Ador Welding Ltd

I had attended the 2022 AGM of Ador Welding. Some snippets of the AGM are given below:

• Higher ever turnover and profits during FY22. Confident of growth going forward as well. Every financial parameter improved last year. Company became debt free last year.
• FY23 outlook: Company well placed to mitigate risks. FY23 to be another good year with increasing investment from public sector. Risk factors – erratic RM prices, Russia Ukraine war, supply chain issues and competitive markets. Continue to face this risk but well prepared to face the risk. Opened new office in Dubai. Focus on key international market. Key business priorities – 1. Prudent cash flow 2. Supply Chain 3. Product launches. 4 Improve efficiencies. 5 International market.
• Developing new products – R&D team introduced new products. Due to improved reliability, we could gain customer confidence.
• Welding industry – inherent demand is strong. IIP growth also reflects. Power, heavy engineering, ship building etc all showing good growth. Infrastructure development is major focus of government. Good growth prospects. Increasing export competitiveness and reduced imports due to weakening of rupee.
• Approved amalgamation of Ador Fontech with Ador Welding. Apart from cost optimization, synergies in HR, manufacturing, brand building, R&D etc. Complete game changer for the industry. Ahead of competition. Ultimate aim is to improve customer experience.
• Merger: Timeline – minimum of a year from now. All depends on NCLT approval. As we move along we can give a timeline.
• Dividend – company has a dividend policy and also look at earnings and other factors. We gave good dividend despite headwinds last year
• Distributors – most of our distributors are not exclusive while handful of them are exclusive.
• Post-merger promoter holding with 53%.
• Welding business – capex revival – we are seeing revival. Some waiting was there about steel prices but normalized now. Things stabilizing now and slight revival.
• Operating margins of welding business? QoQ will keep on improving. There is scope of improvement. Not just product improvement but the way one sells. In general, able to pass on prices to end customers.
• Capex – automation? Scope of growth there and that we are doing too
• Exports? Critical part going forward. Steel prices difference between us and other countries. Want to grow it. Acceptance of Indian products there.
• Capex of the company? Regular maintenance, replacement of old lines. Second part is for rejigging operations. Second part many changes. Post H1 we will do analyst meet and will update more on capex.
• Kuwait status? Following due process as per local laws. Local laws will favour us. 12 – 18 months from now. Hopefully, recovery will happen.
• Flare and process equipment? Seeing a turnaround. It was a restructuring of the product line. We have gone into different product groups. Flare has lot of engineering. We have got new team. Design, engineering lot of confidence. This division has lot of potential. Order that we have got is pretty interesting. Margin will keep on improving. That will happen over time. Turnaround is more or less done. We have got a very healthy order book. We must execute well now.
• Merger? Nothing will change. Merger will have tremendous value. Cross customer sales – lot of benefits we see going forward. We look forward to that.
• Competitors? Esab, local players like GEE, Modi. International players like Lincoln. Most of the competitors there. Cant comment on Esab. Trying to narrow the gap with Esab. As we keep doing the turnaround, our ambition is to create tremendous value creation for shareholders. Product mix differentiation is there slightly but not much. They also do engineering services which we don’t do. Product mix gap isn’t much – around 10 – 15%. They do simple things better which we will also do now. Manufacturing rejigging we are doing will also help us.
• Impact of rupee on the business? As we are net exporter, it will benefit us. Rupee benefit will be quite good. Benefit of Make In India product. Required more business development work and marketing work. Enquiry base is growing in exports.
• Property monetization? Looking at case to case basis. Sold 24 crore worth of property – majorly 2 we sold last year. Nothing large left now but keep on doing it.
• Working capital – will keep improving on welding equipment, flare division will see improvement. Flare division will see some elevation due to ONGC project. Engineered flare is our forte. Kuwait was more of construction. Working capital exposure, engineered flare, margins, deliverables etc totally different compared to Kuwait experience. Contract is favorable. Board also played a big role in its supervision.
• Volumes of consumable last year 50,000 MT last year. Grow that this year. Last year did 10,000 – 12,000 units for equipment last year. Will grow it this year.
• Capacity utilization varies from 50 – 55% to 90 – 95% for different product segments.
• R&D – two or three things: 1.Import substitution 2. Changes in steel for better product. 3. Cost or process improvement. Fairly in line with last year.

(Disclosure: Invested since last 2 years. Please do your own research and due diligence as I am not SEBI registered investment advisor and this post is purely for educational purpose.)