Graphite Electrode Major HEG Limited Posts Strong Sales for Q3 FY19

India's Graphite Electrodes (GE) producer, HEG Limited has released its results for the quarter ended December 2018. Below are the key highlights of the company's performance:

Sales surged by 121% Y-o-Y basis: In terms of sales, the company's sales have registered a rise of 121% y-o-y basis at INR 1,865 crore in Q3 FY19 against sales of INR 843 crore in Q3 FY18.

2. Profits surged by 154% Y-o-Y: The company has reported a jump of 154% y-o-y basis in its standalone net profits from INR 342 crore in Q3 FY8 to INR 867 crore for the quarter ended on December 2018 (Q3 FY19).

3. EBIDTA per tonne improved by 135% Y-o-Y: HEG's per tonne EBIDTA in Q3 FY19 stood at USD 10,987/MT thus registering an increase of 114% y-o-y basis.

4. HEG's performance Q-o-Q basis: If we make quarterly comparison of the company's performance against previous quarter of Q2 FY19, while the sales have surged by 4% Q-o-Q basis, its profits have registered a fall of 2.4%.

The key reasons behind this:

o Halt in exports to Iran post U.S. sanctions which have resulted in build-up of tailor-made inventory.

o Realisation was up by 101% YoY basis but flat Q-o-Q basis as quarterly contracts were rolled over at similar prices in Q3 FY19 over Q2 FY19.

o Needle coke costs in Q3 FY19 increased by USD 1,000/MT Q-o-Q to USD 3,300/MT.

5. Company's capacity utilisation rate for Q3 FY19 had been at 83%.

6. In the first nine months of FY19 (Apr-Dec'18), HEG's sales have registered an increase of more than 200% at INR 5,246 crore against the corresponding period of the previous financial year 2018. While its profits have been increased from INR 447 crore during Apr-Dec'17 to INR 2,526 crore in Apr-Dec'18.

7. For Q4 FY19, the graphite electrodes manufacturers' realisations are anticipated to fall amid destocking by China and Iran. The non-UHP prices in the domestic market have been impacted by removal of the anti-dumping duty in Sept'18 and higher imports from China, whereas UHP prices have been impacted by the weakness in steel prices.

Further, both Indian GE producers stopped exports to Iran from Q3 FY19 amid no clarity regarding exemption for GE from U.S. sanctions. Iran comprised 8-10% of volumes for both GRIL and HEG and this has eased market tightness. Also, with expectations for a further price fall in China, the steel mills are de-stocking their GE inventory, while they were re-stocking in panic during 2018.

Graphite India Ltd vs HEG Ltd Performance

Amount in INR Crore
Source: Company financials