Key Highlights

Favorable government policies have aided the domestic steel production in FY 18. India's steel production has grown by around 6% compared to 1.6% growth in the world steel production.

Expects domestic steel production to grow around 6-7% for the next 2 years.

Big players like Sail and Tata steel are increasing their capacities.

Around 10 MTPA of new steel production capacities are expected in 2021-22.

Despite a subdued global steel production, management says that the expert expectations are that that the global steel production will increase and utilization rate will stand at around 85% as compared to current global utilization rate of around 78%.

For IFGL Refractories, domestic growth was strong in FY 18, however all the subsidiaries; Hoffmann, Monocon and EL Ceramics delivered lower Ebidta.

Consolidated Ebidta margin for FY 18 stood at 13.1% lower by 40 bps. Domestic operations supported the margins while losses in subsidiaries affected the margins. Indian operations margin jumped to 17% due to strong volumes and better economies of scale.

Goodwill of around Rs 26.7 crore is written off in FY 18 and will write off the total goodwill with same amount for the next 8 years

Tax rate was higher as, SEZ benefits were lapsed in FY 18.

Hoffman Ceramics reported loss at PAT level of 0.3 M Euro as compared to profit of 0.2 M Euro. Lower capacity utilization and pressure on steel consumption in Germany and in other EU nations affected the performance. The company is doing a capex of around 2 M Euro in Hoffman plant to increase automation which will be completed by H2 FY 19.

Monocon Group had a flattish performance at PAT level. Margins were slightly under pressure due to lower utilization. Expects Monocon to perform well with higher exports going forward.

El Ceramics saw margin improvement and PAT stood at 2.2 M $, as compared to 1.7 M $ for FY 17. The Make in US and exports are helping the subsidiary. Expects more sale of value added products from this subsidiary which will drive higher margins in years to come.

The company is doing a capex of around Rs 20 crore in domestic operations. Rs 10 crore in Kandla plant to increase capacity from 1.6 lakh pcs p.a to 2.4 lakh pcs p.a. Around Rs 10 crore to augment zirconia manufacturing facility in Odisha plant.

Company's net consolidated debt stands at around Rs 20 crore as on Mar 18.

Expects better performance in years to come driven by improvement in global subsidiaries.

The company is open for more acquisitions and mergers going forward.

Globally Refractories market size is estimated around US $ 45 B which is expected to reach to US $ 53 B by 2021 as per the industry reports. 60% of the Refractories market of US $ 45 B is for steel and iron sector while rest of the market will be for aluminium, copper and steel segment.

Steel production in India grew by around 5.5% YoY basis between Jan to July 2017 period. Globally also the steel production improved in almost every geography except China.

In India, the New Steel Policy 2017 was announced and is expected to result in new green field expansions by steel majors which will lead to higher demand of Refractories going forward. Various favourable policies like increase in custom duty on imports increase in FDI limits and Make in India program will further aid the production of steel in India. All these augers well for Refractories growth in India.

IFGL Refractories (IFGL) got merged with IFGL Exports and the company announced the June 17 quarter results considering the full effect of the merger.

June 17 quarter results include good will write off of around Rs 6.7 crore. A total of Rs 26.7 crore will be written off against goodwill every year for the next 10 years.

Internationally, Monocon group of UK reported 6 M Pound in sales and Ebidta of around 0.6 M Pound with Ebidta margin of around 6.6%. Hofmann Germany reported flat net sales of around 2.7 M Euro on YoY basis with break even at Ebidta level. El Ceramics reported 4.5 M $ of net sales in June quarter with Ebidta margin of 14%.

There is a plenty of scope of margin improvement in subsidiaries which will result in higher margins in next couple of years. Management expects to reach consolidated margin of around 13.5-14% in next couple of years.

The company is more or less a debt free company with debt of around Rs 60 crore and more or less same amount of cash, most of which is kept in subsidiaries.

The company has aimed to spend around Rs 20 crore in Indian operations and around 2 M Euro in Hofmann Germany for increasing manufacturing facilities and automation of existing facilities in FY 18.