HEG Limited Books Strong Profits in Q1 FY19 amid Buoyancy in Graphite Electrode Industry

HEG Limited which is India’s one of the leading graphite electrode manufacturers has today reported its financial results for the first quarter ended 30 June 2018. According to the numbers disclosed, the company’s sales have recorded a dramatic surge of 644% y-o-y basis at 1,595 crore, whereas sales have increased by 23% against last quarter (Apr – May) of FY18.

In terms of profitability, HEG’s EBDITA (Earnings before depreciation, interest, taxes and amortisation) in Q1 FY19 stood at INR 1,196 crore against INR 24 crore in corresponding period of FY18 while its net profits are recorded at INR 770 crore as on 30 Jun’18 against losses of INR 8.43 crore in Q1 FY18.

The key reasons for underlying growth in the company’s sales and financial performance are higher volumes, price realisations, and capacity utilisations.

According to Mr. Ravi Jhunjhunwala, Chairman and Managing Director of HEG Ltd, the global graphite industry including that of India continues to remain buoyant since the latter half of 2017 amid the structural changes that have been brought about because of macroeconomic factors. Also, due to steep entry barriers and being a highly capital intensive business, supply constraints are expected to continue in this industry till the foreseeable future.

“The steel industry continues to grow globally, and electric arc furnaces continue to take a more important place. Our main raw material, needle coke, which has also found a new application in Lithium-ion batteries, has made any meaningful expansion in the industry difficult, hence making the entry barriers higher,’’ Mr. Jhunjhunwala has added.

He also said that amid strict entry barriers and China’s war on polluting industries, the current upsurge in global graphite electrode demand is expected to sustain its momentum over the foreseeable future as the demand for the same is widening. HEG is contemplating an increase in the operational capacity to capitalise on the structural changes in the industry. The company is also looking at the possibility of debottlenecking their plant, for which necessary steps are currently being taken.

HEG’s GE plant is located in Bhopal, Madhya Pradesh and has an annual production capacity of 80,000 tonnes of UHP grade graphite electrodes. The company has three captive power generation facilities which can together produce around 77 MW which fulfils almost the entire requirement of the graphite plant.

HEG Ltd Financial Performance

Prices in INR
Source: HEG Ltd Earning Presentation