Conference Call with Surya Roshni Management and Analysts on Q2FY25 Performance and Outlook. Listen to the full earnings transcript.
Iron & Steel Products company Surya Roshni announced Q2FY25 results Revenue: Rs 1,529 crore compared to Rs 1,916 crore during Q2FY24, change -20% YoY. EBITDA: Rs 83 crore compared to Rs 139 crore during Q2FY24, change -40%. PBT: Rs 46 crore compared to Rs 104 crore during Q2FY24, change -56%. PAT: Rs 34 crore compared to Rs 76 crore during Q2FY24, change -55%. Raju Bista, Managing Director, said: “In Q2FY25, posed several challenges for the company’s businesses due to seasonal factors, price volatility, and geopolitical tensions affecting export markets. Nonetheless, the company has managed these headwinds through stringent operational efficiencies and proactive capacity expansion, which are expected to support gradual improvement in both domestic and export markets. Due to external economic factors, the company faced a challenging Q2FY25, with consolidated revenue stood at Rs 1,529 crores. Strategic initiatives in operational efficiency, high-margin product focus, and regional market expansion are expected to support improved performance in the second half of the fiscal year.” “In Lighting and Consumer Durables, we faced a challenging environment during Q2FY25, with significant headwinds in form of price erosion in LED lighting products and adverse weather conditions, including floods and rains across various regions. These external factors limited consumer and professional lighting demand. But despite these challenges, the segment demonstrated resilience. The topline of this vertical increased by 5% YoY in Q2FY25 on back of healthy volume growth in several subsegments, even though steep price erosion in LED products limited overall growth. In Lighting segment, price erosion in LED was notably severe, which affected the segment's margins. However, the company successfully maintained margin stability through cost innovation and an increased focus on higher-margin products. Volume growth was recorded in high-wattage battens, downlighters, and panel sales within the LED segment, which helped to cushion the impact of price declines. Professional lighting continued its positive momentum with a high single digit growth in Q2FY25 and double-digit growth rate in H1FY25. The segment faced some delays in project decisions due to the recent general elections, but a strong order book, provides optimism for sustained performance. The professional lighting segment, backed by a healthy order book and scheduled project executions, is expected to contribute significantly to Q3FY25. In the Appliance segment, particularly water heaters, showed excellent volume growth. The company also launched products in mixer grinders and irons. The positive response to our newly launched Mono Block residential pumps, initially targeted for the northern and central markets, has prompted us to plan for further geographic expansion. Seasonal preparations for the festive period, beginning with Onam and extending through Diwali, were integral to the business strategy in Q2FY25. Extensive product launches and promotional activities were timed for this season, which included social media campaigns, dealer meets, and point-of-sale enhancements. We are optimistic about the upcoming quarters, expecting improved performance in professional lighting and consumer appliances on account of demand due to the festive season. We continue to aim for revenue growth close to 12% for FY25, with a cautiously optimistic outlook for EBITDA margin. Our expansion efforts in consumer durables and increasing geographical presence in semi-urban markets are anticipated to further strengthen our market position and instill resilience against ongoing price pressures.” “In the Steel Pipes and Strips, the company recorded a revenue decline of 26% YoY for Q2FY25 at Rs 1,135 crore. Market hesitancy due to declining steel prices led distributors and dealers to scale back on inventory holdings, impacting topline performance. Additionally, the fall in sales can also be attributed to seasonality, as excessive rains led to reduced demand across various product lines. A significant headwind this quarter was the sharp reduction in steel HR prices, by Rs 7,500 per ton during the quarter ended Q2FY25. This price drop not only dampened demand, as stockists and distributors delayed purchases, but also exerted considerable pressure on profitability, eroding EBITDA by an estimated Rs 3,000 per ton on account of inventory valuation adjustments. However, through rigorous operational efficiencies, the company managed to stabilize its EBITDA per ton at Rs 2,901. Value-added products continued to constitute about 45% of total revenue in H1FY25. While demand in the API pipes segment remained subdued due to limited government tendering activity, the Spiral Pipes segment exhibited robust performance, supported by strong order inflows, particularly in the water pipe segment. The order book for spiral pipes remains healthy. The spiral plant at Malanpur (Gwalior), which is expected to commence operations in the coming month, has already secured a six-month order backlog. Galvanized Pipes segment faced a challenging quarter, recording a 28% YoY decline. Demand was particularly impacted by the monsoon. However, we anticipate a recovery in the upcoming quarters as seasonal conditions normalize. The ERW segment saw a YoY contraction in volume, influenced by lower inventory levels held by distributors amidst falling steel prices. The CR Strips segment demonstrated modest growth, with volumes increasing by 5% in Q2FY25. Export volumes declined, primarily due to geopolitical tensions in key markets, notably the Middle East. Despite these challenges, we remain confident in the potential for export recovery over the next six months, as demand stabilizes both domestically and internationally." Vinay Surya – Managing Director said: “In Lighting and Consumer Durables, we presented a more resilient performance with a 5% YoY growth in revenue in Q2FY25. This was achieved despite facing headwinds on account of steep price erosion in LED products as well as adverse weather conditions impacting demand across various regions. The company managed to protect margins through a focus on high-margin and premium products, along with continuous cost-innovation efforts, which countered the impact of price erosion. Consumer Lighting saw steady demand despite price erosion in LED products. However, our new launches across high-wattage battens, downlighters, and panels, contributed to both volume and margin growth. The Professional Lighting sub-segment grew in healthy double digits in H1FY25, driven by a strong order book and major projects are set to commence execution in Q3. In the Consumer Appliances category, the water heaters particularly saw strong seasonal demand. We also had preparations in place for the festive season launches extending from Onam to Diwali, which should reflect in our Q3FY25 results. Ahead of the Diwali season, the company invested in a significant marketing campaign, especially on social media, emphasizing decorative lighting. Furthermore, we held dealers and electricians meets to showcase new products and provided merchandising materials to enhance visibility at the point of sale. These initiatives were aimed at stimulating demand and ensuring that dealers were well-prepared to serve customers during the high-demand festive period. Additionally, regional trends indicate stronger growth in semi-urban and rural markets over urban areas, with premium products gaining traction outside metro markets. Our focus in expanding premium offerings and strengthening our presence in semi-urban and rural markets are expected to provide tailwinds. We remain optimistic for Q3 and Q4, driven by a robust order pipeline in the professional lighting segment and sustained demand in consumer durables.” “In the Steel Pipes and Strips, the price corrections in steel over the three months of Q2FY25 significantly led to the overall revenue decline, as dealers delayed their purchases. To mitigate the impact of declining prices, we implemented rigorous cost management strategies and operational efficiencies. The recent upward trend in steel prices provides an optimistic outlook for margin improvement. Steel prices rose by 3% over October and November, and this pricing trajectory is expected to support enhanced profitability across product segments. Our value-added product portfolio continues to contribute significantly, maintaining a 45% share of total sales in H1FY25. With the commissioning of the new Spiral plant, we anticipate an increase upto 50% in coming years in this share, underscoring our focus on value addition. The ERW mill in Bahadurgarh, operational since July, has already achieved a production output of 7,000 tons. The Bahadurgarh cold rolling expansion and Spiral plant in Gwalior are on track to commence operations, with turnover contributions beginning in Q4FY25. The Hindupur facility expansion is underway with an initial capex allocation of Rs 25–30 crore, while the Anjar facility expansion will proceed following a technical review with suppliers. Full operations at Hindupur facility are projected to begin in 12 months. These strategic investments, aligned with our focus on efficiency and capacity, are anticipated to strengthen the operational backbone of the Steel Pipe segment. Q2FY25 presented a unique set of challenges across various sub-segments of the Steel Pipe business. While market dynamics, price volatility, and geopolitical factors impacted performance, our proactive operational adjustments, coupled with strategic expansions and efficiency initiatives, reinforce a positive outlook for the coming quarters. With a focus on executing our capex projects and leveraging favorable trade conditions, we remain well-positioned to drive growth and value creation in the Steel Pipe business.” Bharat Bhushan Singal, CFO said: “For the quarter, the revenue was Rs 1,529 crore as compared to Rs 1,916 crore. EBITDA and PAT stood at Rs 83 crore and Rs 34 crore as compared to Rs 139 crore and Rs 76 crore, respectively. For H1FY25, the revenue was Rs 3,422 crore as compared to Rs 3,791 crore. EBITDA and PAT stood at Rs 242 crore and Rs 127 crore as compared to Rs 255 crore and Rs 135 crore, respectively. In Lighting & Consumer Durables, for the quarter, the revenue stood at Rs 395 crore as against Rs 377 crore, a growth of 5% YoY. EBITDA and PBT stood at Rs 36 crore and Rs 26 crore, respectively. For H1FY25, the revenue stood at Rs 781 crore as against Rs 751 crore, a growth of 4% YoY. EBITDA and PBT stood at Rs 70 crore and Rs 52 crore, as compared to Rs 68 crore and Rs 54 crore, respectively. In the Steel Pipes and Strips, during Q2FY25, the revenue was Rs 1,135 crore as compared to Rs 1,539 crore. Similarly, EBITDA/MT stood at Rs 2,901 compared to Rs 5,104. EBITDA and PBT stood at Rs 48 crore and Rs 20 crore as against Rs 104 crore and Rs 76 crore, respectively. For H1FY25, the revenue was Rs 2,643 crore as compared to Rs 3,042 crore. Similarly, EBITDA/MT stood at Rs 4,653 compared to Rs 4,758. EBITDA and PBT stood at Rs 172 crore and Rs 117 crore as against Rs 187 crore and Rs 131 crore, respectively. Improved capacity utilization, working capital optimization and cost rationalization enabled us to become a zero-debt company, and having cash surplus of Rs 136 crore in H1FY25.” Result PDF