India’s graphite electrode (GE) major, Graphite India Ltd (GIL) has announced its third quarter (Q3) results for the financial year 2018-19 and below are the highlights of the results:
1. Sales increased by 67% y-o-y basis – In terms of sales, the company’s sales have registered a rise of 67% y-o-y basis at INR 1,562 crore in Q3 FY19 against sales of INR 933 crore in Q3 FY18.
2. Profits surged by 79% y-o-y basis- The company has reported a jump of 79% y-o-y basis in its standalone net profits of INR 609 crore for the quarter ended on December 2018 (Q3 FY19) as the same stood at INR 341 crore in the corresponding quarter of previous year FY18.
3. EBIDTA per tonne improved by 126% y-o-y: GIL’s EBIDTA in Q3 FY19 stood at USD 9005/MT registering an increase of 126% Y-o-Y basis in Q3 FY18.
4. GIL’s performance plunged in Q-o-Q basis: Although the company’s performance has improved y-o-y basis in Q3 FY19, if we make the comparison of the same against the previous quarter of Q2 FY19, the company’s sales and profits have dived down.
While sales have registered a fall of 33% Q-O-Q basis, profits of the company have plunged by 45% and EBIDTA per tonne have been down by 18% against the previous quarter i.e. Q2FY19.
The key reasons behind this:
• The halt in exports to Iran post U.S. sanctions which have resulted in build-up of tailor-made inventory.
• Realisation was up YoY basis but flat Q-o-Q basis as quarterly contracts was rolled over at similar prices in Q3 FY19 over Q2 FY19.
• Needle coke costs in Q3 FY19 increased by USD 1,000/MT Q-o-Q to USD 3,300/MT.
5. Future Outlook
Commenting on the industry’s future outlook, Graphite India chairman K. K. Bangur said, steel production across the industry was impacted by increasing concerns of GDP growth. “Overall, global steel production declined 1.3% with India declining by 0.3% compared to the previous quarter. This apart, a slowing Chinese economy together with oversupply of Chinese steel has resulted in an ongoing correction of steel prices,” he added.
He further added that Indian steel industry’s performance was subdued during the quarter. “However the outlook still remains positive with the prospect of increased infrastructure spending and demand for affordable housing on the horizon.”
For Q4 FY19, the graphite electrodes manufacturers’ realisations are anticipated to fall amid destocking by China and Iran. The non-UHP prices in the domestic market have been impacted by the removal of the anti-dumping duty in Sept’18 and higher imports from China, whereas UHP prices have been impacted by the weakness in steel prices.
Further, both Indian GE producers stopped exports to Iran from Q3 FY19 amid no clarity regarding exemption for GE from U.S. sanctions. Iran comprised 8–10% of volumes for both GRIL and HEG and this has eased market tightness. Also, with expectations for a further price fall in China, the steel mills are de-stocking their GE inventory, while they were re-stocking in panic during 2018.
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