CONFERENCE CALL - from Capital Marketa
Carborundum Universal
Expects FY’17 consolidated performance to be better than FY’16
Carborundum Universal held its conference call on 5th May 2016 and was addressed by K Srinivasan Managing Director
Key Highlights
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Of the total consolidated sales, about 24% business comes from Russia and EU, around 7% from US, around 6% from Middle East and Africa, 10% from SEA and Australia and rest around 53% from Indian Operations.
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There was a translation loss of around Rs 158 crore in sales in FY’16.
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Abrasives demand remained strong in domestic market. No price increase in Abrasives was seen in FY’16 and almost entire growth of around 9% is from volumes and better product mix. As per the management, the trend continues to remain positive. In International business of Abrasives as per the management, more inroads have to be made in Russia and in China.
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For Abrasives about 75% business comes from Indian operations. Abrasive growth generally is around 1.5 times the GDP of the company. Overall, the basic consumption growth continue to happen, so Abrasives will continue growth
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Ceramics and Refractory business was lower by around 3% in FY’16 at consolidated level, as no major projects are happening and hence the ceramics and refractory business continue to struggle. There were some smaller projects and replacement demand which led to some orders, but for this segment to shape up, investments need to happen and green field projects need to come on stream. Metalized cylinder business demand continues to remain strong but not upto the expected line.
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In Electro Mineral Division (EMD), consolidated sales were flat at around Rs 731 crore largely due to translation impact. The profit increased to Rs 127 crore from Rs 79 crore in FY’15 largely due to lower losses from South African subsidiary. The entire restructuring exercise in South Africa is complete and there will be no impact in FY’17 of any losses as everything has been booked.
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During FY’16, around Rs 100 crore is capitalized rest around Rs 80 crore is in WIP. The benefit of capacity addition will accrue in every quarter of FY’17.
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Consolidated Debt equity ratio is around 0.26
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More than 20 IP filed during FY’16 for future growth. Some of the IP are product and many are processes. These IP’s are largely in EMD and Industrial Ceramics business. These IP’s are mostly, active IP’s and they will be employed in the company’s business
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Management expects a significant growth scope of sales of Ceramics and Abrasives in US market, given the lower base and expected growth opportunities in US.
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The company received around Rs 40 crore benefits of lower fuel costs in FY’16 which was more or less a translation gain impact on conversion of power costs in Russia. Actual benefit of fuel costs was around Rs 6 crore from India.
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No more captive manufacturing plant in China. But the entire manufacturing will be done through dedicated vendors to whom the company has outsourced. Management expects Chinese business to grow in FY’17 and China will come out of losses in FY’17. Loss for FY’16 from Chinese subsidiary stood at around Rs 11 crore.
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Management expects higher sales growth in FY’17 as compared to FY’16 growth of around 11% at standalone level. At consolidated level, due to currency and other volatility, it’s difficult to predict, but the growth will definitely improve and management expects better performance than FY’16.