AIA Engineering Ltd

My research notes on AIA. Have picked few points from this thread as well & credit goes to respective persons -
@rajpanda, @aveekmitra, @hack2abi, @punitm306

PRODUCTS
High Chrome Mill internal products that are used for crushing/grinding

Cement
The company supplies - grinding media, shells liners & diaphragms for this industry.

Tube MIll Parts
Following diagram explains the usage of various tube mill parts -

Vertical Mill Parts
The company provides grinding rolls for vertical mills. The company claims to have improved abrasion properties of these rolls resulting in cost savings. The company claims to have improved metallurgy of grinding rolls in following client mills - Loesche, Polysius, Atox, E, Raymond, CE

The company also provides - HRCS castings & crusher parts.

Mining

Tube & Rod Mill Parts
The company provides grinding media, inlet/outlet head liners, shell liners & diaphragms in this segment. The parts are customized for different metals that are being mined.

A similar assortment of products is provided for power sector as well.
Also company provides services like - Mill Audits, Installation Supervision, Mill optimization etc.

Grinding media needs to be replaced every 30 days whereas liners need to be replaced every 2-3 years.

INDUSTRY & CUSTOMERS
Cement
AIA is global supplier of mill parts in cement industry in Europe & North America.
In FY11, company started supplying vertical mills parts to China cement industry.
The global demand of high chrome mill internals for cement is pegged at 0.3 million tonnes per annum.
The global client list includes - Holcim, Lafarge, Heidelberg, etc

The company serves the cement industry in domestic market as well.

Mining (60%+ revenue)
AIA supplies mill parts to Iron, copper, gold, platinum & zinc mines in various counties like USA, Canada, Brazil, South Africa, Australia, Philippines. The global replacement demand in mining industry is pegged at 3 million tonnes per annum & only 10-15% of the demand is converted into high chrome.

The focus of the company in mining industry is predominantly outside India. The company sells products to companies like - Rio Tinto, Anglo American, BHP Billiton, Vale, Arcelor Mittal, etc.

Utility
Company also serves coal powered thermal power plants in India.
The list of customers include - NTPC, SEBs, BHEL, Doosan, L&T, Hitachi, Alstom etc.

SALES & MARKETING
Worldwide presence in 120 countries through front end marketing companies.
S&M Commission Expenses - 20Cr+

COMPETITION
Magotteaux – 350K MT, Anhui – 12K, Estanda – 8K, Christian Pfeiffer – 7K
Manpower cost too high for foreign players, freight cost is not an issue.

Forged players also form competition & falling forge prices pose challenge.

STRENGTHS

  • Replacement products - these products are repetitive in nature as against one time nature.
  • Stickiness - Once customer moves to chrome (takes 2-3 years), they stick with chrome due to tangible/intangible benefits.

RISKS

  • Lower commodity prices poses a question for survival of various metal mines. This also naturally holds back investments from mines. But on the other hand, increasing RM prices can hit OPM.
  • The major growth driver for growth in company is exports markets. This seem to have slowed down in FY15, FY16. (Need to figure out why?)
  • If some other technology other than high chrome metallurgy provides mill parts with longer life/lower cost, that would be disruptive.

SUBSIDIARIES

  • Welcast Steels Limited (71% stake)
  • Vega Industries (Middle East) FZE, U.A.E.
  • Vega Industries Ltd., U.K.
  • Vega Industries Ltd., U.S.A.
  • Vega Steel Industries (RSA) PTY Ltd.
  • Wuxi Weigejia Trade Co. Limited, China
  • DCPL Foundries Ltd.

GROWTH AXES/ENABLERS

  • Conversion to high chrome parts
  • Mines for newer metals
  • Geographical expansion in India & Abroad
  • Commodity upswing

MANAGEMENT
Bhadresh K Shah - Managing Director, B. Tech Metallurgy, IIT, Kanpur
The company seems to be one man army riding out on the talent & skills of Bhadresh K Shah - an IIT graduate. His age is 60+ & prudent succession planning is required for future growth of the company.

Mr. Sanjay Majmudar, Independent director
Independent director yet quite hands on.

Dr. S Srikumar, Director
Common director with powertec & company uses powertec services.

Yashwant M. Patel, Whole Time Director
Closing in on 70, salary is just 7-8 lacs. Can’t figure out - what does he bring to table? wisdom?

Mr. Kunal Shah, Executive Director, Finance
Working in company in last 14 years. Intelligent but very direct in communication.

NUMBERS

MISCELLANEOUS

  • The legal & consulting expenses are consistently high - 10Cr+ since FY10

AR FY10

  • Added 22 new customers in cement business
  • Started supplies to - Platinum mines in South Africa, Iron ore mines in Brazil, Copper mines in Africa, Gold mines in Far East.
  • 45 - 55 sale ratio for India - Outside India
  • FII + Mutual Funds already hold 30%

AR FY12

  • OPM shrank from 24% to 21% mainly due to increase in raw material cost (447 Cr → 580 Cr) & 31% increase in other expenses (373 Cr → 489 Cr – 20Cr more purchases + 37Cr more in power & fuel)
  • The capacity of cement industry domestically stood at 300 million tonnes per annum
  • It seems to me that some accounting method has changed in this FY. The numbers vary across two annual reports in Raw Material, Loans & Advances etc. Raw material example shown below. (Ask CA??)

FY11 RM →

FY12 RM →

AR FY13

  • Joint venture with Polyex Minerals Private Limited on 50-50 basis. The goal is to establish a Silca Sand Refining project with capacity of 2L MT. This will help in backward integration & procurement of quality sand on continuous basis.
  • Another instance of mismatching numbers between AR FY13 & AR FY12. In FY12 AR, exchange loss in consolidated financial statement is 8 Cr. The exchange loss for FY12 as per AR FY13 is 55 Cr.
  • Award of Damages in Patent matter by District Court of 3924.02 - Nashville, Tennessee U.S.A. (US$ 7228544.64, INR - 39Cr), which is disputed by the Company.

AR FY14

  • Operating margins significantly expanded in FY14 on the back of reduced RM cost (39% to 35%) & reduction in other expenses (40% to 33%)
  • The patent matter dispute in USA of 39Cr seems to have resolved without any payment. Perhaps, this is one of the reasons legal fees had spiked to 19 Cr in FY13.

AR FY15

  • Margin expanded again due to inventory expense going from +70Cr to -100Cr.

AR FY16

  • Margin expanded again on the back of reduced RM cost from 39% to 32%

The pro-investment points in AIA engineering are -

  • Very sharp managing director
  • A very large opportunity size in converting mill parts from forged to high chrome
  • Repetitive nature of business
  • Capacity expansion to 4.4L TPA with utilization around ~2L TPA
  • Clean balance sheet with negligible debt through expansion.

The risks in investment thesis are as follows -

  • The stock is well discovered (32% holdings by FII + MF) & richly valued.
  • The growth in export business has slowed down which was major growth driver

Disc - No investments at this point

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AIA engineering results out -

ink

Link - http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/13B235D6_F558_40B3_B8DE_5EC3944D7AD0_131430.pdf

  • Very flattish sort of results on 9M basis & PAT is up more than sales due to other income. RM cost climbed up faster than sales on 9M basis.
  • Very good results for Q3FY17 on Y-o-Y & even Q-o-Q basis

Regards,
Rupesh

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Sharing here for the benefit of all interested, the Q3FY17 Conference Call Transcript which was held the day before. I have transcripted this myself from the conference call recording and there may be errors, so please be careful about the factuals, and confirm all figures with the management.

Q3FY17 ConCall Transcript.pdf (255.9 KB)

Q3FY17 Conference Call Recording: Dropbox - File Deleted

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Thank you. Management sounds bullish.
Here is a link from barron’s on AIA
http://www.barrons.com/articles/aia-engineering-shares-can-grind-20-higher-1488939558

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Thank you for uploading good stuff, grinding media application explain in simple words.
Disclosure: No any holding in AIA

AIA Engineering: A long term investment that may gain from shift to Electric Vehicles

By 2030, purchase of ICEVs (Internal Combustion Engine Vehicles) will completely stop as they will enter a vicious cycle of increasing costs, decreasing convenience and diminishing quality of service. - Tony Seba in Rethinking Transportation 2020-2030. (1)

EVs (Electric Vehicles) require more copper wiring than standard internal combustion engines. For example, the battery in an electric car contains about 38 kilograms of copper, 11 kilograms of cobalt and 11 kilograms of nickel, according to Glencore. Those materials, along with manganese, stand to benefit from more demand for electric cars, Glasenberg said. (2)

EVs will influence the demand for metals:

Today’s conventional ICEV contains about 20 kg of copper. Hybrids use about 40 kg, an average PBEV (Pure Battery EV) requires about 80 kg, four times the amount of a conventional vehicle. Today there are about 1.1 Bn light vehicles globally, about 1 million are EVs. By 2035, we should see 140 million EVs or 8 % of the total 1.8 Bn fleet. Building the EV fleet will use about 11m tonnes of copper. Subtract the amount that would have been used in the conventional vehicles ‘displaced’ by EVs, and that figure comes down to about 8.5m tonnes of genuine new demand — equivalent to more than a third of total global copper demand today. (3)

Other LME commodities should benefit from these trends. Although lithium gets a lot of press for its role in batteries, nickel, manganese and cobalt, (in that order) will see more volume growth in our view. Aluminium will also continue to benefit from the push to make cars lighter. But the combination of market size, diversified demand and long-term supply constraints make copper the pick for our portfolio. (3)

(The above estimates by BHP are their mid case scenario while the high case scenario expects the 2035 EV fleet to be double of the mid case scenario. Different studies have different estimates of the future penetration of EVs in the global fleet. Some being conservative and some being aggressive. What is certain today is the direction of disruption, the speed of disruption is anyone’s guess.)

Thesis is dependent on:

1.) Shift from ICEVs to EVs materializes (Cost of EVs should be below ICEVs for mass adoption)
2.) That Taas (Transport as a Service) does not significantly reduce the number of vehicles needed globally, car ownership shifts from individuals to fleets.
3.) Durability of EVs does not extend the life of a vehicle immensely. (Elon has mentioned a million mile electric drive train, which has no value for an individual owner who drives on average 10k miles per year but will have immense value for a fleet owner providing TaaS.) (4)
4.) Grid Scale and Residential Scale Energy Storage Requirements due to intermittent renewable sources of energy.
5.) Charging Infrastructure Requirements.

How to benefit from the long term Copper Demand Pick Up?

One play would be to directly invest in copper miners, producers, refiners but being a commodity play it is difficult to time the investment for me. A better way in my perspective is to invest in the suppliers of copper miners who are indispensable to the mining industry. Suppliers of mining equipment should benefit but the maximum benefit should be seen by providers of consumables to miners.

Grinding media consumables was a commodity low margin business globally (Forged grinding media is a highly competitive mature industry with little technological barriers to differentiate) until it was disrupted by the likes of HCGM (High Chrome Grinding Media) suppliers such as Magotteaux and AIA Engineering.

How May AIA Engineering Benefit:

The best part about grinding media business is its consumable nature which leads to repeat demand. To sweeten the deal with declining ore grades, the per tonne consumption of grinding media increases over time as more ore needs to be ground to extract the same quantity of refined mineral. With the added tailwind of boost in global copper demand for the next two decades, AIA Engineering should do good business.

The current scenario is that the 9MFY17 volumes were at 156000 tonnes of which 97000 tonnes were from mining, 9MFY16 volumes were at 132000 tonnes of which 72000 tonnes were from mining. Current mining opportunity in grinding media is at 2500000 tonnes per annum of which 15% has been converted to HCGM from FGM (Forged Grinding Media) by the two HCGM suppliers. (From Q3FY17 Investors Conference Call).

Their main targets in the mining industry are copper and gold producers but the company does not track and provide individual breakdown of volumes and revenues from different ores. The management is currently aggressively targeting to make the HCGM the mining industry standard by volume at all cost.

The company has accumulated a war chest of 1100 cr in cash with little debt to help them scale up manufacturing capabilities as and when required.

Long Term Risks:
1.) Threat of substitution of Copper by Aluminium in electrical application.

2.) Revenue from thermal power stations will have diminished by 2030, if the renewable energy revolution plays out.

3.) Any future changes/advances in the grinding media technology, similar to forged GM being replaced by High Chrome GM could disrupt the company.

Disclosures:

1.) Invested.

2.) This is a personal opinion which may contain inherent biases and blind spots that may not be possible to correct from my vantage point. Please do your own research and form your own opinion before investing, this is not a stock recommendation. This information is being shared to facilitate collaboration. Any opposing views that may arise from a different vantage point and thought process are welcome to enhance my understanding.

3.) I refrain from talking about the most important part, the current valuations, as it is difficult to accurately gauge with sufficient margin of safety, that whether the current valuations and the inherent expectations built in the price account for how much of the future growth and business opportunity.

References:

1: https://www.rethinkx.com/transportation/

2: https://www.bloomberg.com/amp/news/articles/2017-05-16/glencore-says-electric-car-boom-is-coming-faster-than-expected

3: https://www.ft.com/content/84b3fa1c-9ee8-11e6-891e-abe238dee8e2

4: https://www.tesla.com/blog/three-dog-day

4: https://www.rethinkx.com/blog/2017/5/11/is-teslas-lead-bigger-than-we-think

PS: I understand that the future copper demand pickup can be played in many ways other than the ones mentioned above. I would request everyone to keep your responses relevant to the AIA Engineering thread where this is being posted. Any new discussion on other ideas can be started in a new relevant thread on VP.

17 Likes

Good research Abhinav…And thanks…

The Q4FY17 Conference Call Recording

http://bit.ly/2rnrNQZ

Use either of the links to download the file.

Global High Chrome Steel Grinding Media Balls Market 2017 Growth with Current Size, Trends Analysis & Forecast till 2022 ( http://www.ndmcolumns.com/global-high-chrome-steel-grinding-media-balls-market-2017/ ) Do you have this report? please share it.

Magotteaux had initiated a lawsuit against aia in end of May. The claim is for usd60M. Any updates or comments?

Some news on the anti-dumping duty in India for grinding media from Thailand and China.

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Annual Report FY 2016-17
http://www.aiaengineering.com/fiancial_reports/ANNUALREPORT16_17.pdf

It is well known that after Lithium, Cobalt has a major role to play in batteries made for EVs. This article suggests that Cobalt is a by-product of Copper mining, which if true may benefit AIA.

This research is in preliminary stage and will have to research the entire Cobalt production value chain to determine how much of it is from sourced from Copper mines and whether AIA’s grinding media is used before or after the Cobalt has been extracted from the copper ore.

If anyone related to a mining background, or related experience is reading this please do share your knowledge with us.

Q1FY18 Conference Call Recording

http://bit.ly/2uGBOXu

Use either of the links.

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I have been trying to get competitive picture for AIA and following are some notes ->

To read up, I chose one competitor which supplies Steel Grinding Balls (Molycop) & other from High Chrome Grinding balls (Magotteaux).

MOLYCOP
Molycop is probably largest producer of Steel/Forged grinding media balls in the world. The have installed capacity of 1.7MT and sales of about 1MT. If AIA is trying to convert forged media mills into high chrome media, they would be going after some of the customers of Molycop. Molycop has manufacturing facilities located in Chile, Peru, Mexico, USA, Canada, Indonesia and Australia. it also fully owns two steel mills - one in Canada named AltaSteel and another one in Australia named Waratah.

Molycop also has grinding rods as products which are used in rod mill. I need to check whether AIA makes such an product and whether high chrome rods would provide similar efficiency. Also about 15% of world’s mineral extraction (for gold, copper, iron) happens in Russia (no surprise). Also Latin America, especially Chile also seems to be big mining center along with other geographies in America, Africa.

In 2016, Molycop developed new grinding media balls by the name Moly Cop NG aimed for SAG (Semi Autogenous) grinding mills. The company claims that these balls have higher impact & spalling resistance resulting in overall lower consumption. In some experiments, it seems like consumption reduced by 13% in low/mid impact environments and 20% in high impact environments.

Molycop was actually a subsidiary of Arrium group and it was sold for $1.2bn to American Industrial Group as a part of restructuring plant.

AIA is currently valued 1.5bn$+ and close to ~2bn$. The capacities and business of AIA is at much lower scale compared to Molycop.

MAGOTTEAUX
Magotteaux is an 100 year old company founded in Belgium. The company was acquired by Chilean company named Sigdo Koppers listed in Santiago, Chile in 2011. The company has following capacities in tonnes - High Chrome GM (300,000), Low Chrome GM (55,000), Forged Steel GM (55,000), Castings (66,000). Apart from this, the company has JV with South African company named Scaw which has capacity of High Chrome GM of 100,000T. The company has 15 production units located in USA, Canada, China, Brazil, Thailand & Belgium.

The company had reported full year sales of ~629mn$ in CY16 (692mn$ in CY15). The EBITDA of company went down from 80mn$ to 63mn$ in same period. This was mainly due to product mix being skewed towards low margin products.

If feels like company has reasonably strong R&D department and company spends on average about ~6mn$ on R&D. One can read about various technical innovations done by the company on their website & reports. One interesting thing I found is something called as Metal Matrix Composite (MMC). In this it seems that, some high waer resistant alloy is mixed with other material like Ceramic. The resultant product seems to have wear resistance higher by 3-4 times. This technology seems to have been developed around 1990s and it feels like game changer. I would love to know more from technical experts in this area.

The company formed a JV with chinese steel Supplier named Xingcheng to supply forged grinding media balls.
http://www.magotteaux.com/group-news/strategic-alliance-production-commercialization-forged-grinding-balls/

The products and mill overview pages of Magotteaux are simply beautiful. I learned a few things from them ->
Wiki -> http://www.magotteaux.com/wiki-mag/
Mills -> http://www.magotteaux.com/customers/

Now some questions in my mind -

  • Both Molycop and Magotteaux seems to have decent institutionalized R&D. I haven’t found something similar for AIA. Would be great if someone with metallurgy background can comment on this (quality of research, impact, risk etc.)
  • The forged grinding players are also not static while AIA attacks their customers. As shown by Moycop NG, even forged media products can be innovated to reduce end consumption. This along with RM price cycles and difference between chrome vs. steel means it is not so straight forward for AIA to win and keep customers. They migt have to sacrifice margins.
  • One reason for competitiveness of AIA vis-a-vis Magotteaux seems to be the fact that all the plants of latter are in high cost geographies barring Thailand (50,000 capacity). I have not done research on cost competitiveness of Thailand. Although I could not find financial breakdown for Magotteaux, but AIAs cost advantage might be primarily in employee cost (around 5% of sales). If Magotteaux opened plant in India or other low cost geographies, wouldn’t that change the game?
  • Both Molycop and Magotteaux are not simply grinding media/mill parts players. They provide more products along the milling/cement pipeline. Would such ability to provide complete solutions has any advantage?
  • Ferro Chrome prices and Currency Fluctuations remain two most important risks for AIA as demonstrated in last 2 quarters.

A lot of information about other competitors is publicly available. Those invested and interested can go through those and share any interesting findings. (Competitors - ME Long Teng Grinding Media, Gerdau, Donhad, Scaw, Arcelor Mittal, Metso and many more)

Disc - No investments.

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Adding a few verbatim notes from previous conference calls, related to the subject of AIA’s competitive intensity and business model. These are just highlights and please go through the entire conference call to get a more informed view.

Competition from Incumbents: Incumbents cannot do anything other than reduce costs, they are operating in high cost geographies. And we believe we are creating a product category, so there is no comparison with forged players. Nobody likes losing market share but that has been the story for every single kilo we have sold. We face same pressures when we were a 50000 tonne company and face the same now.

Margins have gone down due to higher raw materials. It has to passed on next quarter.

Entry Barrier for Molycop to enter HCMI space: Not a business where you setup a line and start producing. You have to build an ability to deliver solutions, your ability to find the right combination of metallurgy, application knowledge and design. You have to try it out at the end of the customer. And you cannot sell to the customer until he is convinced that you are selling the right solution to him. Entails a huge knowledge which is not a recipe but something that you have assimilated over years. This is business of extreme micromanagement at every level. All the key client in 125 countries expect just in time deliveries. Not a product which you can sell through dealers, wholesalers and retailers. Our own people have to be in front of the customer no matter their size. The whole business model is extremely difficult, entry barriers are many. It is a long term relationship business where small small entry barrier assimilate to form large entry barriers. Molycop has no problem putting out a CAPEX, the problem here is that how will they change their business line and do something they have never done before.

Inventory: Only produce on order, we do not produce anything in anticipation. So buildup of inventory not possible. Buildup is not because we have produced and not able to sell. When we get a new account, we need to keep supply of few months.

Business Model: Our whole business model is about converting miners from forged to high chrome. Nowhere in our business plan do we figure at what currency we will convert what. Our BM is that we have a much superior solution tailor made to the client’s needs, that helps them in reducing their wear cost, improving their process efficiencies, improving their throughputs and yields, and reducing the cost of expensive reagents and highly polluting chemicals. We take 6-12 months to develop a solution, demonstrate that it works for the mine. The wear rate we are talking about is 50%,100% and 200% wear rate reduction. So we are talking about structural fundamental savings rather than savings from currency rate at 64,65, and 68. We do not track at what currency rate how much profitable we are. The impact of the currency is marginal and manageable.

When currency moves, we revise our price in the next order, in the past we have been able to pass on variations with a lag of one or two quarters. Today, structurally our focus is on market share. There is an entry level pricing pressure, our customer of big mine expects us to offer a much superior product at a price that is comparable to forged. We have to explain the benefits, we start with a lower price and gradually scale up the price to get back to normal margins. It is a function of the cycle and the maturity of the relationship with the client. These are very very long term clients, once a client is on board generally no one moves back to previous solution.

Definitely impact of currency is their, but we have the wherewithal and the ability inbuilt in the business model to pass it on and normalize over the period of time.

Ferro chrome prices shot up from 65/kg to 100/kg. We will pass it on in FY18. Currency is also unfavorable at 64.58, but these are short term effect which we will adjust in over a period of time.

Business cannot be tracked on a QoQ basis as mining cycles, commodity cycles, new business development is a time consuming endeavour. No trend setting can be spotted in quarterly figures. We take 18 months to gain a new customer, once we gain a customer, in our history we have never lost a customer, forget about one quarter.

Total Addressable Market: The total addressable market of 2.5-3 million tonnes is according to today’s forged figures. Over the last 4-5 years we have been talking about the same figure, there is no organized statistic available, this is our internal estimate. There could be 25-30% theoretical reduction as we penetrate the market, the current penetration is 10-12%, let us assume in the next 5 years we reach 30%, there would be a theoretical reduction by 20-30-40% in the total addressable market. But by that time we would have targeted newer ores, market is growing at 2%. Suppose we reach 50% penetration, we will not see an impact in our endeavour to take new market. It will not impact us until we reach significant market share. There will be new solutions for new set of ores.

Manufacturing Competitiveness: The plant in GIDC, Kerala is the most modern plant in the world, there isn’t any such plant even in Europe.

Difference between forged and high chrome price is around 20-40% depending on chrome content. It is like comparing a normal bulb with LED bulb, there is a payback, you get significant life out of it. It depends on total cost of ownership. We have 30-40% market share in high chrome.

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Nicely covered. I had done a presentation on the AIA in Bangalore VP forum. Attaching the same for reference. https://drive.google.com/open?id=0BwopyxfitAx0OGRIUXhJa3QxNUU

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@Prash good presentation. Do you have such presentation on Vinati Organics or other companies. Please share it for awareness

H2FY18 Notes on Investor Presentation & Conference Call

Investor Presentation:

Production & sales similar to yoy and qoq. RMs costs increased. EBITDA margin at 24% vs 35% yoy. Volume increase from mining. 110k tons against 99k tons H2 last year. H1 CAPEX is 61 cr, guiding H2 to be 120 cr.

Guiding incremental volume growth of 40k-50k tons per yr from FY18 onwards.

Bagged new LT order from Barrick Gold group of 18k MTPA

Order book 656 cr.

Conference Call:

Revenue does not reflect increased tonnage due to FOREX and RM adjustments to prices.

Took 2.5 - 3 years to get Barrick gold order. Has good potential upside. Is a 3 year order. This is new order from an earlier client. Intermittently we have supplied to Barrick. Our entire GM consumption for cement in India is around the size of the Barrick order. So this is a prestigious event. This Barrick volume is next year. Even thought the contract is LT, the price adjustment is revisited every 2 quarters. In mining there is a tendency to have LT contracts. So there is volume clarity, but we will not lock in the price. This order is for Americas.

Many spot orders should change to LT. Pricing products very aggressively. Miners want to operate within their budgets. For few more quarters margins will remain range bound.

Our model has the wherewithal to provide good margins at higher volumes. But time will tell.

We may reach 225 -230k tons this year against guidance of 240k.

We believe incremental 40k-50k ton growth is comfortably achievable.

Collaborative research efforts are bearing fruits.

There are much more tailwinds in orders next year. Quite a few more customers which will become LT.

RM & currency are very volatile. We are trying our best to pass through.

We cannot give margin guidance as above and new tonnage is being added. Difficult to predict the mix.

Tax will be at 30-31%.

FeCr is very volatile. No point even discussing its effects.

HCMI is 20-40% is more expensive than forged depending on Cr content. Not adding any more commodity mining. Enough to gain from Cu and gold.

When we entered mining we decided to enter sectors where Cr was already in use and serviced by Magotteaux. This was a low hanging fruit. Once we got that, we moved to conversion of forged to HC.

We were ourselves climbing up the learning curves. Mining segment needs very custom solutions, no mine is same. Cement the clinker is standard world over. With mining we had to develop our domain knowledge. We started doing more research. We shifted our selling approach from cost based to cost + value added. Where if we target only cost saving, a 10-15% saving in a process that is insignificant to the whole operation, will not convince a miner to shift product. So we looked at more value addition, benefits that FeCr brings to the process. Like improvement in recoveries, reduction in use to hazardous chemicals like cyanide. Where salinity is very high, it leads to corrosion, there FeCr fares better. We have not mastered everything, but we have grown.

We are focusing on bigger sized grinding balls. We are focusing on areas where we have distinct advantage. We have the confidence internally to see sustained growth for the next 5-10-15 years because the market is huge.

Before the miners who were not ready to even talk to us, are not giving us a very serious consideration to the value addition we are bringing to their operations. There is a qualitative shift that has happened over the last 2 years.

Plant manager is completely empowered to take decisions based on yield, cost, throughputs. Winning one mine gives us nothing more than the first meeting at the same groups other mine. Conditions are vastly variable mine to mine. We like that it takes time, but it gives us the stickiness.

Till H1 last year currency was in my favor. Nothing is more relevant than FeCr. We had 5-7% benefit from these 2. Now they are going against us. ST impacts are there, but generally we try to move to a more comfortable position in LT.

We have better visibility now on volumes going forward. We will review in 19-20.

Since last year, currency, FeCr and shipping rates have hit these 2 quarters. We will pass on these cost pressures in future. These variable going against us can go in our favor in future also.

Seeing very good, very very good traction. We see tremendous acceptability in large size 50-90 mm. So much so that we have stopped segmenting internally, it is a normal process now. Primary GM is more than 50%.

Margins are a function of the life cycle of the relationship with the customer.

Still trying to make inroads into Chile.

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Such kind of actions, could have impact on AIA as it produce grinding media 100% in India and export to other countries.