to inform you that we have recorded highest ever quarterly EBITDA and PAT in the history of IFGL. I shall now move on to give you a brief on our performance. Let me start with the stand-alone figures. We recorded highest ever revenue, highest EBITDA and highest profit at the stand-alone level on the back of strong demand, increased realization, cost measures taken by the company and operating leverage benefits. Total income for the quarter 2 was INR 167.6 crores as compared to INR 122.3 crores in quarter 2 FY 2020. This was up by 37%. EBITDA for this quarter was INR 36.4 crores as compared to INR 17.8 crores, which is like almost doubled. EBITDA margins expanded by 7.1% to 21.7% as compared to 14.6% in the previous corresponding quarter. PAT was INR 19.2 crores as compared to INR 7.6 crores, up by 152%. PAT margins was at 11.4% as compared to 6.2% in the corresponding quarter. I will give you a brief on the consolidated financial highlights. Our consolidated financials also include our international subsidiaries in the U.S. and Europe which were impacted by the second wave of COVID which is still continuing. International markets are showing considerable kind of improvements as we speak. Nonetheless, we reported highest ever EBITDA and PAT at the consolidated level also. Total consolidated income for this quarter was INR 248.4 crores as compared to INR 227.4 crores, up by 9%. Consolidated EBITDA was INR 41.3 crores as compared to INR 26.2 crore, up by 58%. Consolidated EBITDA margin was 16.6% as compared to 11.5%. Consolidated PAT is INR 20.6 crore as compared to INR 12.5 crore in the corresponding quarter, up by 65%. Consolidated PAT margin were 8.3% as compared to 5.5% in the corresponding quarter. Let me give you brief highlights of the financials of subsidiaries for this quarter. EI Ceramic, our U.S. subsidiary, total income was USD 3.89 million for the quarter. EBITDA was $0.47 and PAT was $0.31. Monocon Group total income was £6.76 million, EBITDA was £0.22 million, PAT was £0.12 million, Hofmann, our German subsidiary’s total income was EUR 1.28 million, EBITDA near breakeven level and marginal loss at PAT level. I am happy to tell you that we continued to remain net debt free. We have a very strong balance sheet and a strong cash flow. Our ongoing CapEx plan at Kandla and Visakhapatnam remains on track. With the economy now opening up rapidly and showing signs of improvement, our product offerings and strong financial positions, we are well placed to capitalize on the business opportunities in the times to come. This is the brief. I look forward to any question from you. Thank you

[Operator Instructions] First question is from the line of [ Ankit Agarwal from ARC Capital ].

And congrats on a great set of numbers, sir. Sir, I have a couple of questions. See, the higher revenue that we have recorded so what is the breakup in terms of value and volume?

That -- I don't have that figure. We don't calculate that way because we have various product ranges. So I don't think we can give you instantly these figures.

But realizations must have improved, right?

Realizations improved on the backdrop of the that rupee had depreciated in the last, I would say, 6 months that has also helped us quite a bit.

And similar for, sir, the EBITDA margins, what are the factors -- key factors there?

As I said -- see, one is the overall business which has increased, if you see on the stand-alone, the total income has increased by 37%. That itself a big increase for us, so that's is one. As I said the cost reduction measures, cost optimization measures taken by the company, we had a soft raw material rates during the last half year. And overall, if you see some of the cost like travel cost there was hardly any travel, lot of things have -- are factored in the improvement in margins

So sir, I mean, are these margins sustainable then going forward like...

Difficult to say. Let's wait. If the costs are going up, the ocean freights are going up significantly, the raw material rates are hardening up. So we will try and see what can be done. Everything in the market looks good.

Okay. sir. And sir, one last...

Yes, definitely the market looks good.

Right, right. Okay. And sir, one last question, sir. The current PLI scheme, which has been announced by the government, is there any benefit for us from that?

No. No. It is not for the refractory industry for some specialized steel. I'm yet to see the detailed guidelines.

Next question is from the line of [ Arush Oberoi from Victor Delta Securities ].

I have couple of questions. Sir, I would like to know that what would the company's total CapEx at Kandla and Visakhapatnam plant?

See if you go through the -- have you seen the presentation? It is mentioned there very clearly.

Okay. Okay. So what could be the potential revenue opportunities from these expansions?

Difficult to say but I think -- let's wait. It will take a bit of a time. We are yet to see yet. We cannot really tell you what is the total. But refractory industry we can always factor into 2.5 to 3x.

Any ballpark numbers like any percentage type? Okay. So another question is that our subsidiaries in U.S. and Europe are not doing well. So can you highlight what exactly are the issues there?

See the U.K. subsidiary was doing okay, reasonably okay, I would say compared to the corresponding quarter. Margins may have been slightly here and there but U.S. market, the first quarter was very bad, but the second quarter towards the end and the last month has seen a significant recovery. And I am sure in the coming quarters unless government comes out with the specific lockdown separately, I see that current quarter should be good. We have seen in the month of October, we have gone back to almost normal in EI Ceramics. We hope the current quarter and the next quarter or H2 should be much better than H1.

Okay. And sir, lastly, what is your outlook on the domestic steel demand in the near term?

It looks very good. Every steel industries, I think you must have seen the H1 results, they're all doing excellent. So I hope they will continue with the same trend. I don't see any reason why they should go down. So prices they have increased. They all are making tons of money.

Next question is from [ Atul K from Rahul Securities ].

Sir, just wanted to know, have the raw material prices softened?

In the first half yes, but now as we speak there are signs that it is going up plus what is happening is the ocean freight, there is a significant turbulence, ocean freight is also hardening up very, very steeply.

Okay. And sir, what kind of impact these prices to have our margins going forward?

It is still to be assessed.

Sir, pardon me, I couldn't get your point.

I said it is still to be assessed. We need to understand where it stops.

Okay. Okay. Sure. And secondly, sir, are we seeing any demand shift from players who are shifting their requirements from China to India?

Not yet.

Okay. And are we likely to witness the same going forward? What is your perspective on the same?

Not in our range of products.

Next participant is Sanjay Nandi from Ratnabali Investments.

So just wanted to know from the presentation, like we have been eyeing for a 4% kind of steel growth in the worldwide from '20 to '21. So what kind of refractory growth can we presume if we see our India to grow at 23% kind of growth in the steel sector from '20 to '21, so what kind of refractory growth in the topline thing is possible, sir, from that perspective?

We are almost linked, I would say. If you look at any growth or degrowth in steel, we will have almost 75% effect of it in refractory industry.

So can you please guide us like so that if can help us in the for our projections purpose...

In fact, [ 2 to 3 years ] of the growth honestly speaking.

Pardon, sir?

I don't have the total figures on the globe. We are not readily -- I think it's about $40 billion, $41 billion in the globe, but I don't know exactly how much is -- see, India is about INR 10,000 crore market, okay, roughly around INR 10,000 crore market. So whatever growth we have of 5% or a 10% growth in steel, we'll have around, let's say, 75% of that in the refractory industry as well. Am I able to make it clear?

Okay. And sir -- yes, it's perfect, sir. Perfect. Sir, my next question is like in this particular quarter, we could find out like they have happened [Audio Gap] in the margin from the Indian operations, sir, is it because of our foreign exchange or did we something improvement in realizations or what exactly happened if you can kindly clarify the same, sir?

I think I answered in one of the last questions.

But it would be helpful kindly clarify a bit, so like if any kind of product mix or something happened?

I telling to -- for the sake of everyone, it will be difficult for me to repeat the same thing. Okay. That's why I think -- so basically, it gives you the demand of our increase in sales is one of the major factor, okay? Our overall customer demands are very high. As I mentioned, the raw material rates are soft in the quarter 2 as well as the H1. Our foreign exchange rates rupee was on a depreciated condition so that also helped us. Then we had taken out a lot of costs optimization measures that helped. I can tell you in that MPT prices were very soft in the first half. It is still very, very similar. Then on the other cost is our travel cost, we hardly had any travel everybody was working from home. So that the net reduction in cost. So then there could be various other small small reasons. So these are the major factors.

And sir, one thing, so like can you just give us the sales mix, like what percentage do we sell in the like shaped refractories and what percentage do we have in the unshaped refractories?

We don't calculate in that way.