AIA Engineering Ltd
NSE:AIAENG
US |
Fubotv Inc
NYSE:FUBO
|
Media
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
|
CN |
NIO Inc
NYSE:NIO
|
Automobiles
|
|
US |
Fluor Corp
NYSE:FLR
|
Construction
|
|
US |
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
|
US |
TopBuild Corp
NYSE:BLD
|
Consumer products
|
|
US |
Abbott Laboratories
NYSE:ABT
|
Health Care
|
|
US |
Chevron Corp
NYSE:CVX
|
Energy
|
|
US |
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
|
US |
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
|
US |
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
|
US |
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
|
US |
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
|
US |
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
3 424.9
4 813.35
|
Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
Fubotv Inc
NYSE:FUBO
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Uber Technologies Inc
NYSE:UBER
|
US | |
NIO Inc
NYSE:NIO
|
CN | |
Fluor Corp
NYSE:FLR
|
US | |
Jacobs Engineering Group Inc
NYSE:J
|
US | |
TopBuild Corp
NYSE:BLD
|
US | |
Abbott Laboratories
NYSE:ABT
|
US | |
Chevron Corp
NYSE:CVX
|
US | |
Occidental Petroleum Corp
NYSE:OXY
|
US | |
Matrix Service Co
NASDAQ:MTRX
|
US | |
Automatic Data Processing Inc
NASDAQ:ADP
|
US | |
Qualcomm Inc
NASDAQ:QCOM
|
US | |
PayPal Holdings Inc
NASDAQ:PYPL
|
US | |
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Good evening, ladies and gentlemen. Thank you for standing by. This is [ Vikram ], the moderator for your call 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. Over to you, sir.
Thank you so much. A very warm welcome to everyone. Thank you for joining the call. One meeting was yesterday, but on account of the public holiday, we had to have the call today. So we have -- I hope you all got a chance to look at the numbers. There are some figures that will need a conversation, and which is where we'll attempt to try our best to explain those. We had sales of 61,000 tonnes, 61,220 to be precise, compared to 63,000 tonnes -- 63,600 in the first quarter and 61,600 in the second quarter of last year. So first half figures are almost at par with the first half last year about INR 125,900 lacs was the first half last year versus about INR 125,000 lacs for the first half this year. So those tonnages for the second quarter were a little soft. And I guess [ on ] all that, while after finishing with the rest of the commentary. Actual value figures at INR 676 crores for the year and INR [ 1,390 ] for the half year sales as which compares almost at par with the half year numbers from a sales standpoint. EBITDA is at INR 182 crores, and which represents 26.15%, at par with second half -- second quarter last year, down a bit, about 1.5% from the first quarter last year. Depreciation is at par. Otherwise, the next important figure is our tax results, which are at INR 6 crores -- INR 6.41 crores for the quarter, taking a profit after tax of INR 152 crores. This is from a consolidated standpoint. So I'll expand on the tax for the year. So we have elected to go with the 25% regime. As we do that, there's a reversal of about INR 21 crores of additional depreciation, a reversal -- a deferred income tax, which would not be payable now. So there's a reversal on that account. There's another about INR 12 crores on account of the first quarter tax that would get reversed. On a full year going-forward basis without the 20 exceptional reversal of the deferred tax, on a full year basis, we expect our tax to be at with about 23%, 24% levels on account of some tax benefits that we have on our margins in our Middle East subsidiary and small gains from treasury investment. So going forward, our other income for the quarter had export benefits of INR 20 crores. And the other income, which is treasury and other things are about INR 28 crores. One important point I forgot mentioning was our production for the quarter, which is about 59,000 tonnes. And while I'm at it, I'll circle back, I'll expand on the sales figures as well. So this quarter, there were 2, 3 main themes. We went for a reduction of stock, where we built up -- we built stock in transit and at customer locations for -- against orders that we had. And over the last few quarters, we were producing more and building up that stock, we've rationalized some amount this quarter. Second point is, from a sales standpoint, we've seen about 4,000 to 5,000 tonnes that went away on account of the iron ore mine that we talked about last quarter as well. That and on a macro basis, what we are seeing is while the mining industry continues its path [ to have not suffered ] sharp now decreasing production but a lot of the mines are operating under uncertainty around the future as global trade and the U.S. headwinds, U.S.-China trade issues, Brexit. A lot of these global macro factors it seems have seeped into the confidence indexes [ directly ] across different customers, different oil-producing customers. And one action that has started to take on is rationalizing their stock. And we have last seen this in 2007, '08, [ medias ] where instead of buying, keeping stock for 3 months, 6 months, they're just reducing their offtake and trying to optimize their whole supply chain. So that is one reason why we believe we probably lost about 4,000, 5,000 tonnes of sales, which we would have otherwise accrued in this quarter. So these both factors now whether mining sector continues, whether it actually undergoes a downturn and things like that are things that you all understand better. But from our standpoint, for this quarter, I mean these are 2 main macro developments that related to our sales at 61,000 tonnes. This also is the lower -- the reduction of stock, because lower production also meant that while raw material prices fell over last quarter, and we have planned this year, this quarter, we've not seen that convert into margins because we sold out of stock, which had a higher price costing attached with it. So that's one reason why we saw about 1% drop in margin. We also had some increments in [ mortality ] adjustments for the rest -- for the year that has came in from this quarter, and there's about half of -- 0.75% EBITDA that was impacted on that account. So moving on. So now our total stock is down from, say, INR 620 crores in the first quarter to INR 590 crores, and it has reached -- and it's a number of days are planned, but our absolute number of value has reduced. Raw material is flat, receivable is slightly lower on account of lower sales. So net working capital has slightly reduced, and we continue to have a hot try on making sure it remains optimal. Tonnage standpoint, mining continues at 40,000 tonnes. That's at par with last 7, 8 quarters, except the fourth quarter of last year. And the rest, the volume from cement and our other sectors are at 20,860. So that put together 61,000 tonnes for this quarter. From a business update, we remain excited about what we have done on the mainlining space because that -- those developments every single day we've -- are engaging with the customer to bring along benefits which are on a different magnitude. And pushing in a higher wallet share, where they're saying we can now supply the full suite of products. And from that standpoint, every single day, they are making progress, meeting new clients, developing existing ones. What is taking time? So that doesn't take away the fact that customers are conservative. They need time and various factors play into those decision-making signals and it's difficult for us to convert that into a timeline, but we remain excited and optimistic about the whole opportunity that our product offers to the mining segment. Mainline plant is on track. We are -- we expect to have it commissioned latest by December next year, maybe earlier. And that's about 50,000 tonnes. And we are out prospecting business for that actively. We are at 390,000 tonnes total capacity, including the 50,000 tonnes that was commissioned in June. We still have one more 50,000 tonnes of grinding media, which we have announced. And the various issues, as you all know, it got deferred. I think we are now on -- as it stands now, we are yet to start the activities around it. But we believe by December 2020, we should be up and about with that as well. There are technical reasons where we're taking time to make sure that we are making the right equipment decisions, and we need to have surplus capacity. So a quarter here and there will not impact that. So as we said, end of next year, we should be adding another 100,000 tonnes to current 390,000 to take that to 490,000 tonnes. Forex, we are -- rupee is on a weakening bent, and we hope that, that continues. And [ to here ], we are cautiously taking hedges. But because it's very volatile. It was at INR 70 crores, but now it's close to INR 72 crores. And we just need to be cautious. Can't just lock ourselves with heavy hedging positions. But as long as the rupee weakens, fundamentally, that just helps from a cost standpoint. We spend total CapEx of about INR 70 crores this year. We'll be spending majority of the INR 250 crores in calendar -- next calendar year, INR 250 crores, which is about INR 250 crores, we'll be spending about INR 30 crores, INR 40 crores this year, and the balance would be next calendar. And the [indiscernible] [ plant ]. So both of that should come along next year. So to sum it up, and I'll ask Sanjay put in his 2 cents on it. But cement continues as is, equal, flat to slightly growth there. Mining, the market's large. We'll reinforce our [ cost ] strategy with the down process benefits for holding copper now with the EEMS mainlining solution. We believe that the value we have for the client is exceptional, is material. And we believe that this conversion is a matter of time. Obviously, it's been a tough one in trying to modulate when and how, but we keep sharing information. The guidance for this year now, considering the first half and what's happening with the stock movements with the customer that's got destocking situation. We expect full year to be -- to be flat as last year. And so about 265,000 tonnes. We'll be hard-pressed for guidance for next year. We hope to share something next quarter as we get a better sense on a lot of these macro movements and what it means for our customers and ultimately for us. I think with that, I'll ask Sanjay to share his inputs, and then we can go to Q&A.
Thanks, Kunal, and a very good evening to all of you. Just to very quickly share 2 things from my side. I think while the Q2 looks maybe a bit disappointing to -- including to us and to most of the investors who were expecting some good traction. From a fundamental underlying current perspective, I don't think there is any change strategically, structurally or directionally. In fact, some discussions that we have internally have made us quite [ well ], particularly in terms of very successful experiments that have been recently concluded apart from Ghana, which we have already shared, one in U.S. and one in India. So that directionally reinforces our belief that this is bound to translate into significant volume growth and make the addressable market of 2 million, 2.5 million tonnes, truly. And we have quite aggressively addressable going forward. What is difficult to predict, frankly, is the time that Kunal explained multitude and plethora factors. But as we speak, apart from these 3 experiments, which have now become very successful, some 10, 12, 13 locations, similar, very aggressive and dynamically different approach has been adopted and [ both ] are bound to be gratifying. And there is bound to push the volumes, both for liners as well as grinding media at various stages of grinding [ series ]. If you look at a little longer perspective, this, frankly, doesn't worry us at all. This is flattish kind of performance, which we are announcing this year. Having said that, the fact remains that the guidance, as Kunal explained, I think we will not be able to cross the numbers that we have achieved last year. But we are quite hopeful and optimistic that going forward, there should be a volume growth, which should be very satisfactory. Those difficulties, we will not be able to tell you exactly at this point in time. We want to wait until the end of this quarter. The rest all remains the same. Tax effect positive. In fact, on an overall yearly basis, we should be able to save at least 8% of the PBT of around INR 650 crores to maybe whatever odd crores, 700. So around INR 40 crores, INR 50 crores of tax saving is clearly there on both ends that rather explained that this particular quarter because of the reversals of the deferred tax liability provided from earlier. And also the Q1 additional provisioning, the [ INR 6-odd crores ] provision appears to be abnormally low. I think with this, I would request the moderator to throw the discussions open for Q&A.
[Operator Instructions] We have a first question from the line of Ashutosh Tiwari from Equirus Securities.
Firstly, on the -- so the [ average order ] that we got have we started supplying the full quantity to them?
Again. Can you repeat?
[indiscernible]
[indiscernible]
We're at 70%.
Still 70%, 75%.
Okay. And I mean, you obviously discussed about that customers are destocking at the year-end for the working capital management. But in terms of new customer addition, are you seeing some issue or they also have this whole caution?
No, that's the time issue, right? I think -- I don't think that it's cautious. The point is that we are adding -- we've just added a 15,000 tonne, not naming them here, but a gold client with 15,000 tonne annual requirement. There's another 20,000 tonne customer that's been actively talk to it. There's plenty of work going on [ as of right now ]. The only thing is that, and this has been our story for the last 10 years, right, to have the ability to answer, saying this is where it will be used also. Please understand this is 0 sum, right? We're replacing someone in wherever -- whatever that they are doing. And there are plenty factors that play in addition to just plain logic, right? So it just takes time. I think that there is nothing more to it besides that.
Okay. And just -- I mean, because we also commissioned this for based on 50,000 tonnes, so will we see fixed cost increase as indicated, or just it won't be a big increase?
We are a lean company, my friend. Look at our employee cost to sales...
So that's why --
No, no, no.
[indiscernible] impacted the cost amount?
No, I'm absolutely cautious while adding our [ audit ]. We will be a little higher, but not material in that sense.
And lastly, I think home prices have been falling consistently. So have we been passing through the customers or some benefits will come through the running quarters?
Yes. So we are mostly happening. It does -- the amount of stock that is there with translating customer requirement for stock on the ground, it was all older priced growth. So as [indiscernible] comes in, I mean you'll see automatically that feeding through. But also, at the same time, the price revisions will come along. So there should be some tailwind sales. Reducing price is always a better place to be, right?
Okay, lastly, one question on [ Brazil ]. I think any guidance on volume? I mean will that continue any percentages of now or ...?
As we discussed, I [ support ] of the customer where we're not talking specifically about the customer because they don't want us to speak about their situation. But as we speak, we are still status quo.
Okay. And last, one more question on Samarco mine, which -- I mean I talked about the mine coming of the latest ...
It's not end of this year. So whatever will come, will be absolute benefit. I mean, that will flow through. We are supplying 100% of their requirement [ for the share ].
So that will continue -- the supply will continue whenever they start.
Absolutely, we would imagine that.
We have next question from line of Bhoomika Nair from IDFC Securities.
Sanjay, you spoke about that the optimization of the supply chain has resulted in about 4,000 to 5,000 tonnes of volumes being lost in the quarter. But if you look at the cut in guidance as being much sharper. So is it that we are looking at this trend kind of continuing for the rest of the year and new customer addition taking much longer than what we were anticipating?
Yes. How much -- when do you expect the Maharashtra government to cover it?All those crystal ball gazing, right? I mean yes, there is uncertainty from a mining standpoint, right? It's because they are uncertain about what's going on. Sometimes, again, we can only read the leaves, right? It's difficult to read the future. But there is uncertainty that they're at the minor end, one. But that uncertainty there across the world, right? You're seeing a lot of discussion conversations happening. Whether that -- those issues come along, nobody knows. So as we speak, it looks okay, but we didn't expect this. We didn't expect customer telling us, let's do it next month, supply next quarter, we already have stock. I mean that's something that -- there's a new conversation, right? Now when they're now taking stock in analyzing what it means, which is why for the guidance also looks okay. But these are the things that as a small business, we are exposed to plenty of global factors, right? We're exposed to a mine shutting or accident in Brazil, we are exposed to duty structures, and chains are exposed to rate change in cross currencies, right? So plenty of things going on in that sense. We're taking realistic stock and make sure that we have a better handle and not possible to have information beyond the point, but just to take stock and come back with what the guidance looks like.
Okay. So we didn't really have a change?
Macro factors have changed. How they mean -- what they mean for us may not be a straight answer.
As I explained, in one of the opening comments, this looks like a [ type of ] coming that, on one hand, volumes remain flat for a variety of reasons, some conscious, were taken by the company, some beyond our control. The fact of the matter remains that the results of the current ongoing experiments are so exciting, and they're so gratifying that we are extremely confident that over a longer time horizon, there will soon be no question, for example, what we have done in one of the companies in India. Nobody else in the world can do it. You understand? They have never expected that anybody in India or anywhere else in the world can do this kind of a transformation. So it is really destructive and just too good.
Just to add on that, so the power saving that the customer wanted was 15%. With the new design of linings that we did, we are saving 45% saving there, right? So the point is that when a product has a compelling reason and compelling consequence, [ clinic in decrease imagination on why customer ] should not happen.
Right. Most of this, which is where we are coming from. So in a distressed environment, where customers are facing a lot of uncertainty, et cetera. So logically, they should be shifting much faster to you versus a slower decision-making on that aspect.
[ With reasons like that ], I agree with you.
[ We are resilient ], it's not a straight jacket formula. We'll be having typically existing stocks or commitments to buy under the existing ongoing contracts, which a, they have to fulfill, b, there are certain management related issues that they are ready, but it takes another 6 months or 12 months for them to have a commercial contract in place and start the supplies. So what I'm trying to say that structurally, there is nothing that has made us sound the defenses or [ conservative ], okay? All that we are saying that it has taken time, and therefore, probably this year, we will have [indiscernible] definitely look to be a flat year. Having said that, by end of Q3, we will be able to tell you very precisely that, what is the traction we have gained in the [ '13, '14, ]'15, very, very probable ongoing the trials and experimentation and how soon it can translate into a significant dollar increase. This is what I -- this is what I just wanted to say. But I mean this is all that we can say at this point in time.
No, fair enough. No. Just from our perspective, where we're coming from, as you know, there's a huge capacity addition that's coming up next year as well. By FY '21 end we will be close to call like 90,000 tonnes. And in terms of sales will be much lower. So the gap has kind of widened quite a bit in terms of utilization. So is it just a temporary issue in your mind and should kind of bounce back?
We're not bearing capacity. The reference saying that the product has -- well, this is something you can check with your mining friends and others, right? This is something that a product has material, beneficial consequences, right? Which is in our hands, right? We are in front of most customers with it in our hands. We're making sure we're talking to the right people. We're doing trials. We're doing tests. The decision-making is not in our hands. And when we're talking with such a global audience, and they are all states with different issues, not possible general license rate. China rate varies and [ hankers ] down, right? Every single global issue actually has an impact, and which is where with a question of time in our mind and nothing else for me. I think it changed [indiscernible] in all in this quarter.
Understood. And if I may just squeeze in when you're talking about the 10 to 13 trials and experiments. That's for -- under the EEMS agreement? Or is this in general or ...?
Overall, we will be prospecting a significant amount of customers and volume. Some EEMS, some outside, right?
[Operator Instructions] We have a next question from the line of Priyankar Biswas from Nomura.
So my question is, I have seen that there has been a very strong operating cash flow generation, I mean in the first half. In fact, much higher than even your full year FY '19 levels. So I wanted some granularity, like I'm seeing that your data levels have, like, on an absolute terms come down so dramatically. And despite that, I will -- and like your payables have also come down. I mean despite that this strong levels of cash flows, how is it possible in this, like, weak operating environment?
I think the CapEx for this first half was lower than planned, actually, just its balances out there. Whatever it pays on CapEx, working capital remained flat. Last year, you look at the cash generated and what has been deployed in working capital. I think that this year, we've, in fact, reduced working capital. So this half year hasn't generated [ multiples ] of cash. We've added to cash with working capital. So last year, when we went from INR 2,400 crores to INR 3,000 crores, which is INR 600 crores of sales we added, we increased spend of INR 354 crores in working capital. I think that's the main difference between last year and this.
And to add to what Kunal explained, weak operating environment is more relevant in terms of the volume growth anticipated with [ selling ] what has [ happened ]. Correct? So -- but at the other end, there was a tightening in the center management consciously reduced the stock. The CapEx was also relatively low. Therefore, the operating cash flow is very positive. [indiscernible] in the end.
But the news [indiscernible] was at [ INR 175 crores ] reduction in working capital.
Yes. So that's what I was wondering, like in this environment, like this massive reduction in details, how was it achieved that sort of [ has reduced ].
[indiscernible] not reduced. The absolute number was reduced. So fourth quarter last year, look at our sales.
I am talking on the absolute numbers only. So...
[Indiscernible] Our sales in fourth quarter was INR 860 crores. Our sales in second quarter, now INR 676 crores. So when you sold to March data. If you look at March data versus a -- the September data. Correct? It has reduced from INR 710 crores to INR 540 crores in line with the reduction in sales. It was 81 days then. It is 82 days now.
[Operator Instructions]. We have next question from the line of Riya Mehta from Anand Rathi.
I have one question. Sometime, you utilization levels are lower a little bit in the coming quarters. And you were talking about cost pass-through of the benefit you are getting of reduced raw material prices. So do we see any impact on the margins? Or do you think that the current level will sustain?
Good evening. I think from a margin standpoint, we are currency in raw material changes, which generally is a philosopher in master, because we pass them on either way. Margins are independent. Nevertheless, when currency weakens or raw material prices go down, you will have quarters when we make more money versus when they go the other way rupee appreciates or the cost goes up. We have 2 or 3 quarters of impact before the pass-through.
Okay.
Yes, so I mean over a period, it evens out.
I know. But if the utilization levels are on a decrease, what would happen with operating leverage?
Not really. We are -- we're not adding overhead for that. No. So all we're adding is another 100,000 by next December. We're still 14 months away from when the utilization, if it don't grow, number comes into it, no? We expect good [indiscernible].
Okay. And ...
It's a new plan that we set up really expected to utilize, we utilized over 4 years. So that is a normal practice. Processes will go through, no?
Yes, I understand.
It was the long-term clarity about the potential growth is very absolutely there and therefore, we have to keep on adding those capacities because when the growth comes, it can become in an exponential session at that time. I can't say that I have to wait and then create capacity. That's not possible. So this one of the quarters, we are in there doesn't impact the structural fundamental business model.
Okay. And one more thing will be using new customization of another fact that while at the time, I think if when you add a customer, we tend to give some discounts to the customer. So do you think that the discount given to add the customer, which would happen in the coming future to add up to the growth? Will it impact the profitability?
Not really, no.
It's already [ digital ] now. It's a well set cycle now.
And just to give us a future breakup of what will be the replacement demand? And what will be the demand coming from the new customers abroad?
I did not understand. Replacement, 100%, over 97% of our business is replacement. You mean existing customers or the new customers?
Yes, yes, yes.
I don't have the figure on top of my head just now. But that's -- I mean been difficult.
The same customers also buy more [indiscernible] their mines, right? It's just not new customers, but also a larger wallet share.
We have next question from the line of Renjith Sivaram from ICICI Securities.
Sir, when I look at your volume sales, it has kind of come down. And last quarter because of the value you had cut your overall guidance for this year. So given this traject trend, when I look your production is also lower. So does that indicate that this year, we might end up even lower than what we had previously indicated?
I just explained that, right, that we are rationalizing stock at our customers' end as well. So when the customers reduce their off pay, we did not [indiscernible]. When the customer says, we need 500 tonnes and 3 months of stock, we need to keep 500 tonnes, but he makes 500 and reduces that to 200. Then all of a sudden 8 months of stock in front of the client, right? So I need to reduce that. So what we've sold is [ own ] stock. It is why you're not produced in line with what we've done previously. So the production level is not an indicative point about because we're carrying significant amount of stock in the customer range. So that's number one. Number two, going forward, what will happen is that's in line with how the market was in right factors. The guidance remains flat for next year. So last year, we did 255, this year, sorry, guidance for this year, March '20 is flat in line with what was there in FY '19.
Okay. And is this -- what's the reason of this. Are there some larger cement sales coming down?
Sales, we lost some of this iron ore, Brazilian iron ore customer was about 4,000 to 5,000 tonnes a month. We also lost -- we explained what the destocking cycle, right? The customers are talking about uncertainty at their end, which is where it looks like their [ renews offtake ], trying to optimize this stock level. We believe 4,000 to 5,000 of impact in this quarter is on that account. So that's one point and it's in this quarter. Going forward, just a variety of factors feeding in into a slower decimating at the customer end, where they are to convert from an existing solution to our solutions and where it's taking time. And then on account of that, sometimes, we don't have a very tight handle on the timelines, and which is where we are now.
I think what you are talking about is the other segment, which is a combination of cement.
Yes.
It contains plus 45, et cetera. I think we are not to read much. It's just about the quarterly genetic requirements. And this should be quite okay. We don't see anything to worry about.
There's no trend in that. That's just [ large captive ] routine consumption.
Okay. And if hypothetically, the demand situation continues like this, will we be forced to look into our CapEx plans?
As of now, no. We don't think so.
Okay. And the many -- the styles, we have got successfully completed. So when do we expect the sales for this to happen? And will the sales for that happen from our newly going to be commissioned facility? Any clarity on that.
Available capacity in existing plants. So we've already started work on it. We already started the trial that we did came from our existing plant. So and this year, we expect to do 15,000 -- 15,000, 17,000 tonnes of mill linings for the mining space already. So by winter plant comes up, obviously, we start supplying from that plant.
Okay. And in terms of margins, you had mentioned that because we had sold most of the products which were in the higher [ frequency ] that the margins were not good. So going forward, can we expect improvement?
No, no, no, that's not what we said. We said that we have stock in the customers. And when we have stock, right, there's transit stock, et cetera. We've got produced out of the higher price.
Higher price, yes.
So now that will get replaced with current production, the current cost of raw material and even out there.
And -- but no, no, just to complete. So if the prices keep on falling, we can add -- I will have to adjust my selling prices as well. So we generally want to work with a constant margin kind of a situation, not profits out of a falling raw material cost scenario, not take a hit when the raw material rises, and I'm given fixed price. But generally, there's a lag of 1 or 2 quarters by the time all these things happen and there is a price adjustment. So this is an ongoing process. So it doesn't mean that if [indiscernible] is 265, automatically, my margin would jump up by 2%. That is not true.
Okay. And anything in terms of ForEx gain loss, which -- this was there this quarter?
INR 75 crores of gain this quarter.
So we have next question from the line of [ ] from Kotak Investment.
My question certainly relates more to the NEI benefits. And now they're going to be replaced by a new scheme. I just wanted to know the impact on that line item.
So we do about INR 80 crores, INR 75 crores, INR 80 crores of export benefit each year. As we understand now, the new regime that's being expected to come in is not expected to be punitive to us. I mean we expect similar levels...
In some other form.
In some other form. These are taxes, and the concept is not to export taxes, right? Other than direct and indirect taxes. A lot of other levies like we pay electricity duty, which is supposed to compensate for cheaper power to farmers. Now that cost in living, there's a provision, which is the duty of compliance, where that can be reversed back. So the government is coming up with a similar scheme. And I mean that, of course, we cannot comment on what those levels would be. But it's unlikely because this is a level that we actually incur in terms of additional costs.
So we don't expect any risk under the new regime, if at all. That doesn't seem to be the intent of the government. Our intent is not to wear actually not being subsidized, right? We're not being -- in reality, this is actually addressing those innovations in terms of other cost of tax versus paying subsidy to support. It's not a tough textile scheme, for example, right, where there's a clean subvention there.
The reason I'm asking is, since this has come up every year, this has come out of the committee. Wouldn't the government accept a liability on export and [ tend to what the farmers ] comes in. So we're in the same as before, then in that case, there was no need to go down that path by the government, right?
No, so it's a different way. That's what I'm saying, a very different setup. Originally, the levels that have been decided are in line with those. It does matter the major was not set up in a format or [ remittitur ]. It was set up a direct giveaway. I mean the nuances are more important in the sales, right? [indiscernible] The government is going along actually calibrating what the level of the ] realization ] taxes and other levies and coming back with those numbers, what under the [indiscernible], we don't expect it only 4% to 5%. So it's not a significant amount. All I'm going to tell you is we will be surprised if actual number is higher than that. [ Such in the states of ] form will change, content should remain the same, don't worry about it.
We have next question from the line of [ Srinivas Seshadri ] from Mirabilis.
The first question is relating to the Other segment. So this particular segment is highly seasonal, maybe in terms of sales in the fourth quarter. So could you shed some light on why it is so? And also, whether -- and last year, especially the seasonality was quite pronounced. So do you expect that to ...?
There's no seasonality. The one thing that happens is, it's not the [ color mine]100 tonnes per month in their lifetimes, right? Some buy for 3 months, some buy for 1 month. Some people have a shutdown and it moves to the quarter after or the period after. So there is no pattern per se inside the way that it's been done. This is as a market that it is. Well, if you see, not in claims. Your question is there's a underlying trend or a seasonality. There's nothing partially underlying that.
Okay. Because there are last 3, 4 years data really shows that the volumes are more in the range of [ 28,000, 29,000 ] while -- of the total of [ 90,000 ] or thereabouts. So about 1/3 or slightly less comes in the fourth quarter. That's what I was trying to understand.
You see, it's like this, the cement worldwide will be around 70-odd thousand tonnes and the mine...
75,000 tonnes, that and another 15,000.
15,000, that's it.
Exactly, 85,000 to 95,000 tonnes. If you look at last 5 year data, I think it's roughly flat at those levels.
Right. No, I was asking about why in the fourth quarter it's nearly 30% of those will happen in the third quarter.
There is no underlying patterns, really.
Last year, then the fourth quarter, largely...
Yes, this is a very consistent trend over a long period of time that I was asking.
Yes, I know. I think that ...
Again, I don't read anything further beyond that this quantity is not my growth driver, and this is what it is. It's the [ defensins ], it continues the growth driver remains mining and entire management attention continues to be focused on mining.
Yes. No, but it's why the other reason I was asking is because, again, you have given a kind of flat guidance but if we see, again, although I agree that mining is the major division now, but some bit of second half heaviness in the company at some cost driven by the other segment. So that's where the question came from actually.
But it's our agenda. Q3, Q4 combined with targeted [indiscernible] last year. The total sale of 100, okay. 265, 5,000 tonnes is not really material. I mean that's something that we don't spend time beyond the point, right?
Sure, sure. And the second is, just to understand your guidance better. Now when you're giving this flat kind of volumes. Are you [ tapping ] in say, some bit of conservatism in terms of, say, potential further destocking by clients or some other factors which go down the purchase decision? Or are you assuming that whatever has happened has happened and now it's back to normal?
I think we are too small a fish to actually open one ocean in that sense. All we are saying is that after a long time, there's uncertainty that's crept in, in terms of how people look at things, right? And what that means, I mean difficult to opine. They've just started looking at there at conserving cash. I think that's the observation. What it means is it's really difficult. It may just end with this and nothing more, but there's a chance it may continue for a little longer period. People are deferring CapEx plans. People are trying to look at conserving cash. I mean -- and it's not -- that in anticipation of a doom and gloom, right, the doom and gloom doesn't happen and everything is okay, right?
Whether that remain actually happens or not is the question.
Right, right. And then the other observation was that in Brazil, where there was a series of mines getting shut down, some of the mines actually coming back. So there's one mine which kind of restarted. Is it fair to assume based on what you said that we won't have exposure to those mines which are indicating coming back on stream? [indiscernible]
The clients are not that -- I think there's a little like we explained last time to radio silence on what's going on. So we're not able to penetrate under that veil on what's really going on. So what material is being used where there is -- there's a lot of other potential consequences that of that accident, and we are just on a wait and watch really.
Sure, sure. But the one which opened this quarter itself, at least to our understanding, there's nothing which has come to us incrementally in terms of [indiscernible]?
No, nothing. We've not received anything this quarter.
Okay. So if I can squeeze one last one. There is this interesting comment you made about the experiment in India where the power saving was actually 45% and not 15%. So I mean if you can just throw some more light on the driver [ gain back ] the nature of clients without naming it and whether this really changes your perception of the value proposition across at least a subset of clients [indiscernible]?
Actually, this -- so the point is that we've been doing this in the cement space all our lives, right, which is optimizing throughput, optimizing grinding which is optimizing throughput, optimizing power consumption, yes. Mining, we started only with supply and grinding media. We're just a supplier of a part. We're doing lots of things around that. We never touched process in mining. Okay. With the EEMS and process, if you want to influence it, the only way to do that is to through mill design, lining design. All right? Which is where the EEMS conversation comes up, where we've got exposure with that process. Where we've got exposure with cause and effect on what does what, right? There's no company in the world today that goes to a mining customer and tells them, "Here's your throughput. Here's your power consumption, we guarantee so and so, we guarantee throughput higher by 20% and power consumption lower by 20%." There's no company in the world which is doing that to mining right. They're all left to their own devices. The large companies would have had their own internal groups. But beyond the point, there is -- what we are doing is currying innovation, right? We're changing the fundamental design of how grinding is being done. Yes. So every single client that we will go to -- we announced this for a gold client in Africa last quarter, correct? Well, the reason for making that announcement is that it's a material development, whether it's in that solution. We know it works. The other team has got lots of experience doing it, but this is proof of pudding, right. For any client to go out and say, so we are talking, for example, I'll not name the continent, another top of mind, for example, okay? Where their core is becoming coarser, which means the mill capacity is going down, the grinding capacity is going down, yes. And we are giving them a solution to give them 30% higher or 25% higher throughput by just using our mill linings. The point is the conversation, the level of conversation, the engagement that we are doing is at a very different level. And that includes -- and when we are doing that, we are looking at the whole system, which is mill linings for the gold lending circuit, grinding media for all their circuit to gain a guaranteeing host of things, an optimized grinding circuit, which is throughput and power consumption, better rates of these wear parts, yes. And for gold and copper, talking about recovery of the metal. So I mean this is all back then, and we would be -- I'm being not immodest in saying that we are one of the absolute handful which is going to in terms of insight influence your parameters, right? The conversation is not because I'm 10% cheaper, right? Every single client that we deal with is where we are going out and making such meaningful and material improvements to their ecosystem. This is what gives us this confidence that -- it may take time, but we are not building a company only 1 year or 2 years, right? We would hope that this market presence continues for a long time, and we are one of the Indian companies that shine as a leader in that industry.
So we have next question from the line of Hiren Dasani from Goldman Sachs.
All right. So just wanted to get a little bit on the macro uncertainty in your conversations with clients, is it more related to the U.S.-China issue or people are referring to something else?
No, it's just uncertainty. I think what people have got anywhere happening without any macro parameters striking out, that confidence is low. U.S. is coming off of a long expansion, okay? U.S. has its own issues around not being able to add capacity and things like that. Any U.S. downturn mixed with Brexit consequence, people don't understand what's happening with Brexit, there's U.S., China, where China is shrinking, China shrinks, the rest of the ecosystem suffers, okay? So all of a sudden, you've got this 3, 4 very large macro sectors, can the -- can those convert into a perfect storm? I think that's the question majority of people ask.Some [indiscernible] tightening the whole stream. Revenue we see no expansion, I should let these things tide over, we will go back to the drawing board next year, correct? What are things on the table. Let's look at optimizing. So they're getting inward. They're looking at optimizing their own operations. Is what it is. I think it's not any single point per se. I think we will not expect next 5 years to be a great global expansion in trade. And any one factor can actually lead back to a serious situation. We don't know where those mobiles are or where those tectonic shifts leads are moving along. So that's uncertainty, I think, and people are saying let's optimize and let's conserve cash. I think that's the summary.
So it leads to a little delay on their part in making a relatively bolder decision to change or to shift to a new solution. Because there is always an element of buildup and uncertainty, not from our side but from their side, which makes them go slow on this decision, and that is what is perhaps taking a little more time in the process of conversion. This is what we meant actually.
My only limited point was if you look at some of the [ non-core ] commodity prices, I mean by and large, they are in that range over the last few months. So there are not new uncertainties, but it is the client actually are probably happening now versus the years. [ indiscernible]
You're right. Your point is right.
Yes. And the other point is like on the tax cut. So on 700-odd crores of PBT, you said, unfortunately, you can see [indiscernible] growth with the lower tax rate. I mean how are you thinking about it? Is it straightaway pass through to the EPS profit growth? Or do you think you can use those savings to, let's say, do more discounting on your product to push more volumes or [indiscernible]?
That was never a consideration. In the past, we have been always handsomely in the robust play taxpaying company. This just happens to be an additional benefit. At the PAT level, therefore, be at the EPS level and see, eventually, and then when we take a call about what to do with extra cash, if we have a little bit of more extra cash that will be left to be, that's it. But it definitely improves the balance sheet in terms of EPS, PAT, et cetera.
That's for sure. I was just thinking about like in there are few not exposure into companies like yourselves, but for domestic companies, which we've talked about using that benefit to score demand over this period today.
That correlation, unfortunately, opportunity does not exist. I mean our strategy doesn't depend on how much tax size is. [indiscernible], you see?
So we have next question from the line of Varun Ginodia from AMBIT Capital.
I just wanted to have one clarification first. You said 15,000 to 17,000 mainlining products that is sold this year. That means it's in first half, implying 20% share of total mining volumes.
No, that before the full year, not the first half.
Okay. So first half would be half of that. [indiscernible] If my understanding is correct, mainlining products are higher-margin products, right, compared to grinding media. So as they gained share in the overall mining volumes, your EBITDA margin should steadily go up going forward? Is that a fair assumption?
Not really, because they're already part of that mix. Now it's not a singular choice to do just mainlining right? The idea is to sell the whole package. And the margins have to be looked at from that standpoint. Our current margins have a certain product mix. We expect that to continue to be in grinding media as well, right?
Okay. Because I thought it's a more process-driven approach, so it becomes more...
That is true. But it [indiscernible] we're doing not just midlines doing other mill parts as well, other than grinding media. Because so other than grinding media, there are also parts that we do, which are higher margin. And so there's a product mix, the higher-margin and the less -- less-than-higher margin and the product mix ratio should continue with this.
So we have next question from the line of Anupam Gupta from IIFL.
So 2 questions. So first, on the guidance. So if I recall right, Q4 '19 had higher volumes. And then you had said that there was a pent-up demand was off the bookings which have happened in 2Q and 3Q. And if that is the case and understanding your commentary on some equipment in CapEx and regression of spend by the miner, does second half, being flat, seems possible or there an downside to that?
I think there's the flat itself is a downside, we're already down-pressured our expectation, we should be at a flat level. And as we speak, as we look at things forward, look, we should be at a flat level.
Okay, understand. Secondly, you gave very strong commentary on the trials which have been doing for liner. And obviously are pushing a lot of benefits to the customers?
Yes.
Will that reflect more in loyalty of the customers to you, i.e., guaranteeing volumes? Or will you be able to monetize that also in the form of contents on liner and [indiscernible]?
I think the point is that today, for a customer, if there are 5 vendors doing different parts, what is one vendor doing 5 and in effect, being able to give a guarantee on the whole system. Their business is to convert all to metal, right? And there are costs of power and other things, alongside this productivity, there's metal recovery. If we can influence that by having the higher control on the system, it's a win-win situation, right? We get to sell more. And in return, we add value in terms of giving a better control to all of that, which is where I think the stickiness of the customer seems going up. When the engagement is not just supplying a part, what, not just one type of part, but a cross-section of parts. So it results in all of that, so what does loyalty mean? The value that's being provided, which is exceptionally lower and above standard and ordinary. And that's been what we've done all our lives, right? Last 35 years, that's the hallmark of AIA that we would not do anything that is just a product supply, right? There's always engagement that's deeper and wider and the customer clearly recognizes that by supplying this part, there was contribution on many other factors of adjoining process.
Right. So let's say, as the benefits of these trials start flowing, it will be first in the form of liner volumes going up from the existing avenue that ...
And grinding media as well.
And grinding media as well. Now they're in those plants, many of these plants where we may already be supplying lining media and others will use this and then take more grinding media, a variety of things.
Okay. So basically, the liner benefit was only immediately come in FY '22, when your capacities for your personal. But grinding media can flow through in the --
No, no, even at the current level mill lining, [ 10, 20 years. ] Because we can do another 10,000 tonnes of mill lining from current capacity. The rest will come from, but that will also be a 3-, 4-year process. The plant is not going to be built up on day 1, right?
Ladies and gentlemen, that was last question. I now hand the conference over to the management for closing comments. Sir, over to you.
All right. Thank you all. And as always, Sanjay and I remain available for any other queries you may have. And hopefully, we have a better guidance for volumes when we talk again next quarter. Have a good evening. And...
Thank you very much.
Yes. Thank you.
Thank you very much, ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using Chorus Call Conferencing Services. You will please disconnect your lines now. Thank you, and have a great evening.