India: Welspun Corp Q2 FY21 production doubles to 268,000 t
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Welspun Corp Ltd. (WCL), flagship Company of the Welspun Group, announced its consolidated financial results for the quarter ended September 30th, 2020.
The key highlights of investors presentation are as follows:
Performance Q2 FY 21:
- Production Volumes more than doubled (268,000 t in Q2 vs. 130,000 t in Q1)
- Q2 FY21 Reported EBITDA at INR 240 cr vs INR 197 cr in Q1 FY21
- Increase in Net Cash by INR 457 cr vs Q1 FY21, closing Net Cash Position of INR 655 cr
- Current Order Book stable at 701,000 t, valued at INR 6,100 cr
- EPS from continuing operations in Q2 FY21 at INR 5.8 per share, up 161% over Q1 FY21
Update on Saudi business:
The Saudi business continues to contribute towards profitability. Welspun share of PAT has increased to USD 6 mn in Q2 over Q1 FY21 which was USD 3 mn. Welspun has also proposed the listing of our Saudi JV viz. WMEPL at the local Stock Exchange. The process of Listing would involve divestment of 30% of stake, split equally between both JV partners.
Key figures of Saudi JV, which is not consolidated as per Ind-AS:
| Particulars in US$ MN | Q2FY21 | Q1FY21 | % |
| Saudi Arabia Ops: | |||
| Pipe Production (MT) | 107,000 | 25,000 | 324% |
| Pipe Sales (MT) | 98,000 | 41,000 | 140% |
| Revenue | 96 | 44 | 121% |
| EBITDA | 25 | 12 | 99% |
| PBT | 19 | 8 | 150% |
| PBT - Welspun share | 9 | 4 | 150% |
| PAT - Welspun share | 6 | 3 | 119% |
Bhopal Project Status:
Considering the business prospects and optimal utilization of assets, Welspun has relocated one more spiral mill from Anjar to Bhopal, which will also commence operations by mid November 2020.
Foray into Ductile Iron Pipe Segment:
Welspun intend to set up a Greenfield facility at Anjar to enter the high growth Ductile Iron (DI) Pipe segment. At approx. INR 9,750 cr (in 2019), domestic DI market size is expected to grow to INR 19,500 cr in 2029. The project is being setup with an initial investment of around INR 1,250 cr (plus soft cost) and is expected to be commissioned within 18 months.
Update on Plate & Coil Mill Division (PCMD) Divestment:
Both parties to the Business Transfer Agreement (BTA) for sale of PCMD, have reiterated their commitment to consummate the transaction stipulated in the BTA on or before March 31, 2021.
Business Outlook:
India:
The outlook for oil remains subject to unpredictability as the recovery from COVID-19 continues to evolve. Minister of Petroleum and Natural Gas said that Oil PSUs alone are spending INR 1.2 lakh crore on various O&G projects during the current fiscal. There is also a strong demand for small diameter pipes from City Gas Distribution projects. The downstream segment too is expected to grow further with refinery expansions and new planned refineries like Barmer, Vizag Paradip and Ratnagiri. During the quarter, Welspun bagged a highly prestigious 45,000 t order from Australia which once again is a testimony of Brand Welspun. Their overall order book in India stands at a healthy 421,000 t.
USA:
Based on the current order book for HSAW, Welspun has visibility till May 2021 and have already commenced production of a large order from their longstanding customer.
Saudi Arabia:
The JV in Saudi Arabia has an order backlog of around 4 months. They are continuously engaged with a large customer in the water segment and are in a favorable position on three large orders.
Commenting on the results, Mr. B. K. Goenka, Chairman, Welspun Group said, We have seen a strong improvement over the previous quarter with higher sales and production volumes. Our performance has been satisfactory and we have bagged several orders in the domestic market as well as a few large orders for exports. Profitability has been healthy, supported by product mix and the cost optimization measures taken by the management.
