IFGL Refractories (NSE:IFGLEXPOR) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to IFGL Refractories Limited Q1 FY 'twenty seven Earnings Conference Call hosted by Monarch Networks Capital Limited. Before we begin, a brief disclaimer. This conference call may contain forward looking statements about the company, which are based on beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantee of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participants' lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded.

0:47 I now hand over the conference to Mr. From Monarch Network Capital Limited. Thank you, and over to you, sir. Thank you,. Good evening, everyone. On behalf of behalf of Network Capital, I welcome you all to the q one f y twenty seven earnings conference call of IFGL Refractories Limited. We are pleased to have with us the management team represented by Mr. Maheep Bajuria, Managing Director Mr. Mukesh Ravindra, Director Mr. Manu Rakeja, Chief Executive Officer, Mona Khan Mr. Amit Agarwal, Chief Financial Officer. We will have the opening remarks from Mr. Maheep Bajuria, which will be followed by a Q and A session. Thank you. And over to you, Mihir sir.

1:34 Hello. Good evening, ladies and gentlemen. Thank you for joining us on IFGL Comp. Limited Q1 FY 'twenty seven Earnings Conference Call. I am joined Let me start with industry updates followed by our performance in the quarter. We faced multiple challenges in FY 'twenty six, including geopolitical uncertainties, supply chain disruptions, delays in traffic, holding and volume interest cost.

2:30 Yes, yes. Go ahead. In volume interest cost, despite the headwinds, IFGL delivered growth ahead of the underlying industry performance and was supported by strong growth in the domestic market, along with continued customer additions and expansion of our wallet share across key customers and and in our global business. On the industry front, India companies are the strongest major steel market. We see demand forecast to grow at 30.4% in '26 and nine point two percent in '27. And IFGL with a large segment is in a very strong position. U. S. A. Steel production has been robust and has grown 6% year on year, reflecting in the results of our U. S. Subsidiaries.

3:20 Europe steel demand is bottoming out with growth expected to revive in 'twenty six to 'twenty seven. Financial revised as published by the big steel groups in Europe, which is Arcelor in Eastern Europe, U. S. A, SSAB Europe, etcetera, in the presence of overall growth in the present a picture of overall growth in the industry. Speaking of IFGL and its position, IFGL delivered a strong performance with consolidated growth of 13% year on year in Q1, largely supported by our Indian overseas operations. Details will be shared by my colleagues in Kredge and Manoj. As I take on my extended responsibility as Managing Director, I remain committed to building on the strong foundation established over the year. The senior management team, IFGL is now all placed and is completely focused and driving IFGL to higher level and delivering greater value to each shareholders and investors.

4:19 With that, I will now hand over to you to discuss the operation and financial performance for the quarter and the year in greater detail. Thank you, and I will now the Thank you, Mihid. Good evening, everyone. It is a pleasure to be speaking with all of you today. As Mihid mentioned earlier, I will be transitioning into the role of Chief Executive Officer, India operations. Against the backdrop of strong steel demand and continued capacity expansion of steel manufacturing capacity in India as well as forecast to grow by 7.4% in 2026 and nine point two percent in 2027, we remain very positive about the outlook of our domestic business.

5:16 Now I will take you through the financial performance of Q1 FY twenty twenty seven. Revenue for Q1 FY twenty twenty seven stood at $2.97 crore, registering 8% year on year growth in our standalone business. With domestic revenue growing 7% and export increasing 9% and we remain confident of growing ahead of underlying market over the medium term. Coming to profitability, EBITDA for the standalone business stood at crore in the current quarter, a decline of 17% year on year. The contraction was primarily driven by higher raw material costs arising from geopolitical uncertainties and supply chain disruptions, along with elevated LPG costs due to availability constraints during the quarter.

6:19 To mitigate these pressures, we have implemented appropriate price increase across customers and product categories. However, given the nature of our business, there is typically a time lag in passing on cost increases with some of the elevated costs being absorbed in near term. We expect the benefits of pricing actions to flow through progressively over the coming quarters. Needless to say, our IFGL team have risen to the occasion and registered our manufacturing plants are operating without hindrance in spite of headwinds and supply chain disruptions. As mentioned earlier, we are having extra impetus on new products and categories such as bricks, casting flux and various products from our group company, Sheffield Refractories.

7:15 IFGL also is working very closely with Monocon, who has its own engineering division to bring some of the advanced refractory application equipment to the market. With that, I would like to invite Manoj to provide an update on our overseas business. Manoj, come in, please. Yes. Thank you, Mukesh and Mihir. Good evening, everyone. Our focus remains on strengthening our product portfolio, improving operational efficiencies and leveraging our global capabilities to cross sell products across multiple geographies. In Q1 financial year 2627, we saw improving demand conditions across our key overseas market.

8:05 In UK, British Steel is now in public ownership, alleviating much concerns about longevity of British Steel manufacturing operations, bringing tier to our group companies in UK in terms of long term visibility of business and growth opportunities. Further, we are told from market sources that the administrators of the Austroil Liberty Steel all work, now called Specialty Steel, is also looking to restart their other and mail shops sometimes in November to December 2026. Amongst above positive lights, we cannot ignore headwinds like British steel producing at a very minor steel levels in Q1 due to their blast furnace problems, which hopefully will be rectified in Q2 and the spot in ocean freights due to the prevailing geopolitical situation, which has had a big impact on our operations in UK and China.

8:59 Monocon UK and Monocon China operations continue to make inroads into new geographies with multiple new products and year on year turnover has increased significantly. Business turnaround remains key focus. Sheffield Refractories product portfolio integration with our IFGL India operations is going on well and at desired pace, including regular interactions and joint visits to the customers. We have also commenced production of Sheffield Refractories plastic running mask at our IFGL Vizac facility. Overall, our Monocone and Sheffield Refractories revenue have a double digit growth year on year in spite of the headwinds mentioned above. US business has delivered a revenue growth of double digit year on year.

9:44 Cost optimization and efficiency initiatives also supported a positive trajectory in margins. The results are testament of the resilience of our US operations and teams to deliver consistent results. The US steel market remains healthy, supported by investments in new facilities as well as modernization and expansion of existing plants, while the broader Americas region, including Canada, Mexico, select Latin American markets continue to offer attractive opportunities. Overall, we remain positive on the outlook for The Americas and see the region continuing to be an important driver for of our international growth. At Hoffman Ceramics, we have been able to maintain order book at similar levels compared to corresponding periods.

10:31 New initiatives undertaken across product enhancement, customer additions and cost rationalizations are beginning to show progress. Turning around the business remains a key priority, and we are taking multiple measures to improve performance. With the objective of reducing losses and achieving breakeven by the end of financial '27. Okay. With that, I would like to hand over to mister Amit Agarwal, CFO for financial performance. Thank you. Thank you, Manojeet. Let me give you a brief on financial. Starting with the stand alone financial highlights. Total income for quarter one FY 'twenty seven stood at INR $2.99 crores, reflecting a 7% year on year growth. Gross margin stood at 43% in quarter one FY 'twenty seven compared to 47% in quarter one FY 'twenty six.

11:23 Impact on gross margins was on account of increase of raw material prices due to supply chain disruption and geopolitical tension. EBITDA for quarter one FY 'twenty seven stood at INR 31 crore, down by 17% year on year. EBITDA margin were impacted on account of lower gross profit and also on account of significant surge in fuel prices in current quarter. PAT for the current quarter stood at INR 16 crore, a growth of 7% year on year. Breaking it down further by domestic and export sales, the domestic business continued to demonstrate strong momentum, diluting 7% year on year growth in quarter one FY 'twenty seven. Export revenue has shown sharp surge and grew by 9% year on year, increasing operational efficiency and visibility help us from an optimistic view going forward.

12:15 Let me now move forward to consolidated financial highlights. Our consolidated financial highlights also include our international subsidiary. Total income for quarter one FY 'twenty seven grew by 13% year on year to INR $5.15 crore. Gross margin stood stable at 48%, showcasing our resilience and operational efficiency delta. EBITDA for the quarter was INR 40 crores, raising a 2% year on year increase. As mentioned, EBITDA was impacted due to increase in raw material prices and surge in fuel prices, impacting the domestic margin, which had overall impact on consolidated numbers. Profit after tax stood at INR 17 crore, an increase of 58% year on year. PAT margin for the quarter stood at 3%.

13:05 With this, I shall now leave the floor open for question and answer. Thank you. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question to assemble. The first question is from the line of Krishna from.

13:51 Please proceed with your question. Good afternoon, and congratulations from a good set of numbers. Sir, my first question is our overseas subsidiary has shown good growth. Can you elaborate what changed? Also, the margin stood strong. Any color on margin outlook? This is Manoj here. So as you mentioned, Krishna, overseas subsidies top line have had significant growth. The important reason as we discussed earlier also was from Americas. Americas margins are also quite robust. In terms of individual breakup of the margins, etcetera, we do publish our segment results in the consolidated results, what is published.

14:43 And if you can see from there, year, quarter on quarter, there has been significant improvements on those results. Individual company with details, we are unable to divulge at the moment. If you can, Manojeet, just answer them on this future, how do we see, I think it will answer their question. Going forward, we expect the momentum to be maintained for all the subsidiaries which in consideration. And as I mentioned on individual operations of UK, Europe, America, and Germany, in each area, we have taken significant steps to see that we keep the momentum of growth and the companies which were in red, the objective is to bring it back to black and turn the operations around.

15:39 So our operational focus and efficiency remains. We are expanding our product portfolio across various geographies, helping us to get the numbers where we wish to. So my second question would be, how can... How was being the subsidiaries performing, especially Monocoon? The... That has been under some pressure last year. Yeah. So as I mentioned, for Monocoon, we are now taking a very aggressive stand of introducing new products as well as getting into new geographies. In my last conference call also, I mentioned we have put a robust team across the globe for mon... To help Monocron drive the growth plan, which we have set forth.

16:28 Second, we have had some positive news from The UK industry where British Steel is now in public ownership. So the business longevity and visibility is much better than before. And in November, December, if the other melt shops, as I mentioned in my opening remarks open, you know, it will be much more positive and robust for monocon operations going forward. But overall, we are quite buoyant about the way things are moving, and we will continue to trade along that path. Thank you, sir. Thank you. The next question is from the line of Snehal Surna from Star Broking. Please proceed with your question. Hello.

17:16 Am I audible? Yes. Yes. My question is regarding the tech transfer from product from Shield Phase one has commenced. Can you let us know on how much time it will take for full transfer of capabilities? And by when do we see those products being available in the domestic market? No. So as I mentioned... This is Manoj here. So as I mentioned, Sheffield Refractories phase one plastic ramming mass has already started to be produced in our IFGL facility. That is already complete. And now marketing trials and all the other relevant activities relating to promoting the product is ongoing now. In terms of the various other products, joint visits to the customers, interactions with the groups, technology transfers, all that have been put in place.

18:08 So... But as you know, these products will take time to mature in the market. It will undergo a full set of trials and accreditation at the customer's end. So the process is already on now. Now. Next question is from the line of Amit Ahuja from CJ Capital. Congratulations for the good set of number. So I have two questions. The first one is growth in growth in the domestic business was, like, 7% compared to the higher growth number in the previous year.

18:54 So how has been the demand environment, and is there any market share loss? And my second question is, also the EBIT margin were down by, like, 17%. Is this because of competitive pricing and intensity? Like, what has impacted the margins sharply? Thank you, sir. Think, Amit, Suraj, this growth number, what we are talking of domestic business, the base number has grown up. So that's why in terms of percentage, it's looking small. We are almost have done double digit. So we have to see on consolidated basis, including the domestic business as well as export business. This time, we have done very well in terms of export.

19:51 But we continue to, I think, give importance to domestic business, and we target to increase by double digit at least for at the year end. Okay. And what is the, like, competitive pricing? No, with respect to dip in EBITDA margin, as we said that because of geopolitical condition, our raw material prices has gone up and the LPG or the fuel prices have gone up like anything. Although we have been able to get price increase from the customer, but that was not enough to compensate the overall price increase in input cost. So this is the major reason for the EBITDA margin as compared with the corresponding quarter.

20:50 The next question is from the line of Sahil Singhbir from Monarch Networks Capital. Please proceed with your question, sir. Yeah. Hi. So my first question is on on the EBIT margins that we've shown for the year of business. Now after some, you know, quarters of, you know, reaching towards the breakeven, especially q four was, you know, very close to breakeven, We've again started going towards 9% and negative 8%. So what's exactly happening over here? And do we expect to, again, breakeven this year? Or how do you see that evolving for the year of business? Sai, is this with respect to style of business or control?

21:40 This is the segmental split that you've given the financial result, the Europe category. Okay. I think Europe, per se, I tell you, Europe will consist of two companies, basically, Middle East, Molokan UK and. Okay. So both are individually performing good. But as mentioned by Mr. Manoj that because of lower performance of brittle steel, one of our customer, our sale in safety refractory was considerably low. So that's why this quarter is exceptionally low for Shefield Refractories. Otherwise, Monocorn is doing better from the previous quarter, and we are moving towards the breakeven.

22:25 So that we maintain that Monocorn U. K. Per se, we are reaching towards breakeven, and that continues to do so. And for this is, I think, one of the quarter, Manoj, we can further put light on this that quarter two will be normal as usual, I believe. Very much true, Amit. Yeah. Because we're still hopefully in quarter two with the blast furnace coming back in operations, their sales, etcetera, will come back immediately. You know? It's not that we have lost any orders, etcetera. It's just because of the timing difference. The plant's not producing, so we were not able to sell much there. But it's quarter two, we will be back where we should be for Sheffield. So has this... Has the margins also affected at Sheffield because of this, you know, low uptake in terms of Yeah. Yeah.

23:18 Okay. Okay. Okay. Second second, I wanted to understand, in the opening remarks, we heard that there there are some more price hikes to be expected. So would this would this be across all products, or would this be across geographies, or how should we think about it? And what what kind of benefit do you expect on the margins because of this? So see, I tell you, this is not all across easily distributed. So every contract has its own feature, and, accordingly, we are going and getting the price increases. And these are all temporary price increase based on the input cost, which has increased on this geopolitical front. So we are trying to get and continue this price increase as long as we are being impacted by input price cost. Otherwise, no additional margin on this account we see.

24:18 Okay. Okay. And on the stand alone, we are seeing a big bump up on the staff cost, which is roughly 28.7 crores, roughly 10% of the top line. So should we assume that the staff cost will continue at 10 of the top line? Because absolute numbers, it's a I mean, it's a jump as compared to how May, if you compare with this with quarter four number, which is around INR 24 crore, there is an increase. If you compare this with quarter one FY 'twenty six, this is at the similar level. So 10%, obviously, this is 10% of overall revenue. And we are trying to manage this, and we do not expect this to go beyond this.

25:07 Okay. Okay. But on on the console front also, there is there is a big jump. So 84 crores versus 76 and y o y in seventy seven q o q. So would... Is it safe to assume that this run rate will continue and what is composing this increase? No. If you see again for console also, for corresponding quarter INR 76 crores to 77 crores. So only INR 1 crore price high. But if we compare this with quarter last quarter, there is an impact because I believe because of this some provision reversal happening in the last quarter. But but employee cost is our focus area, we are working on it.

25:55 Okay. Okay. Now with respect to a longer term guidance, like, we we were maintaining for one particular time that we can achieve a 12% EBITDA margins. Mhmm. Do we stick to that kind of guidance? And is that that... Is that possible on the console business? See CONSOL business, we are trying to achieve double digit EBITDA margin, and it all depends on how the geopolitical situation stand and overseas demand stand with us. Okay. Okay. But we'll be back again for sure on this. Okay. Okay. With respect to Liberty Steel restarting, is there a possibility you know, get any kind of lost dues that we had, you know, historically?

26:49 No. For Liberty Steel, see, this is not under the management. Now Liberty Steel is under the administrator, and they have renamed us Specialty steel. So the old use, because of being unsecured in nature, that the administrator will deal with it in due course once the new buyers are in place. But given the historical situation, how things turn out, I very much doubt there would be anything which is forthcoming from that site. But the silver lining is the the operation start, we can start reselling the products. We have a... We... Which we used to have a big sales and a big service team placed in that plant. You know? So in that way, our monocone operations will get a big impetus once those operations start.

27:39 And when do you expect this to, you know, reflect in our revenue numbers? I mean, any timeline on this? See, market sources at this plant, mail shops would be looking to restart sometime November, December 2026. Okay? Okay. Hopefully, we are also keeping a very close watch on this. We also had meetings with their operational and procurement team also. So, you know, things are in motion, but time will tell once they restart. But as of now, I can say we are very positive and optimistic about this whole thing. Got it. Got it. And and and, sir, you you said in your opening remarks that we have been adding some new products and trying to enter new geographies at Monocon.

28:25 If you can give some more details which product are these and which are these geographies where we are trying to enter? So in terms of products, we are into iron and steel. So they are relating to refractories relating to iron and steel. Also, are trying to get into the foundry industry. Again, primarily with refractories of... In the similar family and nature of application. And in terms of geographies, you know, it is all spread over. See, Monocone has operations in UK, China, and we have... As you have seen, we have opened an office or company in Australia. You know, recently, IFGL Monocone has opened an office in Saudi. So, you know, the operations will be spread all across, and there are a lot of these areas which do present growth opportunities for Monocone, which we are trying to really capitalize upon.

29:17 Sure, sure. Manoj, can I come in? Manoj, on this one, expansion of monocone market, I think we have a very strong positive customers' feedback from Mexico and USA. So these products will be also introduced in this market. Sure. Good to hear that. Thank you for answering my question. All the best. You. Thank you. The next question is from the line of from Kapoor and Company. Please proceed with your question. Yeah., sir, and thank you for the opportunity. As as you were alluding to to the improvement in the EBITDA margin on a console basis to double digit number, so, sir, if if you could just explain or give us some more like what factors are you think are in the annual that will lead to this EBITDA margin improvement?

30:13 So for the first quarter, we were closer to 8%, 7.7%. And taking into account the steps and the rationalization cost rationalization that you've spoken about, what should we anticipate going ahead the improvement in the EBITDA margin, sir? Some color on that thing. I think,, we have been talking to bring Monocont UK back in black. So if we turn that company into black, EBITDA margin will automatically have a positive impact on overall team. And with U. S. Coming to more than double digit margin, it has already added to our EBITDA margin. So it has to be seen in each and every company segment wise, and we are working with each and every company to bring the EBITDA margin back what it was there in past.

31:04 And we do see an improvement in U. S. And Monocont U. K. Per se at least. So, Amiji, what was the loss contribution from Monocont for this quarter and for the last financial year? Yes. I would not get into the breakup of the loss number, but I would surely say that number has come down from last quarter to this quarter for Monocons UK. Just to really do it, sir, when we look at the Monocon losses being kept coming and being summed up, it is under the European entity of The US. Yes. So when when we look into that number, as I also mentioned that on a Q on Q basis also, the losses have moved up from INR 3 crore to INR 7 crore.

31:54 So has the Monocone performance deteriorated over the quarter? Or what has led to this INR 5 crore change, sir? Yes. I'll tell you that I've answered this also that Monoco Europe consists of major two entities, Monoco UK and SRL. So this quarter, SRL, because of lower offtake and everything, we had a lower margin over there. So that has added to it, which is not there in past. Okay. And and, sir, we had... I think we invested around $100,150 crore in our r and d facility in in Odisha also. And Mhmm. So if if you could just explain to us what are the benefits we are retrieving out of the same? And on the CapEx front, what have we outlined for the current financial year?

32:45 And if if you could just give us some more color, how are you progressing? No. I think the number you are quoting is not correct. We are not spending $1.50 crores on r and d. We have spent around 20 crores on our r and d. Okay? Sir, sir, just to interrupt you, sir, r and d facility, we have And on r and d front, I think Rahul for Manoj, we can further update you on the benefit of it. And CapEx? Yeah. Manoj.. Yes. I think I should this is Mukesh.

33:34 So as regards to the R and D facility, like the works are very continuously going on. One is developing new materials, which have been done now and helping the Monocon U. K. Products into the foundry market. Second is the designing of very special product that is your Condition SEN for the thin flap caster, which are being designed in our R and D center for The U. S. Market, which has given very good results and the new products have been introduced into The U. S. Market manufactured in U. S. And that is where it is given the big growth in The U. S. Market too.

34:24 We are also looking into recycling a lot of materials, trying to use the recycled materials in our mix rather than where possible. Plus, we are now also putting in new team, I mean not new team, adding augmenting our R and D team and we are going by the market given situations in India where new products can be introduced too. R and D is becoming a very good support to the whole sales team around the world. Right. And lastly, sir, on the Chinese JV part, how is the progress? And how much have we spent? And if you could just give us some more color, how are we progressing and the commissioning date of the sale?

35:18 Can you... Hello? Meir, can you put on the Chinese joint venture, please? So basically, on the Chinese joint venture, Basically, the... There, we've got into a couple of issues with the market. No. I think I've made that if I can update them on this issue. For this Chinese JV, we have applied for an approval with the government of India appropriate authority, and we are yet to get any positive response from them. So we... They have advised us to apply for the same again.

36:03 And on receipt of this approval, I think we'll be able to further announce anything. Okay. So so our earlier commitment and earlier plan are are on hold as of now? Yes. Yes. So the so the product placement part, I think, yes, please. Yes. Please me, DP, Rankin. Actually, the thing is that because this is an Indian and Chinese joint venture, at the moment, the government is, you know, going a bit slow on the approval of Chinese joint venture. So that's the primary issue. Okay, sir. So I think this is the land acquisition part and things we have done in Gujarat. It was also pertaining to this area only. So we have spent money on it. Okay. So we have made the investment in in the land and other part, or what is the So far, only in the land.

36:56 Okay. So far, it's only been done in land, and some money has been spent because we've been marketing other products, but that's not as affordable. Because of what, when we remember that it was about some product substitution or import substitution rather, which we were looking at through that, and that will be getting to the cement industry, if I'm not wrong. Yes. Yes. Correct me, David. Yes. So in terms of... We we are through on the payment. We'll wait for the approval. And lastly, taking into account your commentary and the brief given to investors in the presentation, do we think that worst is behind in terms of the profitability aspect and also the negative impact of the pass on of the raw material prices. And now going ahead, we can expect these as a steady set of EBITDA margins going ahead.

37:52 This understanding is correct on a controlled basis? See, this is Manoj here. If you ask me today, I would very much agree with that. But tomorrow brings another day, another news. You know? And the world changes so fast. It's so difficult to predict. But what we see today, definitely, what you are summarizing sums up the position very aptly. You know, we can see the upshoot or the green shoots in the European steel industry. The financial results of the big steel giants have all been showing a positive number for the first six months. The steel plants which are closed are coming back in operation. So, you know, all in... And fingers crossed, hopefully, keeps like that. You know? So, definitely, the worst is behind us.

38:41 Thank you, sir. I joined the queue, and all the best to the team. Thanks. Thank you. Thank you. The next question is from the line of Sanjeeta Thut from Global Capital. Please proceed with your question. Hi. Thank you for the opportunity. Just one question from my end. I apologize if it's a repetition. I joined the call a little late. But I just wanted to know what is the peak revenue that we can do on our current capacity, and what will it be post all expansions and CapEx once that's completed? I don't think we have any number. I said that what is the peak revenue we can do with this current capacity and all.

39:32 But in past, we have said that with addition of this matte carbon and casting flux to new line addition, we can add additional INR 150 crores to INR 200 crores at peak capacity for that two particular products. Sir, could you repeat the number once? What I said that in past, we have spoken about the addition of two new product line, met carbon brick and casting flux. We can add around INR 150 crores to INR 200 crores on account of these two new product line at peak level. Okay. Got it. That's also my answer. Thank you. Thank you. Ladies and gentlemen, that was the last question from the participant.

40:21 Now I would like to hand over the conference to management for their closing comments. Thank you. I hope we have been able to answer most of your queries. We look forward to your participation in next call. For any query, you may contact SGA, our Investor Relation Advisors. Thank you. Thank you. Thank you all. On behalf of Monarch Network Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.