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Last Updated : May 19, 2015 01:17 PM IST | Source: CNBC-TV18

Uptick in US steel prod to aid growth: IFGL Refractories

Going forward Pradeep Bajoria, MD, IFGL Refractories is hopeful of things turning around for the steel industry in FY16.

Pradeep Bajoria, MD, IFGL Refractories while speaking about the weak fourth quarter numbers in an interview to CNBC-TV18 said the growth was not as bad as it looks especially with rupee appreciating against euro and pound and hike in steel prices. However, the last year was an exception because of drop in steel production in the US and war situation in Ukraine.

If both the above situations were to improve that is US were to hike production and there would be some calm in Ukraine then it would be possible to grow at 15 percent, says Bajoria.

Going forward he is hopeful of things turning around for the steel industry in FY16 and is bullish on Indian steel industry.

He also clarified that the drop seen in the margins was mainly due to strengthening of rupee versus the euro and not due to high raw material costs and going forward the company has taken steps to get back to earlier margins using alternate raw materials and cheaper energy costs, he adds.

The consolidated net profit fell 46.9 percent to Rs 8.37 crore on 3.8% decline in net sales to Rs 192.75 crore in Q4 March 2015 over Q4 March 2014. Profit after tax was down 18 percent at Rs 5.9 crore for the quarter versus Rs 7.32 crore in the corresponding quarter of FY14.

The company manufactures specialized refractories, having facilities in Brazil, China, Germany, India, UK and USA. Krosaki Harima Corporation (a subsidiary of Nippon Steel Corporation, Japan) is the technology provider.

Below is the transcript of Pradeep Bajoria’s interview with Anuj Singhal and Ekta Batra on CNBC-TV18.

Anuj: Looks like a bad quarter and a bad year for you. What went wrong and what is the outlook for this year?

A: I don’t think last year was very bad keeping in mind the situation of the steel industry and also the rupee appreciating against the euro and pound, we did well to maintain, we grew our top-line marginally.

In fact it would have been even better but for the last quarter when there was a sudden dip in steel production in the US. Due to strong US dollar there has been massive imports from China which we hope gets corrected next year but I would say the main factor the steel industry is not in a good position we hope that by next year steel will turnaround and we will see a remarkable improvement.

Ekta: Your margins were significantly lower for Q4 as well as for the entire fiscal. Just give us a sense in terms of what your key raw materials are and where exactly did you see the spike and what can we expect in terms of raw material costs going into maybe the first half of FY16?

A: The margins have dropped not because of raw material prices going up but because of strengthening of the rupee against the euro. Rupee which was trading at 83 against euro dropped to 67-68, so that affected our margins. However, going forward in the coming year we had taken steps to go back to the earlier margins by using alternate raw materials, also the cost of energy has come down and some other raw material prices have dropped, so next year we see a better performance.

Anuj: What about the top-line itself, it is quite anaemic in terms of the kind of growth that you saw for full year? What kind of outlook will you have for that?

A: It is very difficult to give an outlook today especially keeping in mind about the uncertainty in the US and also the war situation in Ukraine. If these two improve, then we expect the margins to grow by about 10-15 percent but it will depend a lot on the steel industry going forward how it shapes up.

Moreover, we have appointed the ex-CEO of RHI, one of the leading refractor manufacturer in the world and he has been an out and out market man and he will be heading all our global operations based in Europe, so he should be able to bring in a significant improvement in the coming years.

Ekta: Do you expect maybe FY16 to show a growth in terms of total sales as compared to FY15, if so, by how much, would it be in single digits so that is up from one to nine percent or maybe nine to 15 percent, what would it be?

A: As I mentioned, we are targeting a growth and we have plans for growing but that will depend a lot on what the situation is in America because American steel production has dropped and that must pick up and also the Ukraine war situation must improve, and the Ukraine plants must reopen. We are also very bullish about the Indian steel industry and hopefully from the second quarter we see a surge in the Indian steel industry.

So, if all that happens, then to achieve a growth of 15 percent is very easy. The order book which we have for India today can improve by at least three to four crore a month if all the plants start operating to capacity, there is a lot of dormant capacity in India which is just not operating at present. If things change, to have a growth of 15 percent would be quite easy.

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First Published on May 19, 2015 12:05 pm
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