Good Luck Steel Tube posted healthy Q4 earnings and the company expects to perform better with new capacity, better product mix and new product launches going forward. Discussing the earnings, MC Garg, CMD, Good Luck Steel said the company is focusing on value added products. He is expecting a 20-25 percent growth in topline in and 25 percent growth in bottomline in FY16.
Below is verbatim transcript of the interview:
Q: Your margins have now improved with that 8.5 percent mark. We understand that you are also shifting your focus now to some higher margin products. So, is this growth in your operational efficiency now sustainable for you and what is the kind of upside that you see in your margins?
A: Definitely, because we are continuously adding value added products. Our more emphasis is on high value added products sent to the sophisticated markets. Auto tube forging and structured division are doing very well.
We are adding new fields in solar as well as railways which will start giving the revenue next year. That means the year ’15 and in year ’16-’17 there should be considerable revenue. We expect a 20-25 percent of growth in revenue as well as 25 percent growth in bottom-line.
Q: So that is the outlook, 20-25 percent revenue growth and a 25 percent jump in the profits as well. The company is also looking to expand their presence in the international markets. Could you tell us what percentage of your revenue comes from the international markets and how much will it?
A: It is roughly 35 percent last year. It had almost been a flat growth in exports, in spite of terrible recession in exports market, we have been able to maintain our bottom-line on exports, the revenue. And next year exports should grow faster. The products that we are adding will definitely give a boost to exports. We have been an export company for last 20 years.
Q: Did you see 35 percent growth in exports? Or it is how much it contributes to your revenues?
A: No, 35 percent of the total revenue.
Q: What is the growth in exports?
A: We are expecting at least 20 percent growth next year because we are expecting Europe to come out of the trouble. Therefore, the flat growth has been in spite of the trouble in Europe. And we are expecting that Europe troubles will be over now and we expect a good turn around in exports next year.
Q: One question on your taxes, this time around, your tax paid is just about Rs 64 lakh odd, so why is it that in Q4 it is so low? And even for the entire year your effective tax rate is just 23 percent, could you explain that to us a little bit?
A: We had an expansion and project expansion so that we got the benefit of a development rebate from government as of now and that is why our tax outflow is lower. In fact we have paid the minimum alternate tax (MAT), the actual amount of tax will be lower even because we have done a expansion of almost Rs 100 crore which was done, commissioning of the plant was done in record nine months which has resulted in a lot of saving of tax to the company in the last financial year.
Q: How much will your capacity go up by in FY16 and could you walk us through the balance sheet position of the company?
A: I expect the capacity to go as much as the output is growing. The capacity realisation of the new plant will be ramped up fully in the next financial year.
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