Analyst Meet / AGM - Analyst Meet
Expects to do volume of around 21500 MT and net sales of around Rs 350 crore for FY'17
The company held its analyst meet on 23rd May 2016 and was addressed by Mr. Vijay Kumar Executive Director and CFO
Key Highlights
For Q4 FY'16, export volume was down by around 40% to around 1300 MT due to postponement of orders from the key customer. The domestic volume was down by around 4% due to softness in manufacturing sector and capital goods output. Overall, the volumes were lower by 19% to 4889 MT.
Total volumes for FY'16 stood at 19654 MT and were lower by around 8%. Exports accounted for around 29% of volume sales while rest is domestic sales volume. On volume wise, domestic volumes increased by 3% to 13936 MT while export volumes were lower by around 28% to 5717 MT. Management expected a double digit volume growth in exports for FY'16; however delay and deferrement of pickup of orders by GE, the key customer, led to the decline in exports. On value wise basis, domestic sales were lower by around 1% to Rs 168.80 crore, while export sales were lower by around 15% to Rs 140 crore.
Significant decline in export volumes particularly the high value addition business of stator frame exports, higher employee expenditure due to ramp up of Pune factory along with continuation of existing manpower costs at Coimbatore factory, obsolete high costs of inventory of around Rs 3.5 crore, VRS expenditure of Coimbatore factory of around Rs 2 crore and a onetime separation costs of Rs 44 lakh and lower realization of scrap sales; all affected the Ebidta margin which hovered around 6% in FY'16 as compared to an anticipated Ebidta margin of around 13% for FY'16.
Higher working capital cycle due to lower demand and higher inventory holdings also resulted in higher interest costs to the company.
Management expects the situation to improve gradually.
Lot of restructuring exercise has been taken by the management, which will start yielding results in FY'17. Manpower costs have been rationalized; the running employee costs and other expenditure are less in Pune factory, company is cleaned up with its obsolete inventories, scrap price from henceforth will be included as an item under PVC clause with certain customers and ad hoc rate increases can happen during the year of contracts unlike in the past etc.
Further commodity prices looks to be bottomed out but a steady price or a rising raw material price is good for the company. As per the management, the export business has stabilized and now will rise only from here. High margin stator frame exports area also returning slowly.
The company has a net debt of around Rs 144 crore as on Mar'16 and management expects the debt to come down going forward as not much capex is aimed at.
On export front, due to high inventory that GE was carrying, it slowed down its consumption. However by end of Mar'16 based on client interaction, GE will clear off its inventory and will once again start its normal run rate of around Rs 200 crore in FY'17.
The company is working further with GE and Alstom, both of which have won combined contracts worth of around US $ 5.6 billion from Indian railways towards supply of new locomotives for modernization. GE will provide Indian railways with 1000 diesel locomotives over next 11 years and will invest around US $ 200 M in plant and maintenance sheds in a deal worth US $ 2.6 billion.
Management expects robust growth from domestic and exports market in FY'17. All the costs saving measures together with higher volumes will lead to an Ebidta margin of around 12% for FY'17. Management expects a volume of around 21000 MT for FY'17 and net sales of around Rs 350 crore.
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