GuruFocus -
- Revenue from Operations (Q2 FY25): INR 867 crore, a 1.3% decline quarter on quarter.
- Revenue from Operations (H1 FY25): INR 1,746 crore, a decline of 8.8% compared to H1 FY24.
- EBITDA (H1 FY25): INR 279 crore.
- EBITDA Margin (H1 FY25): Improved to 16% from 14.9% in the previous corresponding period.
- Profit After Tax (H1 FY25): INR 119 crore, with margins at 6.8%, up from 5.6% in the previous corresponding period.
- Net Debt to EBITDA Ratio: Reduced to 0.3x from 0.6x at the beginning of the year.
- Production Volume (Q2 FY25): 86.2 kilotons, a 10.8% increase from Q1 FY25.
- Shipment Volume (Q2 FY25): 119.4 kilotons, compared to 113.9 kilotons in Q1 FY25.
- Capacity Utilization (Q2 FY25): Increased to 67% from 61% in Q1 FY25.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RHI Magnesita India Ltd (BOM:534076) has a strong order book in the iron pellet and DRI baking business, with new contracts and increased market share.
- The company is establishing its first center of excellence for iron making in India, expected to be fully commissioned by 2027, enhancing capabilities and positioning for sustained growth.
- Operational efficiencies have led to a reduction in the net debt to EBITDA ratio from 0.6x to 0.3x, indicating improved financial health.
- Capacity utilization improved to 67% in Q2FY25 from 61% in Q1FY25, reflecting ongoing operational enhancements.
- The company maintains a solid foundation for sustainable profitable growth, with a focus on aligning capabilities with evolving market conditions.
- RHI Magnesita India Ltd (BOM:534076) reported a 1.3% decline in revenue quarter-on-quarter, impacted by competition from lower-priced imports and limited new commissioning.
- Raw material costs, particularly for alumina-based materials, have increased, exerting pressure on margins.
- The company experienced a decline in shipment volumes, with a 7% decrease compared to the previous year, raising concerns about market share in the steel business.
- The cement sector has slowed down, impacting overall demand and contributing to a lower realization rate.
- Export markets remain weak, with no significant recovery expected in the next 2-3 quarters, affecting potential revenue growth.
A: Pramod Sagar, CEO, explained that iron making and cement, which have lower realizations, contributed to about 6% growth. This impacted overall realizations and margins due to lower selling prices in these segments.
Q: What is the status of reducing imports of key raw materials?
A: Pramod Sagar, CEO, stated that the company aims to reduce imports progressively. Currently, imports have decreased from 40-45% to 30-35%, with a target of 80% local production. Azim Syed, CFO, added that a change in accounting interpretation caused a one-time impact on traded goods.
Q: How will the order book, which is heavy on iron making and cement, affect margins in the second half?
A: Pramod Sagar, CEO, noted that while iron making and cement are significant, steel will remain a major growth driver. The company expects to maintain around 15% margins, supported by steel industry expansions.
Q: How does the pass-through mechanism work for fluctuating alumina prices?
A: Pramod Sagar, CEO, explained that there is typically a 2-3 month lag in passing through price changes to customers. The impact is neutral over time, as price increases and decreases balance out.
Q: Why is there a decline in shipment volumes despite steel production growth?
A: Pramod Sagar, CEO, clarified that steel production growth was only 2.9%, not 6-7% as perceived. Shutdowns at key plants and competition from low-priced Chinese imports also affected volumes.
Q: What is the outlook for exports and the impact of geopolitical tensions?
A: Pramod Sagar, CEO, indicated that exports remain weak due to geopolitical tensions, with no significant recovery expected in the next 2-3 quarters.
Q: How does the company plan to utilize its strong cash flows and manage CapEx?
A: Azim Syed, CFO, stated that the company is conservative with spending, focusing on need-based CapEx for efficiency and productivity improvements. They are open to opportunities for strategic investments.
Q: What are the plans for optimizing the Dalmia acquisition and achieving target margins?
A: Pramod Sagar, CEO, mentioned that the focus is on optimizing production and product portfolio across plants. The aim is to achieve 12-13% margins in the long term, with a holistic view of the business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.