Concall Summary: HIL Q4FY20

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Business Update

  • Have formed 10 workstreams within the organisation to protect profitability and also health of workers
  • Have resumed manufacturing at all our plants but biggest challenge is retaining workforce
  • Expecting demand to improve due to better rainfall
  • Costs are higher due to increased purchase price of fiber from Russia & Kazakhastan
  • The roofing category is doing very well even in April & May
  • Expecting better performance from Parador in the coming quarters
  • All plans to expand capacity have been deferred
  • Have been spending on cost reductions for Parador business which has led to better operating margins
  • Was able to get a loan from banks in April and hence liquidity position during the year will be comfortable
  • The building material and piping segment have been hit badly because it is related to the real estate industry

Participants

  • Unifi Capital
  • Equitas Investments
  • SIMPL
  • Sundaram MF
  • Nippon AIF
  • Sunidhi Securities
  • Prabhudas Liladhar
  • Finquest Securities

QnA

  • Have been taking operational and sales directives to improve profitability at Parador
  • Have setup joint ventures in Nordic countries for the business operations
  • The e business initiative of Parador has worked really well for Parador in Germany and while that market is growing at 2-3%, Parador is growing at more than 10%
  • At the moment doing business of 40% of last years in building material and polymer segment
  • There are serious headwinds for Parador in the international operations but it has done very well in Germany
  • Utilising all cost saving measures for international operations
  • The advertisment cost going forward will be lower for the current year
  • The price premium for the company’s product in the domestic market still remains
  • The availability of cyrsotile fiber has not been a problem but it has only been an issue of pricing due to now only two players supplying
  • The R&D team has been working on reducing fiber content in the company’s roofing products
  • The company doesn’t make pipes for agriculture sector as profitability is very low and there are too many players in that segment
  • Looking at pull from retailer end rather than pushing product from distributor end 
  • The consolidated net debt (long + short term) is at Rs 643 crores as on March 2019. The company will be paying Rs 100-150 crores from the Indian operations and Parador debt repayment will happen as per original repayment schedules
  • Expecting that prices of fibre will not increase further from the producing countries this year
  • There was a 20 days washout in April for the roofing business but for the balance part of the quarter expecting business to do well
  • Currency translation led to a Rs 6 crore impact to EBITDA in Q4FY20
  • The capex in Parador have been Euro 3.8 million
  • The market in China hasn’t been shaping up well as of yet
  • Capacity utilisation currently:
    1. Roofing segment: 100%
    2. Building solutions: 40%
    3. Polymer: 20%
    4. Parador: 70%
  • The rural markets are open better than the urban markets
  • Summers if Parador business is usually a leaner period so that should be the same this year as well
  • The company will continue divestment of non core assets as the management comes up with any asset that is idle
  • Have increased selling price of roofing products by 10 percentage and have a feeling that even competitors have also increased prices
  • The cost of debt in india stands at 8.25%
  • The putty business is doing very well. It has negative working capital and the brand is doing very well.
Also Read on FinMedium:  Concall Summary: Muthoot Capital Services Ltd Q4FY20

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Karan Sharma
The Concall Summary Guy | CFA | Investor
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