Manufacturer of graphite electrodes and graphite specialties HEG Ltd announced the Financial Results for the period ended March 31, 2013 on May 3. It posted a net profit of Rs 35.14 crore in the fourth quarter.
Manufacturer of graphite electrodes and graphite specialties HEG Ltd announced the financial results for the period ended March 31, 2013 on May 3. It posted a net profit of Rs 35.14 crore in the fourth quarter.
Manvinder Singh Ajmani, Head Corporate Strategy, HEG says that the company's EBITDA margins have been better this quarter largely on better volumes and better realisations on export front.
Going forward, he believes EBITDA margins will remain somewhere in the same territory between 16-20 percent for FY14. The company is taking steps to imporve operations costs.
“We hope to deliver better performance going forward” he told CNBC-TV18.
Below is the verbatim transcript of his interview to CNBC-TV18
Q: Could you tell us the factors behind your Q4 earnings? Going forward what is the kind of margin trajectory that we can expect?
A: The EBITDA margins have been better this quarter largely on account of volumes and some better realisations on our export front. Overall the EBITDA is about Rs 307 crore.
Fourth quarter EBITDA has been higher because of the fact that we have had good volume realisation. They are marginally short by about 500 tonnes than the same quarter last year. Hence the marginal gap in the EBITDA.
Q: Can you explain margins as well as the total EBITDA is lower for Q4 compared to the year ago. What would be the reason for the lower EBITDA performance?
A: There has been a slight gap in the volumes vis-à-vis Q4 last year vis-à-vis Q4 this financial year. So, yes we sold less.
Q: You expect that to get corrected in the current quarter?
A: Given the steel scenario worldwide we do see some pressure on the volumes going forward. EF, which is our principal customer sector, will also have its own share of pressures. While we expect that we will continue to be able to maintain above industry capacity utilisation rates – this year we have done approximately 75 percent.
We hope to continue to do that and compare this with the graphite majors of the world which are presently operating at close to 65 percent. We are ahead of the industry and we expect to continue to remain so.
Q: Finance costs have gone because your EBITDA is Rs 73 crore still you end up making a profit of only Rs 35 crore and that too with a help of a bit of forex gain. Anything you are working on in terms of reducing this finance cost? Any timeline you have in mind?
A: The overall finance cost is in a fairly reasonable territory. We have incurred some debt in the prior years primarily to fund our expansion from 60,000 to 80,000 tonnes. Due to market conditions we have been unable to utilise significantly this additional capacity.
Once the volumes improve we will be able to bring down the overall costs. Even at the present stage our finance costs relative to our debt is in a fairly good territory. It is in sub 5 percent ratio.
Q: Give us some guidance for FY14? How much might you do in terms of total revenues? This time you stood at Rs 1600 crore or thereabouts. How much might your revenues grow? Where might your margins stabilise?
A: We expect that the EBITDA margins will remain somewhere in the same territory between 16-20 percent. Depending upon on how the steel sector pans out particularly in second half of the financial year. In terms of quantities and volumes we expect that we will do close to about 75 percent.
However, we also expect that prices of graphite electrodes have shown some softening trend. They are likely to be largely offset by the price softness in our principal raw material that is in needle coke. So, overall that effect should get neutralized and we should be able to stabilise and may be even improve margins.
We are taking steps on the operating improvements, which is a major focus area for us. We hope to deliver better performance going forward.