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Ladies -- good evening, ladies and gentlemen, and thank you for standing by. This is Janice, the moderator for your conference today. Welcome to the post results conference call of AIA Engineering Limited. We have with us today the management team of AIA Engineering Limited. [Operator Instructions] I would now like to turn the conference over to the AIA Engineering management team. Thank you, and over to you all.
Thank you, Janet (sic) [ Janice ]. A very warm welcome to everyone. Thank you for joining our first quarter update call for the update for the results for first quarter. We have Sanjay bhai also here with me on the call. This is Kunal. I hope you all got a chance to look at the numbers and our presentation, thereafter. As usual, we'll start with a brief update, and we can go into Q&A thereafter. This quarter, we've done 60,000 tonnes of sales, and we've done about 65,000 tonnes of production. The sales of 60,000 tonnes has resulted in a revenue figure of INR 730 crores and EBITDA of INR 211 crores, which is 28.57%. Profit before tax of INR 186.51 crores and profit after tax of INR 149.33 crores. So these are all figures which are higher than similar numbers first quarter last year. But first quarter, as you all know was a quarter when India went into lockdown. And then we also had plant stoppages and so forth. So -- and which is reflected in the production figures, et cetera, for the first quarter last year. We also had a phenomenal fourth quarter in terms of sales done in that quarter. So I think, to that extent, both quarters are not comparable, either on a sequential basis or on a previous year basis. So we would just want to run through this quarter on a stand-alone basis. We've had several headwinds, as you all know, in terms of raw material costs right from our scrap ferro chromium shipping. And over two quarters, we've seen the impact of that coming in. Our price increases have come through -- have started to come through in this quarter and -- which is partly reflected in our numbers in this quarter. So our realization per kilo has moved from INR 107 to about INR 121. Of course, there is a product mix aspect there as well. But a large part of that increase in realization can be attributed to the increase in -- to the pass-through in the increase in raw material cost and other costs like shipping. So with that said, just running through the other highlights, our operating income, which is export benefits, which is at INR 9.62 crores. We don't -- we stopped accruing the MEIS, which is now discontinued and the RoDTEP scheme, which the government's not announced rates for as yet. So the peripheral benefits remain at INR 9.6 crores. Our nonoperating income is about INR 39.52 crores, that includes treasury income and exchange gain realized and unrealized in this period. So some total of that is INR 39.52 crores. Our raw material cost as a rupees per kilo is higher than previous periods, but -- and some part of that's now flown into our revenue figures with a pass-through. Our other expenses, employee benefits, et cetera, are in line with previous periods, including depreciation, et cetera. Moving on, the sub -- INR 39.52 crores nonoperating income includes INR 22 crores -- INR 22.72 crores of our treasury income and INR 16.80 crores, which is our ForEx gain. This compares to about INR 74.76 crores of nonoperating income last -- first quarter last year. And so interest rates have gone down. So we've seen a mark-to-market gain in our treasury investments and which is where our income was at INR 36.75 crores from our treasury and rupee has weakened and there's about INR 38 crore gain on that account. On sequential basis, that figure was INR 23.24 crores, dividend plus ForEx put together. Working capital is comparable. It's a little lower, but broadly it's around the [ 80 ] mark, which includes raw material, WIP and finished goods and receivable days. So nothing to report over there. We keep getting paid on time. From a segmental revenue standpoint, we are at 60,000 tonnes of sales, of which almost 37 came from mining and 23,300 came from non-mining volume. This quarter, we've seen the impact of a reduction in sales to our Canadian customers post the interim antidumping duty that got installed, and I'll share a brief update on that in a bit. But -- so we've lost that volume, and that's largely reflected in the reduction in mining volume in this quarter. Our net cash is at INR 2,037 crores. That is up from INR 1,754 crores in June 2020. I think that brings me to -- from a CapEx standpoint, we still -- we are still constrained with our -- with engineers -- inability of the engineers to travel for installation. Most of our equipment is European, and there are either the country-related restrictions or international restriction on travel. So we still await that. We're still hopeful that we commission that plant by December of this year, if not by March of '21. So in 6 to 8 months, we hope to have the plant up and about. But notwithstanding that, our CapEx for this year should be about INR 200 crores, of which about INR 110 crores is the pending spend on the Mill Lining plants. We are adding two wind turbines for a total of INR 30 crores, which should be commissioned in this quarter, in the current quarter. And we've got INR 60 crores of balance CapEx land purchase, et cetera. So to total estimated spend on CapEx for this year should be about INR 200 crores. I think so with the numbers out of the way, if we have to move on to the business updates, there are a couple significant items that we would like to touch base. One is, obviously, the update on the Canadian antidumping matter. It is still subdued. As in the last leg of that effort is yet to be adjudicated and we'll be a little constrained in sharing details beyond that. But as a process, one is the computation of the duty, which has been done. So interim duty at 32% now stands at 22%. But it gets levy once a separate body, which is a tribunal in Canada, reviews and determines whether damage was done to the local industry. So that process is ongoing, and we'll have the update on that by the end of this month. And we'll know the outcome of it thereafter. The other update is just on the commodities front. Our raw materials, our shipping costs continue to be just out of control, in line with what's happening, as you all must be seeing across the world on almost all commodity types. But pass-throughs, as we keep saying, it's a cycle of pass-throughs. There's pain for a quarter or two and then the cost gets passed through. So it's just a matter of time as far as the increase is passed onwards to the customer. So that's a process we'll have to engage in. That's not a material shift to the company -- to the direction of the company, but it's just effort that we'll have to run. There is also a challenge, as you all know, on the shipping front, right from unavailability of containers to the cost of the containers. And like every exporting country -- or company, we have to figure out our own ways to manage that. We expect some of that to cool down in coming month's quarters. But as we speak, that's also something that we are having to deal with. I think that's as far as costs are concerned. From a business standpoint, we're very excited by the fact that our customers are doing very well, which means we're seeing cement guys now talk of CapEx and setting up new plants. There's a wave of strong conversations for gold and copper mines to set up new capacities. They are selling their metal at record prices. So generally, the industry is doing well, and we remain optimistic that there's a clear case for high chromium to occupy a larger market share from conversion from forged to chrome. And we continue to persevere in that direction. Unfortunately, with the delta variant holding ground in different countries, our travel remains restricted. I mean that's just something of -- we'll just have to wait it out, right? So our existing business with the challenges of cost, but a pass-through coming through. So that's the first front, making sure that our existing business thrives. And as far as growth is concerned, we are gearing up for things to [ easen ] up and travel to start. It will be sooner than we all think about. So we remain in ready mode for that. I think with that, Sanjay bhai, if you want to share an update or...
Yes, yes. A couple of things. The Kunal has covered everything, and it's not a very long period since we all spoke on the Q4 and FY '21 results in Q1. But the good part is that we have sort of shown our resilience and the ability to continue passing on the costs to the customers, and therefore, trying to maintain our margins at the decent level. That's the first takeaway, point #1. Point #2, from an opportunistic standpoint, the business opportunity, the macro level landscape, everything remains the same. Traveling restrictions, we are very hopeful, and we pray -- actually, we pray that the third wave doesn't really surface with that vengeance. And hopefully, then we should be on track of growth. All other fundamentals remain absolutely intact, and we remain very excited about the huge opportunity that we have in mining, particularly and that too on the front of copper, gold, where there is a tremendous focus, duly supported by iron ore, which is now, as we all know, commodities are burning. And we do remain agnostic in one or the other way to the commodity cycles. But having said that, we cannot ignore the fact that an up cycle lifts up the overall sentiment and spirits, and we are very hopeful that we should be back on our growth trajectory very soon. I think with this, Kunal, let's put the house open for Q&A.
Moderator?
[Operator Instructions] The first question is from the line of Ashutosh Tiwari from Equirus Securities.
Congrats on strong numbers on the margin side. So just you mentioned that there is a 13% increase in the pricing relations overall. So what part of this is basically because of the price increase for commodity inflation? Because I think with Canada volumes being 0 in the quarter or mix also would have improved because of this -- because Canada was the only grinding media. So what is the...
So I think majority is pass-through, I would imagine almost 70%, 75% would be price pass-through.
Okay. Okay. And secondly, even margins, we kind of surprised, almost 23% plus margin, if I remove the other income part. And despite the fact that we had -- because [indiscernible] have been effetely going up during the quarter as well and also ocean freight was very high, probably the whole impact would have compare in the quarter. So how come we deliver such a high margin in the quarter? And...
So I think the simple answer is the price part, right? [indiscernible] -- so we've been -- very, very sensitive, extremely alert which price escalation that came in. Our view was that this may continue for a little longer than imagined. And so we were very active with the customers to ensure that the price pass-through comes in. I think, that's the -- long and short of it.
And the Product mix was also a little more favorable.
Yes, at least 70%, 75% of this thing is the price pass-throughs coming in.
Plus Ashutosh, as we had told earlier also, the freight part generally is always try to be shifted in most of the cases.
But the journey is still on, right? The -- we're seeing -- we also have raw material in stock or working capital, work in progress, material, finished goods and produce at old costs, right? So that's where the lag effect comes in. So I think the journey is on. I think the big question every time we get faced is that costs have gone up, will you be able to pass-through? All we're saying is that, yes, the journey started. The serious amount of pass-throughs have been demonstrated, and that will continue to reflect our costs, basically.
And we were able to convince customers to pass even the ocean freight. And that is something that is surprising...
Ocean freight is-- that's a little tricky one. In many cases, yes, in many cases, no, that's a very -- that depends on each customer, the local conditions, et cetera, right? So our endeavor is to pass through, but we do have to eat it at times. So...
Okay. And going ahead as well over the next one or two quarters, the ocean freight will further increase from here? Is that also a possibility?
Yes. Yes. There a chance that...
Sir, the problem is not merely increase of freight. The problem is getting the shipping lines.
Everything. I think there is no economic principle now left for anyone to pursue saying this happened in 1950 and this happened in 1970, right? It's unchartered world all that all of us are living in -- and we would rather predict a worse outcome and be prepared for it, right? We have to be prepared that costs may continue to go up. And to have a -- and respond in kind rather than be reactive and do silly things, right? So that's the way we look at it. If things ease off, good, if it doesn't, we are prepared for it. So we don't really have a view, but we are preparing in that sense that the inflation may continue for some time.
Okay. And obviously, you said that you cannot comment on Canada where there is subdue and things are going on still. So -- but if we assume Canada to be 0 this year, then what kind of volume we can reach? Any comment on that? Any range without Canada?
Our endeavor is to stay -- at least do what we did last year. But we'll have one -- even without Canada, but we'll know. I think that's an answer we'll have end of the second quarter. We'll have better clarity, visibility on that.
To put it in a different way, in terms of, say, new order that we got over last one or two or three years, -- are those orders now ramping up? Or you added a new mine or maybe in cases where basically from saying customers volumes are going up -- can you comment on some trends over there?
It's difficult to comment simply because like I said, there are so many variables that are being played out, right? The world is not predictable in that sense. And to that extent, like I said, our endeavor is to -- at least be at par with last year's level. And it will be a combination of all three existing customers doing more, new customers, we are attempting all of that, right? In what form and shape will ultimately culminate is something that we'll have to actually work through. It will not be fair to give you a projection when we are -- when it's not based on a clear visibility. So internal target is to at least be -- do what we did last year and take it from there.
Okay. Okay. And liner trials and all the new trials will start only when the travel starts?
No, no, trials have already on -- which are existing product, this I will do more than 15,000 tonnes in the Mill Lining space. So we can't wait for the plant and then do trials, right? So -- but the trials from the new plant will start after the plant gets commissioned.
Yes. yes.
But both are in sync, right? Our people in to travel, discuss solutions, discuss engineering -- And there's a lot of effort we're doing behind the scene, right? It's not a -- that project itself requires competence and skill, and we are happy that this time is there for us to not crunch it and deliver something that may not perform. So while you are looking to traverse the market and develop it and prepare it for our new solutions, we are hoping that, by that time, the plant is also ready alongside. But from a product standpoint, our trials are on, our engagement is on. We're already producing and selling between 15,000 and 20,000 tonnes. So it's not a new product for us when the plant comes up.
No, no I was just saying to the new mines only. Okay.
New mines.
New mines, that's linked to overall our ability to travel, right?
The next question is from the line of Sujit (sic) [ Sumit ] Jain from ASK Investment.
My question is on Brazil. we did get some volumes in Q4. Any progress there? And to the previous participant who also questioned, is Canada mostly holds media in terms of volumes because we understand it was 10%. And when did Canada volume technically stop? And finally, most importantly, how do we tackle the way our competition has now started attacking us once they found a gap, they started with Brazil now in Canada. Is there any other geography that would come under threat because now they achieved success using this weapon? And how do you tackle that? Legal recourse, of course, but lobbying by the company at local level, lobbying with Indian government, et cetera.
Yes. Sumit bhai. I think, so I'll break apart your questions. First is Brazil. I think this quarter, we've done about -- total we've done 1,200 tonnes to Brazil, and our endeavor and effort continues. So as we have discussed many times before, there is a -- it's just a difficult time for us, where we are trying to gain inroads and make sure that we keep the customer. I think -- so nothing different to report from previous quarters. As far as Canada is concerned, there is a large forging market in Canada. So yes. What will that ratio be? I mean, we are not absolutely sure how large that forging market would be. But we would imagine it's reasonably large. And the last question was what is the exposure to -- from a protectionist actions that other countries take in our effort to grow globe -- to sell to other countries? I think that question is where it is relevant to us when we pursue certain tactic or pursue a predatory pricing to get market share, correct? If we were in -- if we were really doing that, we wouldn't be having the margins that we have, right? So as a concept, you see predatory pricing where you have large local capacity is actually going out and dumping. You've seen that in steel. That's mostly a -- you've seen that in rubber. You've seen that in oil. These are generally commodity-driven large industries, many state enterprises, state subsidies fueling some of those actions and then they're selling at cost. I think our product does not fall in a similar way, right? There's a lot of engineering. There's a lot of effort. There's a lot of solutions engagement done. So this is a value-add product where we engage with the customer. Now sometimes things do happen where we do face actions where the local producer may want to protect their market. But that is something that we'll have to take one day at a time. From our standpoint, we have to be clear that we don't want to engage in practices that can be considered predatory or expose us to that. Now beyond that, if somebody wants to pursue it, country wants to impose protection measures, there's very little -- that's not in our hands. So as a company, as a business our philosophy is very clear that rather than worrying about how those actions, and how and which form they can come in. We continue doing our work, which is to provide value-added products at a fair price and deliver benefits that we promise. We don't think, over the last 4, 5 years, wherever the -- such actions could have been pursued I would imagine our competitors would have pursued, right? Now It will be not fair to speculate or has had a guess to say how many more can happen or not. But like I said, the answer there is to make sure that we do the right thing rather than spending too much effort on speculating the future.
Just to add, there are a lot of markets now that we are pursuing, where actually the competition is being taken away, so to say, from high chrome. And we are more into the forged. So the idea is when the focus is shifting your question that what -- which other countries' similar threats can be there? Theoretically, it can there, but from a practical standpoint, we don't think any such serious issues are likely to arise given our geographical positioning and the strategic positioning. You get my point?
Yes, yes. So just to clarify on Canada issue. The duty is on both Forged media and High chrome media coming from India, right?
No, no, it's only on High chrome.
Okay. So technically, now you can do Forged media there, right?
Yes, only High chrome.
Right. And when we had this about 25000-odd tonnes of volume in Canada. That was mostly High chrome.
All High chrome. We don't do Forged, no Sujit (sic) [ Sumit ] bhai.
Right. But now tactically, we can look forward to not losing the customer and do some Forged media with them where there is no duty.
No. I mean, one is to get volume, right? But the idea is that forged is something that's chicken, later yin and the yang. I mean the twin don't meet. I mean we believe forged is a commodity product. It's more of product -- production and distribution industry versus where our whole DNA is to engage solution, custom-made products and value addition to drive for the customer. So to that extent, I mean, just to get volume and look a commodity at a low price, may not -- that may not be our strategy. That's not something that I think we will pursue.
Right. So in our annual volumes, there are no Forged media volumes overseas, right? Practically...
Absolutely 0, sir.
Right. Right. And just one request, at least once in a year, if we get to hear from Bhadresh bhai, what is his vision, strategy, et cetera, that will be great.
I will surely pass that message on Sujit (sic) [ Sumit ] bhai.
The next question is from the line of Sivaram from ICC Securities.
Congrats on good set of numbers given the challenges that we had. Just half of our Canadian development like -- is this kind of just to escalate to other countries will force us to rethink on our strategy of make in India and shipping it to the world will be again go back to our drawing board and think of actually putting some facilities in [indiscernible] Canada so that we can tackle these import issues? Is that forcing us to think -- rethink our strategy?
Thank you. I think that's a valid question from your standpoint. Like I was explaining to the previous question from Sujit bhai, I think our focus -- the idea is to engage and offer a solution that gives the highest benefit to the customer, right? Production is important, but also incidental to that value add that we bring. We are not a forging company. We have a lot of forging or auto component companies in India also, which are manufacturing shops, and they have an OE customer, which is buying that large volume from them. Our whole business is absolutely the opposite of that, where a large part of the value addition comes from the front-end engagement and solution engineering that we do with the customer, right? So production is incidental to that extent. When we are selling a product at a fair price, whether it comes from India or it comes from another part of the world should become secondary, right? Now when you're selling to 100 countries, you will have a few countries where the country may be inclined for a protectionist direction. We have to live with that. If you are saying the market is 2 million tonnes there is enough for us to do without having to worry on where that production will come from. I don't think we want to do a knee jerk and start looking at an alternate location. Yes, never say never, who knows a production plant outside of India could be a possibility. But I mean, as we speak today, there are no plans to have any production outside of India, as we speak. I think they're very clear. We add value to the customer. We sell at an absolute fair price. And as long as we stay true to that, I think we should be okay.
Okay. Fair enough. And again, when I look at the mining volumes, it's kind of 6000 it's not something which we estimated -- that is. So where are we like, is it largely to do with this Canadian loss of volumes? Or is there something...?
Yes, I think -- so it's best to look at annual volumes, right? The quarter numbers are I mean it's -- our business is not something that can be looked at every quarter and every few thousand tonnes variance to be -- for us to be splitting hair on. But having said that, yes, we have lost that material quantity in this quarter from Canada, and which is why there's a stark delta that we see in this quarter. I think over a full year, our endeavor is to at least do what we did last year and take it from there. We are not giving the guidance as yet. I think we'll have a better handle when we talk for the second quarter -- after the second quarter. Please appreciate that this has been a super -- this has been an incredible year with only headwinds, right? From us not being able to produce, international logistics, plants not operating, plants not having staff at their workplace.
Material Raw.
Raw materials constrained still the whole commodity, the price shift that came in to shipping, to customers having their own set of issues. I mean, for us to go out and say, yes, we'll do this in that, we'd rather -- we are not a hockey stick business model that a lot of start-ups espouse, right? We are a steady growth company. We believe we have a superlative product. We believe we bring incredible benefits to our customers. There are a few companies in the world that offer this solution. So -- and that's what we are looking at. So a few thousand tonnes here and there in the scheme of things should not be material.
And Canada, for example, supporting we lose theoretically Canada, say, for the major portion of the year, still, as we have maintained in the past, we have a lot of opportunities on which we are working. Unfortunately, we are constrained because of the current environment of travel restrictions. However, we are trying our level best to see what best can be done given the constraints with which we are working. There's ample opportunity and ample headroom available. So internally, also, we are not worried too much on Canada. Canada has happened, so let it be. There are...
And we still await the outcome.
We still await the outcome anyway. But let us assume the worst. Let us assume that Canada has gone completely. Still it is not going to deter us. And there are tremendous opportunities available, and we are very excited about it. It will be converted over a period of time. It's just a matter of time and things to normalize a little bit.
Okay. And in the non-mine, we have seen a huge [indiscernible] this quarter and also the previous quarter. Are there sustainable trends there in the non-mining volume?
Non-mining will -- it's a bonus. That market is not growing. It's not as large as the mining sector. So while, yes, that market itself can compensate for some of the mining volumes, but overall, we're looking at a 5-year, 7-year period that's not going to be the material part driving growth, right? So which is why 10,000 tonnes more or less per se does not change the thesis that a large part of growth is going to come from the mining side, right? And that's where a large part of our efforts and energy is towards growth reside in. If cement grows, utility in India grows, we will get more volume out of it without us having to spend any extra effort on it, right? We are just -- we are well positioned to capitalize on it.
[Operator Instructions] The next question is from the line of Bhoomika Nair from DAM Capital.
Just a couple of things from my side. When we're looking at the Canada interim duty, which is reduced from 30% to 22%, would we start seeing now volumes coming through this was to kind of sustain? Or do we actually wait til August when the final outcome is done, and then we can only possibly see...?
There's no point in doing a crystal gaze in terms of this or that. I think let's just wait until the end of this month. And which is why second quarter if you're saying hopefully they've more clarity and direction in terms of what -- how the year will pan out.
Right. Okay. Okay. The other thing was in terms of the export incentives, which have obviously come off because of the MEIS scheme being discontinued. But if you can just talk about what is happening on the RoDTEP scheme and by when is it expected to transfer?
Government announcement that it's going to come out -- they're going to be announcing rates today.
Maybe in a day or two.
So we expect it soon now. I think there's enough conversation that's been done on it. I think you should hear about it soon.
So Bhoomika, as and when the rates are announced, we will then have clarity and we will be able to book if we are eligible. And if we have that rates, we will be able to book the income of 9 months in this quarter. We haven't booked any income on MEIS for the March quarter and then the June quarter, and now it will be the third quarter. Hello. I think we lost her, moderator.
We lost the line for the current participant. We proceed to the next question from the line of Anupam Gupta from IIFL.
First question is on the volume side, what sort of customer addition -- so let's say, obviously, travel has been very restricted over the last 1, 1.5 years. But what sort of customer addition has happened actually? Because generally, once you add a customer, it will take some time to actually start shipping to him. So over the last few quarters, have you added any customers in a meaningful way?
We have added customers, but not of any material size at this time. So they could be in the trial stage or sample stage or [ smartball ] test that we do. So most customers would be in that phase.
Okay. So ideally then the pick up, even if it happens, it will be a couple of quarters down the line from -- once the travel restrictions open up fully in terms of volumes?
A lot of work has been done. So -- but when travel opens up, how fast can we scale up is also continuing on the customer being ready for it. So they'll be also dusting themselves coming back to regular mode. We expect that their acceptance for what we are trying to do should be fair -- should be there given that their industry needs more production. See, there are a couple of macro direction that the industry is taking. Copper is constrained, right? They want to produce more. The head grade of most ores, most mines is worsening every year. Their use of groundwater is being discouraged. People are asking to -- mines have been forced to use seawater where there is a practical feasibility. So on account of this, our view is that the world will have to grind more ore or even to produce the same quantity of metal, right? So to that all these macro underlying -- underlayers that are there in the industry suggests that there could be support for what we are trying to -- the solution that we're trying to offer directly feed into some of these industry issues, right? So...
Yes, so no doubt about the long-term thing.Not doubt about that, yes.
Our business is over a 5-year period. It's not -- it opens up in the next quarter, you see a 30% bump in volumes, right? It will be gradual, but that's what it is, correct? The upside is that once it comes, the stickiness is there, despite last year, we did not produce for a large part of the quarter, and we still did, we were down only 15%, 17%, right? So the worst period ever, we were only down 15% in the quarter. So that's the benefit of what we have. It's extremely sticky. It's extremely resilient. But it also has its own pace of growth. And there's -- and we are happy with that with the natural order of that conversion.
Right. I understand. Second question, linked to what happened in Brazil and Canada. So let's say, even though you, obviously, have put across the DIY versus the value-added product and there's no predictive pricing, but Brazil still ended up with certain duty on the product. Maybe Canada ends that way -- it doesn't end that way, that is separate. But let's say, what is driving that even though because you have enough facts to prove that you don't do any predictive pricing, but what ends up is still there is an import duty. So how do you look at that perspective? And in connection to that, so far, it's only been, let's say, at the behest of Magotteaux. But let's say, if -- is there a significant risk in your view, coming from, let's say, Molycorp, which has large capacities across the globe than also pushing this in the geographies where they operate?
So I think that's a -- there's several amounts of crystal ball future gazing you want us to do around it. Like I said, every country has its own -- every regime, rather, the current administration in a country has a certain industrial policy or approach and what they want to do with local production, how are they going to support, encourage, discourage, right? How are their local industry is growing? What is their influence on their government? So there are layers of underlying issues, which determine the ultimate outcome, right? Rather -- and for us to make a generic statement saying this led to an outcome or that, we are secure and confident in the fact that the market is far larger than a few countries where we may have a potential exposure. And as long as we do the right thing, which is fair pricing, that's just fate the company will have to live with, right? Today, if the shipping rates are going up, that's not in my hand. If I start thinking [Foreign Language] will not be the right response to that, right? So we are saying that if rates have gone up, they will correct. So today, a country may think of it from a protectionist standpoint, there is a cost -- that's an inflationary action, right? So I think -- and like I said, if you -- for someone who's following trade measures, over a long period. It's generally attracted commodity-type products. You generally do not have such actions on products of our nature, right? So that's historical benchmark on such products. Now if we still get hit, [Foreign Language] these are 5-year actions. It is -- we are looking to run this business for 100 more years, right? So 5 years of a duty is a very small event in that life cycle. We just have to deal with it and move forward.
Right. I understand. And just one question on the -- so obviously, your realizations went up very significantly Q-on-Q, Y-on-Y, whichever angle look at. But raw material price per tonne hasn't moved in the same way. So if I take this quarter is somewhere around INR 46,000 per tonne versus fourth quarter about INR 50,000, first quarter last year was INR 42,000. So is there a risk -- so is the raw material still going to significantly increase in the coming quarters? Or what is driving this sort of disconnect between pricing and...?
I think -- so that is the product mix also coming in, right? We are doing more than -- We have 100 alloys. We've actually about 30, 35 alloys, right? Different products. So that is why we -- because there is -- we don't have a direct correlation on that is where INR 42,000 becoming INR 46,000 does not mean raw material increased 10%. You understand? INR 42,000 was the weighted average of alloys and the products we did at the time and that product mix could be very different. Even within grinding media, we do right from 11% chrome to 30% chrome and that can change for the same customer over that period. So what I'm going to tell you is that the price increase that you see, almost 75% is because of price increase, which is linked to raw material cost. And [indiscernible] both of it, and freight both of them have come through.
Okay. So should one assume, let's say, some incremental growth in raw material prices going forward few quarters? Or is that not the right assumption?
No. Because our current rates are higher, purchase prices are higher than those our average consumption rate in first quarter. So absolutely that -- that's why I explained that it's a journey. I don't think so price increases prove it demonstrates that, that is our -- that is something that there is part of our business model, right? There is enough value where we can pass through significant price increases, right? But it does not mean that the end of the journey because rates -- shipping rates and raw material rates continue to rise and both rate, cost or something that we'll have to pass through, right? Of course, whether it will be fully passed through, what happens, rates stabilize, they start going down? They are variables, but as a broad indicator, a broad directive, I think we should be able to pass through our costs.
With a lag.
With a lag, yes, there will be lag. All of raw material and endeavor to do as much possible for shipping.
Understand. And just one last question. In your pricing. When you add -- start adding new customers, which has not been the case over the last few quarters, will the pricing come under pressure again in terms of realization?
No. So let me answer this a little differently. See, there are approaches which a new customer is added. So one is on a pure, pure cost savings basis where we become very competitive and try to take a customer just on the High chrome advantage. Then there are customers which are added on the DP basis, that is the down process benefit where there is a significant value add rather than just the cost or the price saving. And then there is a Mill Liner approach where you improve the throughput, reduce the power cost, et cetera. So I think it's very difficult to put 1-plus-1 is equal to 2. It could be 11. It could be 111. So each customer is approached with a little different. So initially, before, say, 3, 4 years when we were only focused too much on the cost savings, and therefore, the highly competitive pricing kind of a scenario, what you say was 100% correct. But today, I don't think that would be the scenario that there could be situations where we are, in fact, higher than the competition, much higher, but the value add is so significant that it becomes insignificant -- it becomes immaterial. Therefore, you don't assume that, therefore, there would be a price for, therefore, there could be a pressure. It could -- it may not be so at all.
The next question is from the line of Bhavin from UTI (sic) [ SBI ] Mutual Fund.
Sorry, this is Bhavin from SBI Mutual Fund. So I have three questions. First, this is -- is there a restriction for us based on the agreement with the Magotteaux many years back on setting up a plant outside of India? Whether we do it or not either differently, it's just whether we can set it up or not?
No, there is no such restriction. I mean, I'm not going into the legal nuances, but there is no such restriction as we speak.
Okay. Great. The second question is if you could give us an update on the efforts that we have been putting across in Chile that apparently is one of the larger copper market and enough of focus areas?
Okay. So of course, Chile is one of the most important and focused markets. We are working very, very hard. We have started getting very encouraging results because that's a very large copper-producing country, and our focus is very much on copper, and we are very excited about the results that we are getting. The only problem is, as Kunal explained, because of the travel restrictions, the speed at which we would love to convert the customer is being hampered. But we have started getting initial good results, and we are very, very excited about Chile. We have started supplying, let me put it. I can't share the volumes or anything country-wise. It's not allowed, but we have started making regular commercial supplies into Chile.
Good to know that. The last question is, the significant inflation that we have seen on ferro chrome and the flipping shipping freight, if you could give us what's the kind of competitive loss vis-a-vis a conventional Forged media that we have seen in terms of the price movement of a conventional Forged media versus High chrome media? And if you could also highlight the efforts on the reduction of the cost? So we are looking at your getting more greener and the cheaper electricity. If you could help us understand on the cost reduction front that will be useful.
Your first question is on the ferro chrome versus forged or chrome versus high-end cost. I think generally they move in tandem. Over the last 15 years, I've been looking at it closely, for 17, 18 years, over a lag, they generally move in tandem because underlying demand drivers are the same, right? Stainless steel or steel, they are both driven by similar infrastructure demand. It does go out of sync for intervening periods, but overall, they move in tandem. Your second question was renewable. I think there's a lot of emphasis at the Board level for pursuing greener electricity power alternates and not just from a cost saving standpoint, but just a better source of fuel. And so we already have about 20 megawatts. We're adding another 6. So we should do about 25, 26 megawatts from next quarter onwards. And we continue to -- there's an electricity act or policy, under which we can set up more renewable power -- captive power sources. And we are actively looking at those as well. So if we get -- every opportunity that we get to set up a sustainable -- see, there's a lot of flux in that market as well, right? So [indiscernible] -- has its own issues, et cetera. So we have to trade it cautiously. But with that -- having said that, we are keenly looking at more investments in that -- in the renewable captive space.
Sure. And just a follow-up on the last part. What percentage of the cost reduction that we would have been able to get with shifting off from a conventional grid to renewable. And overall, over the last year or so, what kind of cost reduction that you would have seen, which are more sustainable? Travel is, obviously, you are seeing that it will come back as things return to normalcy because it's the need of the hour of the business?
I think we save at least INR 20 crores, INR 25 crores each year on renewable power. And from other costs, except for travel, I think all our overheads continues. It's only the travel cost that will get added over that over the period.
Yes, but travel cost will have the positive advantage. It will accelerate the new customer acquisition process, and therefore, it is an inevitable part. So I don't think there will be an endeavor to actually save on travel costs. Rather, we are keenly looking forward to increase the travel costs.
The next question is from the line of Ashutosh Tiwari from Equirus Securities.
Yes. So firstly, we talked about the cement company also are announcing new CapEx. So with a large chunk of CapEx will come through vertical mills or horizontal vagility? [indiscernible]
We couldn't get you Ashutosh. What are you saying large part of the capacity will what happen to it?
So the cement plant that you're talking about the new announcements and all, will a decent chunk will come from vertical mills or...
Yes, yes, vertical mills most part.
So when we supply the castings for that, generally, the relations are higher over there right?
Correct. Correct.
Okay. And secondly, from what I understand, it also happened that in a mining customer at a mine site, if there are 3, 4 lines, particularly of these grinding mills and circuits where they'll be, in some cases, they also use forged dining media or low chrome and [indiscernible] probably shifted to high chrome. Is it correct? I mean in your case also is the case?
You're saying some part of the circuit may have forged and the rest may have...
Yes. There are 3, 4 lines, generally. So maybe in one or two, they have forged in certain cases high chrome. Is that correct?
Correct, correct, correct. It could also be stages where you have the first page second, you have 3 or 4 stages of grinding, where the first stages forging, but the second and the third could be chrome. So it could be that combination as well.
Okay. So in cases where there are 3, 4 lines and probably they would have seen the benefit of this high chrome in the circuit. So if they're expanding like you said that even gold customers or other customers where commodity prices going up, there might be -- the mine side also expanding. So in that case, an expansion having chances of the new circuit will circuit using High chrome is higher, right? Is that current assessment?
No, not really. I mean it cannot generalize Ashutosh like that. Could be true. Mostly, generally when they convert, I mean, generally, they convert. I mean.
Fully.
Yes, yes. So we won't have a lot of cases where they're using -- if they're using forged, it could be because forged is the better solution for that plant. But if chrome is a solution, generally, they'll migrate. It could be over a period, so we can't count on that bit for any additional...
So I'm saying if they migrate over time, obviously, when they add a new line, if you've seen the benefit already in the earlier lines High chrome -- when they add a new line obviously [indiscernible].
Yes, yes. That's correct.
The next question is from the line of Priyankar Biswas from Nomura.
Congratulations for a great set of results. So some questions, maybe I repeat because my line got dropped off somewhere in the middle. So like is the 1Q, there would have been like there had been some impact on COVID -- second COVID wave. Of course, the restrictions this time were not as high as, let's say, the like in the first COVID wave. So can you just give us some idea like what was the impact on the company in terms of the sales volume or in terms of cost? I mean, just from the restrictions that may have applied due to this.
There was no shutdown this time. So technically, there was no stoppage as such of production at any of our plants. However, internationally, as we said, the new customer acquisition process was completely at a halt. So we were, so to say, completely focused on the existing customer orders, which, as far as possible, we have delivered on time, notwithstanding the fact that a much bigger challenge, very honestly, a much bigger challenge is and was logistics. So I think, overall, the impact of COVID on Q1, the second wave was, from that angle, negligible. Having said that, the fear factor was very high during the months of April and May and part of June that did see some absentism, some unforseen events happening in the staff or any of their family members, which could -- which would have put some dampening effect in terms of the psyche. But technically, strictly speaking, no major impact.
Just a follow-up on this angle as well.
And of course we were encouraging working from home and all those things during the months of May, particularly May and part of June.
So just following up on this. So is the logistics issue right now kind of normalizing? Or like in the second quarter? Or is it worsening?
Sir, it is so bad. In fact, people are talking of increasing the freight cost. The fact is there is very little availability of containers because shipping lines are bypassing India. So there are much bigger issues and this is a real challenge, not for us, but probably for the whole country. Because if you don't get containers, because there are no shipping lines who are willing to come, it's not a question of just cost alone. It's a question of sheer continuity, and that's what is a bigger issue. But we believe that over the next one or two months, they should start easing. This is the -- so we also depend on all the -- our export agents and our shipping agents who continuously interact with our logistics team.
And if I must...
My answer is, no, the situation is not easing as we speak. But there are hopes that it will ease out soon over the next few weeks.
Okay. Also, if I may, can you give a very rough idea like of the geographic fixed of our sales by broad regions like how much percentage can be, let's say, in North America, Africa, if you can give a rough split of that, especially on the mining front.
So mining will be fairly evenly distributed amongst all the key countries, about 30-odd countries where mining extensively happens, we are present almost in all those countries. Again, it will depend upon the ore so obviously, when we talk of gold, it is Africa, it is Australia. And if we talk of copper, it is Latin America, North America. So it's fairly evenly distributed. Let's put it like that, including Asian countries.
And just following up on a question that probably Bhavin would have asked on the renewable power. So what I gather from the annual report and what you have also said right now is that in 2Q, there would be some commissioning of [ WTCs ].
Yes. 3.7 into 2. 5.4 megawatts will commission in Q2.
So what I understand in FY '21, you had almost like a 17%, 18% of your power drawn from renewables. So post this...
No. 18% in last year fiscal 18% of our total consumption came from renewables.
See, the problem with this wind and solar is that the power factor is low. So you don't get more than 30% of the so-called rated capacity. Average is about 30%.
Yes. So with...
With 20 megawatts, I get only 6 or 7.
So essentially like this 18% after this commissioning should go up to something like 21%, 22%. Would that be a right assessment?
Yes. correct. And we will continue looking at data. We are continuing to looking at that till it is allowed as per the policy. The policy allows us to go up to 50% of our actual requirement from renewable sources. So we'll try to see whether we can reach there.
Queue select question is from the line of Renjith Sivaram from ICC Securities. .
Yes, please go ahead.
Yes. Sorry sir I'm, my line got disconnected last time. So when I look at your overall performance and this quarter, this realization increase has been in [indiscernible] driver and it has been an appreciation in future. So what do you see about the sustainability for the full year if you look at it, do you feel that this kind of realizations are sustainable?
Yes. So realizing we're seeing a function of the price. It's a pass-through. What you're seeing between the previous quarters and now is a function of the price cost inflation, which has been passed through. So as long as costs remain in that level, this prices becomes the new pricing, the new normal, so to speak. And like I said, we continue -- the prices continue to go up. And this is something that we keep evolving with the lag effect.
And of course, don't forget the product mix. This particular quarter, we saw a decent ramp-up in the larger castings, which was also a good contribution.
Okay. So as a year on a whole, this kind of realization will be a function of whether those kind of product mix continues? Is that...
Product mix and continued raw material levels, which we are witnessing today, both.
And how is the competition behaving? Are they also increasing prices to these levels? Or are they trying to play the pricing gain to increase market share?
Nothing in the status quo. Nothing to report on it. Nothing different.
Okay. And sir, last question. This Mill Liner capacity, we have been continuously postponing an increase in large -- last portion of portfolio you feel that if the COVID scenario continues then it's better to postpone it further? Any risk on the timing...?
First of all, we are not postponing. It's because of people can't visit, right? We have got Italian molding lines. We've got Italian -- the German molding lines. We've got Italian heat treatment equipment. So we need for these guys to come to India, right, to -- and stay here for a month and a half, 4 to 8 weeks, depending on the product and install them. Now they need to have the flexibility to travel and have enough confidence that they're not going to be stuck in the country if they do come down at this time. So -- otherwise, so from March onwards, we are in the situation, right? Right, when they were to arrive in middle of May or early may, I think late April, and we were already in the -- an intense COVID wave at the time. So things have been put off. Otherwise, we should have -- had it continued, we would have commissioned the plan this month or next. So we are -- I think I can say, once these guys can start travel we are 3 months -- 3 to 4 months away from commissioning.
Okay. And that INR 250 crores pertaining to that Mill Liner, how much we have put in? And how much is spending of that INR 250 crores of that Mill Liner capacity?
We still have INR 110 crores, will be spending in this year, FY '22.
Okay. And the remaining INR 90 crores, some portion will be to the business and others will be today?
Exactly. Just general CapEx balancing stuff that we need some land parcels, et cetera.
So that was the last question for today.
Thank you so much. Thanks, Janet (sic) [ Janice ], for facilitating this. Thank you all for joining the call. Sanjay and I remain for any questions you may have offline. I wish you a great good rest of your evening, and we look forward to connecting for the second quarter, sometime in October, early November. Thanks.
Thank you very much. Ladies and gentlemen, this concludes your conference for today. We thank you all for participating and for using Chorus Call services. You may please disconnect your lines now. Thank you. Have a great evening.