- Net operating income of 246 crores in the Q3 as compared to 200 crores in the previous Quarter
- EBITDA increased by about 23%
- Other income in the quarter stood at 31 crores as compared to 22 crores in previous quarter
- Net loss reduced to 3 crore in this quarter as compared to 13 crores in the previous quarter
- Net sales in power segment is higher than previous quarter as the hydro electric generating facility in Tawanagar reached its peak generation during the quarter
- Total Debt stands at 660 crore as against 736 crores on 31st march 2016, which comprise of 243 crore term debt & balance on account of working capital loans
- The repayment of debt in 2016-17 comprise 108 crores of which already 91 crores is paid & next year 156 crore repayment is due & thereafter 220 crore of term loan & 160 crore for next year
- Healthy utilization rate of 75% in the Q3 & expect this to continue with an over all utilization rate of 65% for the whole year compared to 55% last year
- Order book for the year 2017-18 is much healthier
- Good Monsoon in Madhya Pradesh has enabled to attain one of the highest generation at the Hydro Electric plant in the first 9 months of the year & expect to end the year with one of the highest generation ever
- Acquisition of SGL will help reduce excess capacities in the world, thus helping the demand from existing large electrode players.
- Added some large customers in the last 12 months
- Initial indications on next years prices of needle coke are indicating an increase due to an uptake in oil prices. The negotiation for needle coke is going on & should be able to conclude soon.
- Availability of cheap power from captive facility has increased the profitability
- Needle coke is purchased on 12 months basis & since the market is going down, there are more inventories with less prices
- Electrodes prices are $3000 per ton due to competition & over supply. Earlier the rate was $5000
- The share of steel from was 30% in 2008 & keeps increasing upto 32-34%. But gradually the market came down to 30% as prices fell much more.
- Consumption of electrode keeps increasing. The production process keeps increasing & therefore the demand is down due to technology.
- After the SDK takeover there will be consolidation in capacity. India is only country which has grown by 6-7% in steel. US, Korea has been flat & Europe is -2.5%, south America is -10%
Steel Industry overview
- World crude steel production growth is mere 0.8% to 1628 million in calendar year 2016
- Steel producing regions registered a positive growth of 1.4% for Asia, 0.8% for CIS, & 7.6% for Middle East
- The Negative growth regions were EU with -2.3%, South America -10.6% & Africa -4.7%
- China produced 808 million tons of steel with growth of 1.2%
- Steel production through Electric Arc Furnace is 28-29%. America continues to produce more than 60% of steel through EAF, Europe will produce 40% & china 25-26%
- The future global demand of steel is going to remain subdued in the current year as well, but due to government measures the domestic demand might increase
- Indian Steel Industry
- India produced 95.6 million tons of steel with growth of 7.4%
- In India Crude Steel production grew by about 8.5% to 72 million tons in the first 9 months of the year
- Indian steel industry continues to be under heavy debt burden
- Steel Imports stood at 5.5 million tons in April to December declining by overall 37% due to various duties imposed by the government of India like minimum import price, safeguard duty, & anti dumping duties
- India expected to become World's second largest producer of steel in 2017 , moving up from the third position, ahead of Japan and USA as steel consumption expected to rise with increased infrastructure construction & thriving automobile & railways sectors
Graphite Industry overview
- One of the industry leaders in graphite electrode named SGL, Germany is in process of being acquired by SDK, Japan. This is a major consolidation in the graphite industry & a big positive factor for future.
- SDK after its acquisition will become the industry leader with the capacity of approx 290,000 tons followed by Brookfield with 160,000 tons & then two Indian producers followed by few Japanese players
- The current capacity utilization of the industry has been up & is in range of 70-75% as compared to about 60-65% in the first 6 months of the calendar year 2016.
- The consolidation of electrode industry should help in price recovery & margin improvements.
- Uptrend in the Electrode prices & also in the demand. Overall electrode demand in India is 45-50000 tons
- Graphite Electrode
- Demand for graphite electrodes has started picking up. Inventory correction taking place at customers end.
- Electrode prices have bottomed out. Expect an uptrend in the near future.
- Raw material prices are also slated to go up.
- HEG order book for FY 17 healthier than previous year. Export as well as domestic sales by
- Volume expected to be higher than FY16.
- Order building process on for FY18. Trend looks to be positive .
- Average Steel output to increase by a mere 0.5% p.a. between 2016-2020, significantly lower than the 2.5% p.a. achieved during 2011-2015
- Average Steel consumption to increase by a mere 0.4% p.a. between 2016-2020, significantly lower than the 2.8% p.a. achieved during 2011-2015.
- China has pledged to cut about 150 mmt of capacity by 2020, approx 13% of the capacity, mainly some of the very old plants producing low quality Steel
- Shutting down of steel capacity in china, unlikely to change global situation & is not going to bring material change to the global demand-supply equation of the commodity