Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Usha Martin Ltd (BOM:517146, Financial) reported a resilient financial performance with a 13.6% year-on-year increase in net revenue for Q2 FY25.
- The Wire Rope division, a core segment, showed strong performance with a 19.2% year-on-year revenue growth, contributing 73% to overall revenues.
- International markets contributed 55% to total revenue, indicating strong global market penetration.
- The company is focusing on higher value-added products, maintaining an operating EBITDA margin of 18% in Q2 FY25.
- Ongoing expansion efforts in Ranchi and Thailand are expected to enhance performance, supported by investments in digitalization and automation.
Negative Points
- The LRPC segment faced challenges, reporting a 6.7% year-on-year decline in revenue.
- Despite a strong product mix, the EBITDA margin slightly decreased from 18.4% in Q2 FY24 to 18% in Q2 FY25.
- There was a slight increase in net debt, attributed to ongoing CapEx initiatives, with net debt standing at INR127 crores as of September 2024.
- Working capital deterioration was noted, with increased inventory and debtor days, partly due to the Red Sea crisis affecting transit times.
- The company faces pricing pressures in certain segments, impacting margins despite efforts to maintain them through product mix enhancements.
Q & A Highlights
Q: Despite an enriched product mix in Wire Ropes and lower LRPC volumes, why are EBITDA margins lower quarter-on-quarter and year-on-year?
A: Shreya Jhawar, Strategy & Growth: We've faced pricing pressures in general-purpose and plain ropes. However, due to our enhanced product mix, we've maintained EBITDA per tonne at INR32,000 and margins at 18%. Our focus is on value-driven volume growth, with Wire Rope volumes up 19% year-on-year.
Q: How should we view EBITDA per tonne moving forward, especially with new CapEx?
A: Rajeev Jhawar, Managing Director: We aim to maintain current levels. As global and Indian economic conditions improve and new volumes increase, we expect operating leverage benefits, potentially leading to gradual upward movement in EBITDA per tonne.
Q: There's been a deterioration in working capital due to inventory and debtor days. How should we interpret this for the full year?
A: Rajeev Jhawar, Managing Director: The Red Sea crisis has increased transit times, affecting inventory. We've taken major actions to address this and expect gradual improvements in coming quarters.
Q: With increased wire rod costs and freight rates due to the Red Sea crisis, how will you manage these challenges?
A: Shreya Jhawar, Strategy & Growth: We have wire rod inventory to manage costs in Q3. Freight rates have peaked and are decreasing. We pass on 60-70% of freight increases to customers, though some costs are absorbed.
Q: Can you provide an update on the synthetic sling project?
A: Rajeev Jhawar, Managing Director: The synthetic sling plant is under commissioning, with trial production expected this quarter and a soft launch in Q4. The market is promising, and we anticipate significant progress next year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
