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Vardhman Special Steels Limited Q1 FY25 Earnings Conference Call Summary
Key Financial Highlights • Sales Volume: Over 50,000 MT • Revenue: Rs. 415.78 crores (up 1.32% YoY) • EBITDA: Rs. 48 crores (up 31.71%) • PAT: Rs. 26.08 crores • Annual Target: On track for 210,000 tons of steel
Operational Insights • Stable Operations: Ongoing capacity expansions and planned shutdowns for revamping. • Raw Material Prices: Increased by 8-10% in Q1 but have since decreased. • Green Initiatives: Focus on solar power project to reduce CO2 emissions.
Investor Inquiries • Greenfield Plant: Ongoing discussions, no final decision yet. • Pipe Gas Benefits: 40-45% price reduction by sourcing from GAIL. • Power and Fuel Costs: Slightly lower than previous year, expected to remain sustainable.
Pricing and Collaborations • OEM Pricing Negotiations: Costs decreased by 8-10% in the current quarter. • Aichi Steel Collaboration: Progressing positively with ESG initiatives.
Export and Production Strategy • Exports: Currently 10% of total sales, focusing on Southeast Asia and Europe. • Production Target: Aiming for 210,000 tons despite a planned one-month shutdown.
Job Work and Capacity • Job Work Volume: Estimated 25,000 to 30,000 tons with lower margins. • Billet and Rolling Bar Capacities: 2,60,000 tons of billets can yield approximately 2,30,000 tons of rolled products.
Market and Industry Outlook • Demand Growth: Optimism due to expansions by major automobile manufacturers. • Impact of EVs: Lower EV penetration projections suggest continued growth in ICE vehicles.
Competitive Edge and Sustainability • Technical Know-How: Association with Vardhman group and Aichi. • Electric Arc Furnace Production: Lower carbon emissions compared to competitors. • Green Steel Production: Exploring solar power, potential long-term benefits.
Conclusion • Management Optimism: Expectation of better margins and volumes through green steel practices and sustainability initiatives.
Vardhman Special Steels Limited Q4 FY24 Earnings Conference Call Summary
Conference Call Overview • Date: May 2, 2024 • Moderator: Deepika Murarka, Choice Equity Broking • Key Participants: • Sachit Jain (Vice Chairman and Managing Director) • R.K. Rewari (Executive Director) • Sanjeev Singla (CFO) • Soumya Jain (Executive Director) • Format: Business overview, financial performance, Q&A session • Reminder: Call recorded; may contain forward-looking statements
Company Transition and Growth Strategy • Transitioning into a growth phase after consolidation • Celebrated 50th anniversary with a one-for-one bonus • Plans for a second plant and expansion strategies • Focus on sustainability and becoming a leading green steel producer in India • Carbon footprint reduction goals: 0.7 tons to 0.2 tons per ton of steel
Financial Performance and Investments • Significant capital expenditure: ~140 crores for capacity expansion • New CAPEX of 33 crores for environmental measures, R&D, and maintenance • Production capacity increase from 260,000 tons to 285,000 tons over two years • Updated EBITDA guidance for FY 2025-26: Rs. 8,000-11,000 per ton
Market Demand and Export Projections • Current demand landscape: temporary slowdown in tractor sales, growth in car segment and construction steel • Anticipated exports for FY24: 16,000 to 17,000 tons • Focus on quality standards for clients, with full production impacts expected in FY26-27
Q&A Highlights • Other Income Outlook: Consistent with previous year; current operations only • Greenfield Plant Development: Early discussions ongoing, cautious approach • CAPEX Funding: Additional 33 crores funded through internal accruals, payback in two years • Billet Capacity Improvements: Targeting 285,000 tons by 2026-27 based on market demand • Expense Increases: Attributed to higher job work charges and electrode prices, expected to continue • Electric Arc Furnace Challenges: Higher costs but environmentally friendly; unique market conditions in India • Sourcing Scrap Steel: Shift towards a circular economy benefiting steel producers • EBITDA Margin Concerns: Recent high margins not sustainable; ongoing price negotiations with OEMs • Solar Plant Savings: Projected annual savings of Rs. 5 to 15 crores, operational by December 2024
Future Outlook • Pending CAPEX of ~380 crores; potential incremental debt but maintaining debt-to-equity ratio below 0.3 • Projecting volumes of 220,000 to 230,000 tons for FY25 • Bright bars capacity increase from 48,000 to 60,000 tons over three years • No immediate equity raise needed, but potential dilution for future projects • Focus on internal improvements to maintain profit margins • Optimism about future opportunities in green steel and strategic partnership with Aichi
Vardhman Special Steels Limited Q3 FY24 Earnings Conference Call Summary
Operational Highlights • Equipment Upgrades: Two shutdowns for upgrades to increase rolling production capacity by 10,000 tons per annum. • Capacity Expansion: On track to expand steel-making capacity to 260,000 tons per annum. • Carbon Footprint Improvement: Reduction from 0.82 to 0.68 metric tons of CO2 per ton of steel.
Financial Performance • Q3 Tonnage: Slight increase compared to the previous year; stable revenue. • EBITDA Impact: Affected by prior year adjustments and price reductions. • Sales Target: Aiming for 200,000 tons despite a 6% sales decline in Q3.
Q&A Highlights • Blended Realization: Stable at INR 85,000, influenced by raw material prices. • Sales Improvement Plans: Enhancing process flows and increasing capacity to meet market demands. • Maintenance and Capacity Management: Planned maintenance to avoid disruptions; exports increased to 10%, targeting 25-30%.
Industry Demand and Exports • Automobile Sector Growth: Positive signs for steelmakers; exports to Aichi Steel on track. • New Expansion Plans: Capex projects expected to complete by mid-next financial year, funded mainly through internal accruals.
Export Sales and Market Focus • Export Increase: From 5% to 10% due to new customer acquisitions; pending approvals from Yamaha and Musashi. • Automobile-Centric Focus: Evaluating opportunities in electric and non-electric vehicle markets.
Pricing and Financial Guidance • Pricing Negotiations: Recent price adjustments noted; 2% decrease in raw material costs. • EBITDA Guidance: Expected between INR 7,000 to INR 10,000 per ton; potential 8-10% increase in sales volume projected for next year.
Sustainability Initiatives • Environmental Commitment: Solar power project to supply 40% of energy needs; focus on circular economy and reusing scrap steel. • Competitive Strategy: Strong customer relationships and product quality while adapting to sustainability trends.
Future Outlook • Export Goals: Aim for 25% of turnover from exports by FY27. • Market Conditions: Positive outlook on financial health and operational efficiencies.
Conclusion • Optimism for Targets: Management expressed confidence in meeting sales and operational targets. • Session Closure: Call concluded by the moderator, thanking participants.
Vardhman Special Steels Limited Q2 FY24 Earnings Conference Call Summary
Key Highlights • Price Adjustments: Successful negotiations with major OEMs. • Gas Supply Transition: Shift to GAIL pipeline for gas supply. • Collaboration: Ongoing partnerships with Aichi and Suzuki for steel substitution. • Financial Performance: • Marginal revenue increase. • Stable PAT compared to Q1. • EBITDA per ton within expected range. • Future Outlook: Optimism for price increases in H2 FY24. • Sustainability Commitment: Focus on reducing carbon emissions through renewable energy initiatives.
Q&A Session Insights • Approval Process: • European OEM approval takes about a year. • Initial samples sent to Japan for processing. • Price Trends: • Price reduction of INR 5,000 to INR 6,000 per ton in Q2. • Anticipated price increases in Q3 due to rising industry costs. • Volume and EBITDA Concerns: • Ongoing volume consolidation expected to improve EBITDA. • Need for predictable pricing mechanisms with OEMs.
Local Sourcing and Market Positioning • Local Production: Efforts to substitute imports with local production. • Aichi Steel Stake: Aichi's stake in Vardhman expected to increase from 11.4% to around 20%. • Focus on Auto Sector: Sole focus on the auto sector due to anticipated capacity constraints.
Market Dynamics and Future Projections • Resilience of Auto Sector: Products are service-oriented, less affected by global price fluctuations. • EBITDA Guidance: Estimated between INR 8,000 to INR 9,000 for H2 FY24. • Solar Power Initiative: Plans to shift 50% of power needs to solar by early 2025. • Rolling Mill Capacity: Expected to exceed 50,000 tons with planned capital expenditure of INR 160 crores.
Capital Expenditure and Raw Material Prices • Capital Expenditure Impact: INR 160 crores to enhance rolling mill capacity. • Raw Material Prices: • Shredded scrap prices: $100 to $410. • Local scrap prices: INR 37,500 to INR 38,000 per ton.
Electric Vehicle Market Perspective • EV Adoption: Slower than forecasts; hybrid vehicles seen as more viable. • Current Supply: 7-8% of steel supplied to the EV market, expected to increase. • Financial Overview: • Rise in other expenses due to lower revenue and increased job work charges. • Exports account for about 5% of revenue.
Conclusion • Positive Outlook: Commitment to improve results moving forward, with a focus on manufacturing investments in India.
Vardhman Special Steels Limited Q3 FY23 Earnings Conference Call Summary
Key Financial Performance • Sales Volume: Increased by 3.5% to 46,358 tonnes. • Revenue: Rose to INR 400 crores from INR 360 crores YoY. • EBITDA: Increased by 22% to INR 49.74 crores. • Nine-Month Sales: Totaled 150,000 tonnes, aligning with the annual target of 195,000 tonnes. • Revenue Growth: Up 28% to INR 1,312 crores.
Strategic Initiatives • Greenfield Project: Ongoing discussions with Aichi. • Export Volumes: Expected to rise to 15,000-25,000 tonnes in FY24 and 30,000 tonnes by FY26. • Production-Linked Incentive (PLI): Anticipated benefit of INR 30 crores over five years.
Business Model and Focus • Specialty Steel Products: 70% of sales from the automotive sector. • Sustainability Goals: Low carbon footprint of 0.85; aim for net-zero emissions by 2050.
Capacity Expansion Plans • Rolling Capacity: Targeting 230,000 tonnes. • Melting Capacity: Aiming for 250,000-260,000 tonnes within two years. • Brownfield Expansion: Estimated cost of INR 250-300 crores, financed through internal accruals and some debt.
Market and Demand Insights • Cautious Expansion: Prioritizing quality and systematic planning before scaling up. • Annual Sales Guidance: On track despite quarterly fluctuations; targeting around 210,000 tonnes for FY '24. • Passenger Vehicle Contribution: Expected to rise from 38% to 45-50% with new capacity.
Competitors and Future Outlook • Main Competitors: Mukand and Sunflag Iron & Steel. • Operational Improvements: Focus on reducing operational costs and enhancing sustainability initiatives.
Conclusion • Management Confidence: Positive outlook on demand and operational direction, with ongoing efforts in environmental initiatives and partnerships.