IFGL Refractories Limited has informed the Exchange regarding 'In compliance of Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, please find enclosed herewith...
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19th November, 2019
[o � �FRACTORIES LIMITED
Head & Corporate Office 3, Netaji Subhas Road, Kolkata - 700 001, India Phone: +913340106100, Fax: +913322430886 E-mail : ifgl.ho@ifgl.in, Websites : www.ifglref.com
National Stock Exchange of India Ltd 'Exchange Plaza', C-1, Block- G Bandra - Kurla Complex Bandra (E), Mumbai 400 051 CODE: IFGLEXPOR
BSE Limited Phiroze Jeejeebhoy Towers Dalal Street Mumbai 400 001 CODE: 540774
Dear Sirs,
Re: Disclosure under Regulation 30 of SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015
In compliance of above, please find enclosed herewith transcript of Investors Conference Call on Company's financial perf01mance for Q2 & Hl FY2019-20 held on Wednesday, 13 th November,
2019. A copy of this is also being hosted on Company's Website: www.ifglref.com.
Thanking you,
Yours faithfully, For IFGL Refractories Ltd
�� (RAg� Company Secretary
Encl : as above
Formerly known os IFGL EXPORTS LIMITED Registered Office & Kalunga Works Sector 'B', Kalunga Industrial Estate P.O. Kolunga - 770 031, Dist. Sundergarh, Odisha, India Phone: +916612660195,Fox: +916612660173 E-mail : ifgl.works@ifgl.in, CIN : LS l 90 9OR200 7PLC02 7 954
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“IFGL Refractories Limited Q2 and H1 FY2020 Earnings Conference Call”
November 13, 2019
MANAGEMENT:
MR. KAMAL SARDA – DIRECTOR AND CHIEF EXECUTIVE OFFICER – IFGL REFRACTORIES LIMITED
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IFGL Refractories Limited November 13, 2019
Moderator:
Ladies and gentlemen good day and welcome to the IFGL Refractories Limited Q2 and H1
FY2020 Earnings Conference Call. This conference call may contain certain forward-looking
statements about the company, which are based on the beliefs, opinions and expectations of the
company as on the date of this call. These statements are not the guarantees of future
performance and involve risks and uncertainties that are difficult to predict. As a reminder, all
participant lines will be in the listen-only mode and there will be an opportunity for you to ask
questions after the presentation concludes. Should you need assistance during the conference call,
please signal the operator by pressing “*” then “0” on your touchtone phone. Please note, that
this conference is being recorded. I am now glad to hand the conference over to Mr. Kamal
Sarda, Director and Chief Executive Officer, IFGL Refractories Limited. Thank you and over to
you Mr. Sarda!
Kamal Sarda:
Good afternoon everyone. On behalf of IFGL Refractories Limited, formerly IFGL Exports
Limited, I welcome you all to the Q2 and H1 FY2020 Earnings Conference Call. I have with me
SGA, our Investor Relation Advisors.
We had uploaded our investor presentation, I hope you have had a chance to go through it.
I will give you a small brief on the steel industry where we basically serve. The global steel
industry is growing slower than expected for the year 2019 due to various trade war tensions
between US and China and other countries, lower demand and excess capacities consequently
leading to the steep drop in steel prices.
On the domestic front, industry faced headwinds due to slowdown in two key sectors, which
contributes to the steel industry demand. The real estate and the auto industry, both these
industries are going through a severe slowdown. Liquidity crunch in the economy has adversely
impacted the industry. However, lately on the domestic side we are hopeful that due to the efforts
taken by the government, pushing affordable housing and recently announced relief package for
the real estate sector should result into a pick up in the construction activities and resultant steel
demand should increase.
Further India’s decision not to participate in the RCEP which could have seen actually the inflow
of products especially steel from various member countries especially China has provided a sigh
of relief to the domestic steel industry. According to a recent research report, the Indian
refractory industry is poised to become the second largest refractory market in FY2020 outpacing
the US but it is still just 3% of the global market with China being the largest player with over
60% of the market share.
I will move on to give you a brief of the financial performance of Q2 and H1 FY2020.
Consolidated performance levels, total consolidated income for Q2 increased by 1.4% YOY to
223 Crores and for H1 FY2020 it increased by 3.8% YOY to 476 Crores.
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IFGL Refractories Limited November 13, 2019
Consolidated EBITDA for Q2 stood at 26.2 Crores down 16% and H1 FY2020 it stood at 56.4
Crores down 11%. Goodwill write off was 6.7 Crores in Q2 and 13.4 Crores in H1. Consolidated
PAT was 12.5 Crores in Q2 down 9% and for H1 FY2020 it was 26.1 Crores down about 11%.
Consolidated cash profit is 23.3 Crores for quarter and 49 Crores for the half year.
On the standalone performance the total standalone income was 119 Crores up by 9.5% and for
H1 it was 260 Crores up by 13%. EBITDA for the quarter was 17.8 Crores down 14%, for H1 it
was 39.9 Crores down 1.8%. EBITDA margins for the quarter was 15% and H1 was 15.3%. PAT
increased by 3.6% to 7.6 Crores in quarter and up 9.8% in H1 that is 16.2 Crores.
On the international businesses, EI Ceramics the US operations, total income for H1 was $9.8
million almost similar compared to H1 in FY2019. EBITDA was 1.2 million as compared to 1.6
million in the same corresponding period. EBITDA margins were 12.2% for H1 FY2020. PAT
was 0.8 million compared to 1.1 million in the half-year corresponding.
Monocon our UK subsidiary for H1 FY2020 the total income was £14.4 million, EBITDA was
£1.1 million, EBITDA margins were 7.7%. PAT for H1 was £0.8 million.
Hofmann Ceramic, our German business for H1 reported a total income of Euro 4.4 million as
compared to Euro 5.2 million in H1 FY2019 and the EBITDA and PAT were slightly negative
for H1 FY2020.
With this I now leave the floor open for question and answer. Anything I will be happy to answer
that.
Moderator:
Thank you very much. We will now begin the question and answer session. The first question is
from the line of Pankaj Jain from Mahavir Investment. Please go ahead.
Pankaj Jain:
Thank you for the opportunity. Sir, my first question is as the steel prices have reduced, are we
seeing the realizations from refractories also reducing?
Kamal Sarda:
With any kind of reduction in the customer’s front, this will result in a reduction, the pressure to
reduce prices, but what is happening with the slowdown is the competition increasing because
the overall capacity of refractories, the gap between the suppliesf and demand is increasing. So,
there is a pressure on price.
Pankaj Jain:
So, are we seeing a reduction in that price also, like can you quantify it or something?
Kamal Sarda:
It is difficult. It is customer to customer. These are not standard products. These are all tailor-
made products. These are not standard products, so we cannot quantify. For one customer, it
could be said 10% reduction, say for one customer it could be only 2%, for some customer it
could be as high as 25% reduction also.
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IFGL Refractories Limited November 13, 2019
Pankaj Jain:
But this should be a pass through?
Kamal Sarda:
No, I am talking about the actual reductions. There is nothing called pass through here.
Pankaj Jain:
Sir, my second question would be regarding what will be the volume growth for the company in
Q2 and H1?
Kamal Sarda:
I do not have exact figures, but there is a volume growth compared to last year H1 and the Q2
also because we make various products. In some products there is a growth in quantities and in
some products, it is stagnant. Overall there is a quantity growth.
Pankaj Jain:
Sir, any ballpark number if you can share?
Kamal Sarda:
It could be about 5% to 7%.
Pankaj Jain:
Sir, I will get back in the queue. Thank you, Sir.
Moderator:
Thank you very much. The next question is from the line of Siddharth Shah from Harsh Capital.
Please go ahead.
Siddharth Shah:
Thank you for taking my questions. I had a couple of questions. First question is what would be
the company’s current capacity utilization?
Kamal Sarda:
It again varies from product to product, but it could be generally around 60% on an average.
Siddharth Shah:
Do we expect it to increase for FY2020 and FY2021?
Kamal Sarda:
See, as of today it is difficult to predict with the current market conditions.
Siddharth Shah:
Sir, my second question is I just wanted to know the progress of the company with respect to the
capex which has been undertaken by the company across all the plants?
Kamal Sarda:
We have already shared one slide in the presentation. If you go through that slide, we have
mentioned that there are two three projects which are in pipeline, two projects specifically, the
Kandla project and the Vizag project. Kandla is ongoing and we expect that we will start the
commercial production in this financial year and Vizag project we plan to start construction
within this financial year and maybe the commercial production should start by FY2021.
Siddharth Shah:
It is all going on track, right Sir?
Kamal Sarda:
Yes, but maybe a bit slowly, maybe a bit truncated from the originally envisaged.
Siddharth Shah:
Sir, do you think that refractories capacity coming into commissioning in this next two years, it
would create an overcapacity situation in the industry with this capacity?
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IFGL Refractories Limited November 13, 2019
Kamal Sarda:
I think we should not push a panic button as of today. There is a difference between supply and
demand has increased but there is nothing to panic about. It is just a simple slowdown, which
will see a bottom out.
Siddharth Shah:
Thank you so much.
Moderator:
Thank you. The next question is from the line of Dhiral Shah from PhillipCapital. Please go
ahead.
Dhiral Shah:
Good afternoon Sir. Thanks for the opportunity. Sir, my question is does the refractory sector
grows at par with steel production?
Kamal Sarda:
Yes.
Dhiral Shah:
So, for H2 what is the outlook?
Kamal Sarda:
I think you all know better than me. It is difficult to say an outlook, but as of today there is a bit
of a slowdown all across the globe. We do not expect it to improve it so soon at least in this
quarter as well as the next quarter.
Dhiral Shah:
In the opening remarks you said there has been a steel surplus in the world market, so does it
impact the overall refractory demand?
Kamal Sarda:
There is no steel surplus as such. See, the capacity surplus is always there, that is why the people
export to various other countries, China dumping to India, China dumping to US and all those
stuffs, but Indian steel growth is possibly going well. I do not see any problems in the Indian
steel, maybe we are talking of 7% to 8% growth, it could slow down to 6% or 5.5% growth, but it
will continue to grow.
Dhiral Shah:
So, you feel Q3 would be again a laggard but maybe starting Q4 there could be some kind of a
push up?
Kamal Sarda:
Q4 we can expect or we expect slightly upswing there or maybe beginning of the end of
slowdown.
Dhiral Shah:
Sir, lastly with the fall in steel price is there any percentage fall in refractory also?
Kamal Sarda:
I think I answered this question.
Dhiral Shah:
But you didn’t mention the price quantum?
Kamal Sarda:
No, I also mentioned. See, obviously when the steel prices go down, steel production goes down,
the gap increases, the competition increases hence the price of refractory also goes down. This is
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IFGL Refractories Limited November 13, 2019
also one of the reasons why the profitability of maybe not only IFGL the other companies also
would be either flat or lower.
Dhiral Shah:
Thank you.
Moderator:
Thank you. The next question is from the line of Raj Joshi from Ace Securities. Please go ahead.
Raj Joshi:
Good afternoon Sir. Sir, I had a few questions. Sir the first question is how far we have been able
to succeed in the mini mills segment, where Orient holds a strong footprint?
Kamal Sarda:
I would not mention the quantum, but we are doing good there. That much I can say.
Raj Joshi:
Sir, why we have reduced the capex at Vizag from 50 Crores to 30 Crores?
Kamal Sarda:
As I said, we had the industry slowdown so we have tapered down the capex, maybe we can take
it up in one or two years later.
Raj Joshi:
Sir, our EBITDA margin has reduced at both standalone and consolidated basis, so what are the
reasons for the same?
Kamal Sarda:
It is purely the prices going down because of the competition, some input cost increases, there
could be various factors, it has grown compared to the corresponding quarter but it has not grown
compared to the last quarter, the previous quarter. Compared to the previous quarter, we have
come down. So, the volumes have come down in this quarter, not only India, but because we
export more than 60%. The European market and the Middle East market is very, very slow. I do
not know whether you read the news, there is a lot of plants which are either shutting down or
cutting production drastically. So, that has impacted our exports growth.
Raj Joshi:
Sir, regarding the same, do we expect the margin improvement will be there in the future?
Kamal Sarda:
Yes, it is a cycle. It is not that it is going to continue like this. There will be an upswing. It is just
a temporary phase of six months to eight months or nine months or something like that. It will
improve.
Raj Joshi:
Thank you.
Moderator:
Thank you very much. The next question is from the line of Rohan Shah from Parallel Mines.
Please go ahead.
Rohan Shah:
Good afternoon. Sir, I just wanted to know when do you expect our subsidiary performance
Hofmann Ceramic to improve?
Kamal Sarda:
We have done quite a bit, but unfortunately German market is also getting slow, competition is
increasing, so I will not be able to give you a timeframe, but I think we have taken a lot of steps,
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IFGL Refractories Limited November 13, 2019
we are continuously looking at that operations and it is in management’s top most priority to
bring operations back to normal. We are doing a lot of actions there. I hope next half would be
better than the first half.
Rohan Shah:
Sir, my next question would be that is it that we have added any new clients or have we seen any
bad debts from existing clients?
Kamal Sarda:
There are no bad debts from existing clients. The addition of new clients continuously happens, I
would not be able to mention the client, but it is a continuous process.
Rohan Shah:
Thank you.
Moderator:
Thank you very much. The next question is from the line of Rishit Shah from Dhanki Securities.
Please go ahead.
Rishit Shah:
Good afternoon Sir. One question, Within the domestic addressable market what could be
IFGL’s market share?
Kamal Sarda:
In our product group we should be about 10% to 12% or 13% like.
Rishit Shah:
Thank you.
Moderator:
Thank you. The next question is from the line of Priyanka Singh from Atidhun Securities. Please
go ahead.
Priyanka Singh:
Good afternoon Sir. I had a few questions. What is the company’s current working capital cycle
days?
Kamal Sarda:
It would be different for different companies, maybe US is different. I can give you. I do not
have the information. I will ask SGA to pass on this information to you.
Priyanka Singh:
Is the company able to pass on the RM price increase to the customers?
Kamal Sarda:
It always happens. These are all tailor-made products, but also a competitive market. We really
cannot, the competition decides the price. It is not the raw material decides the price. So, it is not
always it is possible, but yes, if it is a steep increase in the next ordering cycle, this is passed off.
Priyanka Singh:
Have you raised any debt or plan to raise any debt for capex?
Kamal Sarda:
We have not raised any debt in the last quarter or maybe last couple of quarters. Yes, for the
expansions we may raise debt.
Priyanka Singh:
That was helpful. Thank you.
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IFGL Refractories Limited November 13, 2019
Moderator:
Thank you. As there are no further questions, I will now hand the conference over to Mr. Sarda
for closing comments.
Kamal Sarda:
Thank you everyone for participating in this investor call. I hope I have been able to answer to
most of your queries. We look forward to your participation. For any queries, which I could not
take here, please contact, SGA, our Investor Relation Advisors or you can contact me. Thank you
very much and have a nice day.
Moderator:
Thank you very much. On behalf of IFGL Refractories Limited that concludes this conference
call for today. Thank you for joining us. You may now disconnect your lines.
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