Graphite India Books Strong Profits in Q4 FY18 amid Buoyancy in Graphite Electrode Industry

Graphite India Limited's (GIL) fourth-quarter numbers for the financial year 2017-18 are out and the company's sales have registered a massive growth of 205% y-o-y basis at INR 1,212 crores against INR 397 crores in Q4FY17.

Also if we analyse company's entire year performance for FY 18, GIL sales have surged by 114% from INR 1,392 crores in FY17 to INR 2,983 crores in FY18.

In terms of profitability, GIL's operating profits have surged significantly from INR 46 crores in Q4 FY17 to INR 705 crores in the corresponding period of FY18 whereas in case of entire financial year, the company's profits have risen from INR 159 crores in FY17 to INR 1,441 crores in FY18.

The key reasons of underlying growth in company's sales and financial performance are higher volumes, price realisations and capacity utilisations.

According to the company's chairman Mr. K. K. Bangur, one of the important changes for the GIL in FY18 was the phased closure of induction and blast furnaces in China in an attempt to curb pollution and comply with international environmental standards.

This industry development supported commissioning of new electric arc furnaces (EAFs) in China giving rise to the demand of graphite electrode which is a key raw material for EAF. Further, the closure of polluting electrode capacities in and outside China also contributed to this transition in demand for electrodes.

Such structural changes resulted in a paradigm shift in graphite electrode's industry demand and supply dynamics which led to the recovery of GE prices globally adding to the sales and profits of the company involved in this industry.

He also said that the despite the strong performance of the company in FY18, its revenue and margin growth was held back by the timing of the fulfilment of certain low price orders. However, as these orders are now mostly completed, the benefit of higher prices is going to be reflected in company's current financial year performance.

Looking at the prospects of Graphite India in the current financial year 2018-19, the company's capacity is fully booked in the first half of the year mostly at current price levels which is going to result in significant margin expansion and enhanced profitability.

Graphite India is India's one of the largest Graphite electrode producers and one of the largest in the world by total capacity with an annual capacity of 98,000 tonnes. The company has total four manufacturing plants with three in India and one in Germany.

Graphite India's Financial Performance

Source: Graphite India's Earning Presentation