How is the management quality at HEG? It is a LNJ Bhilwara Group company.

Edited by valuepicks - 19/Jul/2011 at 4:19pm

Conference Call      
          HEG
Full capacity commercial production in the Mandideep plant by Q3 FY 12


HEG held a conference call on 8 November 2011 to discuss the Q2 and H1 FY 2012 financial performance of the company. The call was addressed by Manvinder Singh Ajmani, Chief Financial Officer of the company.

Key takeaways of the call are as follows
Net sales grew by 7% to Rs 319.17 crore in Q2 FY 12, while the PAT stood at Rs 13.54 crore against the PAT of Rs 29.74 crore, down 55% in the corresponding period last year. Interest cost remained stable due to competitive borrowing arrangements

Margins in Q2 FY12 fell by 460 bps to 13.8% due to higher domestic raw material cost and adverse forex movement on working capital borrowing. Import prices of needle coke in USD remained stable but rupee depreciation resulted into higher costing.

Revenues from the graphite electrode segment grew by 7% to Rs 312.98 crore in Sep 2011 quarter due to the operating momentum maintained on account of better capacity utilization, increasing volumes during the quarter and growth in the steel production through the EAF route

The PBIT declined by 50% to Rs 20.10 crore from Rs 40.37 crore. The margins show the impact of higher domestic input costs and rupee depreciation on working capital borrowings.

The company reported a forex loss of Rs 11.6 crore in Q2 FY 12

The company expects the volumes to improve going forward.
The company expects up trend in the electro prices in CY 12

Needle coke prices remained stable but the other raw material cost were significantly higher

Continued order booking on average rolling 3-6 months basis. The company has 100% order booking for the quarter and has orders for the coming quarters as well. It has also done some booking on improved prices.

Revenues from the power segment grew by 25% to Rs 56.58 crore influenced by the generation related cost as it increased on account of higher input prices and higher contribution from the hydel power plant at Tawa.

The company has three power plants under operation with a total capacity of around 77 MW. Two thermal plants at Mandideep (30 MW + 33 MW) and one hydroelectric power plant at Tawa (13.5 MW).The thermal plant operations are normal and the power generation started on time at Tawa
The two thermal plants at Mandideep provide cost effective and dependable power supply throughout the year, coal linkages received for thermal power plants support operations

Phase 1 of the capacity expansion of graphite electrodes from 66000 TPA to 80000 TPA at the plant in Mandideep, which commenced in March 2011, is operational from Q1 FY 12. Full capacity commercial production is expected to be operational by Q3 FY 12. The expansion is anchored by the revival in demand growth of graphite electrodes due to higher production of steel through the EAF route
An investment of about Rs 275 crore has been earmarked for the expansion and the total expansion capex is being funded through debt and internal accruals

The current net debt of the company is Rs 1125 crore
Capacity utilization was at high level i.e. over 80% in Q2 FY 12 and expected to maintain a high rate going forward.

Needle coke requirements for CY 2011 have been adequately booked and thus assured supply of needle coke continues for CY 11. Negotiations for needle coke for CY 12 to be completed in Q3 FY 12.

The company has a strong presence in the international and domestic markets and the main focus will be on market expansion

During 9M CY 11, the world crude steel production was higher by 9.7% y-o-y as per world steel association.
World steel demand is expected to increase by 5.9% in 2011 and by 6% in 2012

Continued growth trajectory expected for steel produced through the EAF route. As per initial data for 2011, world wide EAF steel production has come back very close to its peak level of 2007 and is expected to go beyond it in 2012.

Buy back of fully paid equity shares at a price not exceeding Rs 350 per share was announced in Q4 FY 2011. So far, it has been completed to the extent of 99%. Total buyback is not to exceed Rs 67.5 crore i.e. 9.95% of total paid up capital and free reserves as on 31st March 2010. The last date of buy back is 13 March 2012.

Edited by shontou - 12/Nov/2011 at 8:47pm