Highlights of the Concall

• HEG recorded net operating income of Rs. 1865 crore in Q3FY19 as against Rs 843 crore in the corresponding previous quarter and Rs 1794 crore in previous quarter. EBITDA including other income stands at Rs 1351 crore compared to 563 crore in Q3FY18 and Rs 1389 crore in Q2FY19. Company reported net profit was Rs.867 crore as against Rs.342 crore in Q2FY18 and profit of Rs 889 crore in Q2FY19.

• Graphite Electrodes sales increased to Rs 1858 crore compared to Rs 831 crore in Q3FY18 and Rs 1793 crore in Q2FY19.

• Graphite Electrodes Capacity utilisation was at around 88% during the quarter.

• USD/INR favorable, as graphite electrode business is net exporting segment

• Power sales decreased to Rs 35.37 crore compared to Rs 69.32 crore in Q3FY18 but was up from Rs 28.85 crore in Q2FY19

• Coal availability under FSA with Coal India is acutely short. Sourcing of coal from open market adversely affecting bottom line

• Net sales reduced in Q3 of FY19 vs. Q3 of FY18, as company has been able to negotiate a win win deal with state electricity board since Feb 2018. Hence, own generation reduced due to commercial reasons.

• Global crude steel production reached 1.81 billion tonne for the year 2018, up by 4.6% compared to 2017. Steel production excluding China also grew by 2.5% while China steel output was up by 6.6%.

• China electric arc furnace steel growth remained strong in line with Chinese government push to reduce polluting steel capacity. Electric arc furnace capacity has doubled from 6% to total Chinese steel capacity to 12% of total capacity which is expected to be around 20% by 2020

• China is pushing for more incentive policies to boost domestic demand in major steel consumption sectors like infrastructure, vehicles and white goods

• In CY18 China's finished steel exports decreased by 8.1 % on year to 69.336 MMT in 2018 due to strong domestic market driven by steel capacity elimination and output cuts for environmental reasons .

• Iron ore prices continue to increase due to declaration of a force majeure at one of the large mines in Brazil. It should help electric arc furnace economics and boost production in immediate future.

• China has achieved its capacity elimination target by 2018. However output cuts for environmental reasons will be less stringent in 2019.

• India removed antidumping duties on graphite electrodes imported from China in September 2018 which has increased imports.

• Needle coke supply continues to be tight and efforts are on to organize as much coke as possible

• All needle coke suppliers are now offering prices on half yearly basis which is a departure from past practice where they used to give prices valid for one year

• Demand for UHP Graphite electrodes continues to remain strong and prices are expected to remain stable at an elevated level.

• The company has completed stopped exports to Iran due to US sanctions which comprised 7-8% of total business in past two years