USHA MARTIN LIMITED Usha Martin Limited
Q4 & FY23 Earnings Conference Call Transcript
May 03, 2023
Moderator: Ladies and gentlemen, good day and welcome to Usha Martin earnings conference call. 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 an operator by pressing '*' and then '0' on your touchtone phone. Please note this conference is being recorded.
I now hand the conference over to Mr. Anoop Poojari from CDR India. Thank you and over to you, sir.
Anoop Poojari: Thank you. Good morning everyone and thank you for joining us on Usha Martin Q4 and FY23 earnings conference call. We have with us today Mr. Rajeev Jhawar- Managing Director of the Company, Mr. Anirban Sanyal - Chief Financial Officer and Ms. Shreya Jhawar from the Strategy and Growth team of the Company.
We hope all of you have had the opportunity to refer to the earnings documents and the investor presentation that we shared with you earlier. We would now like to initiate the call with the opening remarks from the management following which we will have the forum open for a question- and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward looking in nature and a disclaimer to this effect has been included in the earnings presentation.
I would now like to invite Mr. Rajeev Jhawar to make his opening remarks.
Rajeev Jhawar: Good morning everyone. On behalf of the management team of Usha Martin I would like to welcome you all to our earnings conference call. Our goal is to hold such forums regularly in the future with the aim of increasing transparency and building a stronger relationship with the investors and analyst community.
Given that this is our first earnings call, let me give you a brief overview of the Company and our strategy going forward after which our CFO - Mr. Anirban Sanyal will run you through the key financial highlights.
Usha Martin is one of the world's leading manufacturers of specialty steel wire ropes with over 60 years of experience. The Company offers a wide range of products including specialty wire ropes, high quality wires, LRPC,
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customized end-fitments, accessories, and related services. These products are used in industries such as oil and gas, ports, cranes, elevator, mining, fishing, renewable energy, construction and infrastructure and general engineering, among others.
The Company has manufacturing facilities in India along with plants overseas in Thailand, UAE and the United Kingdom. Our business model is primarily to stock and sell through our own distribution centers worldwide in Southeast Asia, Australia, Europe, US, UAE and also do some direct sales from the plant. We have dedicated service centers where we provide value additions such as cutting, socketing, testing, inspection and so on. The Company also has a global R&D center located in Italy, where it designs wire ropes using proprietary software.
In the past, Usha Martin was involved in the steel making business which was impacted due to the severe downturn in the industry and high leverage of the Company. To overcome these challenges, we undertook divestment of the steel business by way of a slump sale. It is important to note that the Company never defaulted, did not go for debt restructuring and there was no haircut by any of the lenders. This exercise enabled the Company to significantly deleverage and turnaround our financial and operational position. While it was a tough decision at that time, this helped us transform from a commodity business to a value-added high ROC business in which:
- One: We are able to grow our margins and profitability despite the volatility in commodity prices that is our raw material basically the steel.
- Two: The barrier to entry in the industry are high because of the long customer approval cycle and critical applications. As some of you know, wire ropes are highly engineered products that need to meet the highest standards of reliability and performance.
Now, with the renewed focus on the specialty wire rope business, Usha Martin has undertaken strategic initiatives to enhance its production capacity for wire ropes, diversify its product range, restructure its cost, secure its raw material sources, and strengthen its financial position. I will briefly highlight some of the key focus areas of Usha Martin at present:
- First, complete the modernization and capacity expansion plans that are focused on high value products such as mining ropes, non- rotating crane ropes, compacted ropes, plasticated ropes among others.
- Second, grow in international markets, by specifically targeting geographies where we have a low market share.
- Third, leverage our Brunton Shaw UK premium brand to continue to secure businesses from premium customers and OEMs.
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- Fourth, focus on digital initiatives to improve our operational efficiencies and enable closer collaboration between our various subsidiaries.
- Finally, double down on ESG initiatives across all plants with safety as the utmost priority.
Most importantly, we will continue our strong focus on being financially prudent.
Post the turnaround and stabilization of our business, we adopted a new dividend policy in FY22. I am delighted to share that the Board has recommended a healthy dividend of Rs. 2.5 per share for FY23, amounting to a total cash flow of Rs. 76.2 crore after taxes. Our commitment to all shareholders remain strong, and our Board will continue to prioritize a balance between investing in the business to pursue growth opportunities and rewarding shareholders through dividends.
In conclusion, I would like to say that Usha Martin has successfully navigated its past challenges and has made substantial progress in the last 3 years. Today, we strongly believe that Usha Martin is in a very exciting phase. We are confident that the Company is well placed to capitalize on the significant growth opportunities which our industry has to offer. We look forward to your continuing support in our journey that we believe will create long-term sustainable value for all our stakeholders.
With this, I would like to hand over to Mr. Anirban Sanyal, our CFO, who will take us through the operational and financial highlights for the quarter ended 31st March 2023. Thank you.
Anirban Sanyal: Thank you and a very good morning to everyone. I will now briefly take you through the Company's operating and financial performance for the quarter and year ended 31st March 2023.
The consolidated net revenue from operations stood at Rs. 855 crore in Q4 of FY23 as against Rs. 767 crore in Q4 of FY22. The Company achieved a 11.6% year-on-year increase in revenue during the quarter, primarily due to the improved realizations. We believe that our strong focus on value-addedsolution-oriented offerings in both India and the overseas market has largely contributed to the overall improvement in realizations.
Operating EBITDA for the quarter registered a healthy 44.3% increase on a year-on-year basis at Rs. 154 crore. Operating EBITDA per ton improved to Rs. 32,063 in Q4 FY23 registering a strong 65.9% year-on-year increase. Our operating EBITDA margin for Q4 of FY23 increased to 18% compared to 13.9% in Q4 of FY22. This margin improvement is largely attributed to our ongoing strategic focus on expanding our presence across diverse critical
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applications and value-added offerings in segments like mining ropes, oil and gas, crane ropes, etcetera. Additionally, our EBITDA performance showcases the strength of our business model and the robust pass on mechanism for raw material costs that we have in place.
Usha Martin sustained efforts to improve the product portfolio and some of the other key strategic initiatives largely enabled it to register a 55.8% year- on-year increase in PBT performance excluding the exceptional income of Rs. 31.2 crore recognized in Q4 of FY22.
On a full year basis, net revenues from operations were at Rs. 3,268 crore as against Rs. 2,688 crore in FY22. The wire rope segments contribution to total revenues rose to 67% in FY23 compared to 61% in FY22. It is important to note that within the wire rope segment, the value-added segments shares rose to 65% in FY23 from 59% in FY22. Going forward, we aim to increase our contribution from value-added products and reduce the share of low value offerings.
Also, our international business accounted for 55% of our FY23 consolidated revenue compared to 51% in FY22. Further, revenue from our international operations registered a healthy 34% year-on-year increase. The Company views international markets as a significant growth opportunity and aims to enhance its penetration in those markets moving forward.
Operating EBITDA stood at Rs. 513.3 crore for FY23 which was up 33.8% from the corresponding period. Profit before tax for FY23 registered a strong 44.5% year-on-year increase excluding the exceptional income of Rs. 31.2 crore recognized during Q4 of FY22. Profit after tax for FY23 stood at Rs. 351 crore registering a 20.3% year-on-year increase.
On the balance sheet front, our net debt stood at Rs. 185 crore as on 31st March 2023. The Company has been able to deleverage and derisk its balance sheet significantly since the divestment of its steel business and is now in a position to support the Company's growth initiatives. We are also focused on optimizing our working capital by reducing the cash conversion cycle.
Overall, given the healthy demand outlook for our products and our dominant position within the sector we are confident of further improving upon these results going forward and at the same time continue to remain financially prudent.
This brings me to the end of my address. I would now request the moderator to open the line for the Q&A session. Thank you.
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Moderator: | Thank you very much sir. Ladies and gentlemen, we will now begin the | |
question-and-answer session. We take our first question from the line of | ||
Aman Kumar Sonthalia from AK Securities. Please go ahead. | ||
Aman Sonthalia: | Sir so far so good; sir I have a few questions regarding the future of the | |
Company. So, the major turnarounds seen in European business with | ||
business and profit rose from £50 million to £71 million and profit from £2.5 | ||
million to £8 million. This is really amazing growth seeing the recession in | ||
Europe. So sir just wanted to know how sustainable this growth is and from | ||
where we will get the next level of growth in Europe. | ||
Shreya Jhawar: | So, as you mentioned the European subsidiary UMIL has shown tremendous | |
growth in this past year and the reason for such disproportionate increase, | ||
we have about three or four key initiatives that we have taken. One is our | ||
organization structure. So, all our international subsidiaries are now | ||
organized under one unified leadership and they do not work in silos. Earlier, | ||
Europe was managed by a separate management. Two, is that Brunton Shaw | ||
which is our plant in the UK has performed really well. Previously, they would | ||
source their raw materials from other European sources, but now Brunton | ||
Shaw primarily buys their wires and strands from our Indian plant. So, there | ||
is a strong raw material linkage which has formed within the Company that | ||
really helped the UK plant. Third, what we have done is we have rationalized | ||
our cost structure and overheads in the European entity that has helped a lot | ||
this year. And four, and a very important one is that we have had | ||
breakthroughs with some premium customers in OEMs in the region through | ||
a strong technical support by our global R&D center which is located in Italy | ||
and we really expect to benefit from this over the next 2 to 3 years as well. | ||
The efforts have started this year, but over the next 2 to 3 years we really | ||
expect the results to continue to play out. | ||
Aman Sonthalia: | Sir which are the sector in market the Company foresee as having the best | |
opportunity to grow and what are the steps the Company is taking to | ||
capitalize to achieve the growth in this sector? | ||
Shreya Jhawar: | So, the major sectors that we see as providing our growth is mining, cranes | |
and oil and offshore segments and the focus of the CAPEX programs that | ||
we have as well in the Company cater to these sectors. Especially the oil and | ||
gas and renewable energy sector specifically offshore wind in Europe is | ||
booming right now and we expect it to show us tremendous growth. Mining | ||
sector growth opportunities as well are visible in Australia, Americas and | ||
South Africa and other than these segments one of the focus areas in terms | ||
of markets for us is both North and South Americas especially in segments | ||
such as cranes, elevator, fishing and mining as well. | ||
Aman Sonthalia: | What is the Company's ability to pass on the raw material prices like steel, | |
coal to the customers? | ||
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Usha Martin Limited published this content on 08 May 2023 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 08 May 2023 17:13:04 UTC.
