Conf-call notes.
- 7-8% volume growth in this year (due to slowness in EU)
- Customer demand in q2 was low due to EU
- Indian type companies export demand is down
- OP margin – EBITA margin last Quarter was unexpected (not normal and won’t hit that anytime in the future)
- 18-19% normal margin for this business
- Volumes are lower – production cost goes up (- 100bps in this quarter)
- Increase in energy cost also high (doubled)
- As Volumes pick up, margin will pick up
- Chennai within budget – no extra money , Machines will come in and trail by March 2023
- Production slowdown in Thailand (10 days shutdown), Nothing in India
- Michelin only for Indian plant near Chennai – bulk approval. Starting in current Quarter (Q3)
- Thailand steel prices low , so can export from both Thailand and EU
- Tyre chords space ? – No plans , We continue to explore the possibilities
- No new announcement of bead wire competition setting up new facilities
- Indian tyre market will go up as auto cycle is going up
- Bead wire demand is down due to exports going very slow (EU, geo-issues, energy crisis)
- Korean companies dependent on china , but want alternate supplier , 3 tyre companies in discussion
- 6-8 months for new customers to sign up in EU (if that happens)
- Sumitomo exports 55% to US from Thailand, Type production as big as India. 70-80% exported outside Thailand
- India business – Steel prices falling , falling market RM advantage comes in next quarter. Carrying some inventory from higher RM sourced earlier.
- Domestic demand has not picked up in China, bead wire demand is low.
- Volumes from Thailand – Existing capacity is under – utilised , Flat volumes this year vs last year
- Client concentration – Top 3-4 clients contribute majority of the supplies of bead wires (MRF, Ceat, BKT).
- 40-45% exported from Thailand (bead wire).
- Directly export bead wire to EU (since tyres export is slow from Thailand)
- EU – 2L50thousand tons is demand. If we get 15% of that, 50% of Chennai capacity will go for that
- Pitampur – 90% utilization, Thailand up soon, Chennai
- 3-4 Years – 1800 crores top line
- Black wire expansion from 5k tons to 10k tons in India – not main product and not focusing.
- commodity cost (200 bps), higher energy cost (India and Thailand), LNG prices also caused BPS issue. 40% price for LNG has gone up
- Exports to EU (if they come through) – No comments on margin. Michelin and Bridgestone – Pricing is stable once you get the contracts. Initial market survey – India is a low cost producer for bead wire. India entry cost is 1/6th of EU production.
- Any acquisitions opportunity – very apprehensive, don’t want to make in EU. Make in India and export to world. Smaller plants are not viable and many have shut down
- No plans to borrow heavily.
- Realisation per tonne has dropped – RM cost has gone, so we had to pass on the same to customer
- 45 thousand tonnes in H1, 95-96 Thousand tonnes this FY (6-7% from last year)
- Regular growth will be 15-20% going fwd after this FY
- Working cycle is reducing
- Committed for expansion and no cash will be spent for buybacks
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