HEG Bets On Transition To Electric Arc Furnaces In Steel Industry To Drive Demand
HEG expects a significant rise in demand for its graphite electrodes as steel producers transition from blast furnaces to electric arc furnaces, according to Executive Director Manish Gulati.
A visible shift to electric arc furnaces from blast furnaces in the steel industry will drive a demand spike for HEG Ltd.'s products, the company's executive director, Manish Gulati, told NDTV Profit on Wednesday.
Gulati said that the current market conditions are "not normal," but he anticipates an improvement in the steel industry in the near future.
"This (the current market condition in the steel industry) is not normal, but we hope that in the coming times, steel production will start to rise, and the major beneficiary of that will be electric arc furnaces, and that's where we are going to get our demand from," he said.
HEG is a manufacturer of graphite electrodes that are used to melt scrap and make steel using electric arc furnaces.
The company, which is dependent on exports for a major chunk of its business, expects to see demand recovery across regions as steel producers shift to electric arc furnaces, Gulati mentioned.
According to the top executive, the global steel demand, except for India, has been stagnant for some time now.
"The whole world has been stagnating. India is an exception. India is still growing on the back of domestic consumption, but more or less, you will see the U.S. also stagnating at that level, and Europe also stagnating at that level, but this time is not going to last forever," he said.
"Steel production will start to rise and the major beneficiary of that will be electric arc furnaces and that's where we are going to get our demand from," Manish Gulati added.
HEG Ltd. posted a 90% year-on-year jump in its net profit at Rs 83.4 crore in comparison to Rs 43.7 crore in the year-ago period. This was despite a near 15% drop in its revenue from operations to Rs 478.4 crore against Rs 562.4 crore in the third quarter of the previous fiscal.
Ebitda slipped 7.7% year-on-year to Rs 79.9 crore. Ebitda margin, in contrast, expanded to 16.7% in the reporting quarter compared to 15.4% year-on-year.
Gulati said that the company is likely to maintain these margins in the fourth quarter and the first quarter of the next fiscal with improvement to follow on the back of price hikes.
“In times to come, the price increase should hold effect and should increase. I would say Q4 is going to be similar, given that Q1 next year also looks similar. However, beyond that, I think we should get some pricing raises,” he added.
Shares of HEG Ltd. closed 2% lower at Rs 344 apiece on the NSE in comparison to the benchmark Nifty 50's decline of 0.12% to 23,045.25 points.
