Conference Call with Everest Industries Management and Analysts on Q4FY20 and Full Year Earnings Performance and Outlook. Listen to the full earnings transcript.
Call Participants: Mr. Manish Sanghi - Managing Director, Mr. Nikhil Dujari - CFO
Introductory remarks from Manish Sanghi
I would like to welcome you all to the earnings conference call Q4FY20. I think I need to start first of all with my regret for not having the call last quarter and also wishing you all safety in coping up not just with Covid-19 but also Nisarga. I suppose during this call, Nisarga is likely to hit all of you and I hope most of you are based out of Bombay. Please be careful, please be cautious and this has become the worst zone nowadays in any case.
The company experienced a challenging quarter in performance. We witnessed a rise in the prices of the primary raw materials. Steel, cement prices rose on account of change in exchange prices, some on account of basic change in the pricing itself. We found that the primary demand that is demanded by the trader was low on account of lower liquidity and this was further impacted by the corona threat and the subsequent lockdown which happened in March. The steel building business was affected due to slowdown in manufacturing activities. Slowing urban demand as a result of Covid-19 affected demand for boards. Our first building materials and particularly roofing starts speaking towards the end of the year which unfortunately couldn’t happen due to the lockdown.
As the government of India declared lockdown on March 23, we subsequently suspended the operations in all units of the company in compliance with the lockdown instructions. Covid-19 has impacted the normal business operations of the company by way of interruption in production, supply chain at production facilities, etc. during the lockdown period. However, production and supply of goods have commenced during the month of April, May at the manufacturing locations of the company after obtaining necessary permission from the government. We were among the first industries to open up and have been working with limited labour while maintaining all safety precautions including the social distancing norm.
The company has adequate stocks to take care of markets. As we open up, over 50% of our sites in steel building space have become operational but they are with restricted head count and with constraints working on account of additional safety, health requirements and a very small manpower. We have made a detailed assessment of the company's liquidity position to continue the operations for the next year and the carrying value of its assets. Based on current performance and indicative features of the condition, the company expects adequate liquidity for continued operations. Company will continue to closely monitor company materials, changes arising out of featured economic conditions and its impact.
In our building product segment, the demand was pretty decent in the first two months of the quarter but suffered a meltdown in March. The roofing demand has come back strongly as rural areas are less affected by lockdown compared to urban areas. Good Rabi output and smooth harvesting have further boosted the demand. We have witnessed strong demand from geographies that have been opening up. However, there are many operations challenges due to shortage of labour, changing rules of factory operations, restrictions on various borders and so on.
The boards and panels business including exports has started more sedately. Great opportunity exists to promote quick construction when the market reopens as a lot of projects are delayed and will at ways and means to finish them quickly. I am also pleased to inform you that the company has played an active role in India's fight against Covid-19 by setting up quarantine centers at many locations across the country. Demand for June and July will really determine the direction of the business trajectory as the urban markets open up. The whole of projects were put on hold with the lockdown and we should see an improved demand as urban centers start opening up.
The increase in raw material prices impacted the profitability of the building products business marginally, the real impact coming from the selling prices. But we expect that we will be able to pass on the prices in the coming quarter. We have worked over expanding hours, distribution footprint to improve the network and better productivity in the coming quarter. In the steel building segment, we delivered around 11,000 metric tons of project demand. Our effort of entering into larger ticket orders have borne through and we expect the same to continue going forward. We meanwhile committed to timely handover of projects to customers with industry benchmark quality in order to create and maintain brand awareness and customer stickiness. We have a strong order book pipeline of around 23,000 metric tons in projects which provide strong revenue visibility.