Carborundum Universal Ltd
NSE:CARBORUNIV
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Earnings Call Analysis
Q3-2024 Analysis
Carborundum Universal Ltd
The company experienced a modest consolidated sales growth of approximately 0.8% over nine months in FY '24, achieving a revenue of INR 3,445 crores. This was driven by mixed segment performances, with Ceramics growing by 4.4% while Electro Minerals saw a decline of 5.2%. Unfortunately, in Q3 FY '24 alone, the company faced a 3.6% quarter-over-quarter decrease.
Despite minimal revenue growth, the company's Q3 FY '24 profit after tax (PAT) grew by 9.2% sequentially and 2% compared to the same quarter in the previous year, reaching INR 111.3 crores. Abrasive segment revenue specifically saw a 3% sequential growth to INR 529 crores and a 3.1% quarter-over-quarter increase. The European subsidiary Rhodius achieved net sales of EUR 15.5 million, an improvement over its performance in the previous year.
A notable achievement for the company is the improved Profit Before Interest and Tax (PBIT) margin, which expanded from 11.2% in the prior year to 13.2% year-to-date (YTD) in FY '24. Sequentially, Q3 FY '24 saw a PBIT of INR 157.9 crores with a margin of 14%, representing a 11.7% growth from Q2 FY '24 and a 6.9% increase from Q3 FY '23.
The Abrasive segment continued its growth trajectory both sequentially and over the previous year, while the Ceramics segment witnessed a slight 4% uptick in sales YTD. The Electro Minerals segment, on the other hand, endured a 10.6% reduction in Q3. Losses in Foskor Zirconia and AWUKO, a subsidiary of the company, were highlighted, with management outlining plans for these units to breakeven in future periods.
Management conveyed efforts to mitigate short-term price pressures, especially from Chinese competition in the Electro Minerals space, expecting these conditions to persist for several upcoming quarters. The aim is to secure volume growth, target around 10-12% margins, and enable key segments like Abrasives retail to return to normal growth rates.
Investments in capacity expansion, particularly in silicon carbide fusion, align with the company's growth objectives. Additionally, the company anticipates saving costs as high energy contracts in Germany come to an end, returning to more favorable contract terms. The subsidiaries in Australia and America are reporting strong growth, suggesting a bright outlook for these markets.
The company is engaging in projects that directly relate to the hydrogen economy, through involvement with solid oxide fuel cell manufacturers, indicating potential growth avenues. Management remains confident that once current obstacles are overcome, they can return to double-digit PBIT margins within the five-year timeline initially set out.
Exports continue to dominate, comprising over 80% of industrial ceramics sales and a growing proportion of refractory sales due to demand from new geographies. This suggests a strategic emphasis on expanding the company's global market presence.
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Ladies and gentlemen, good day, and welcome to Carborundum Universal Limited Q3 FY '24 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwani Sharma. Thank you, and over to you, sir.
Thank you, Viren. Good morning, everyone. On behalf of ICICI Securities, I welcome you all for the Q3 FY '24 Earnings Conference Call of Carborundum Universal Limited. We thank the entire management of CUMI for giving us this opportunity again. Today, from the management, we have Mr. Sridharan Rangarajan, Managing Director; Mr. P. Padmanabhan, Chief Financial Officer; Mr. G. Chandramouli, Adviser and Investor Relations; and Mr. Dinesh Kumar, Senior Manager, Strategic Planning.
So we'll start the call with opening remarks on the results and the outlook by the management. Post that, we can have the Q&A session. I'll now hand over the call to Mr. Rangarajan for his opening remarks. Thank you, sir, and over to you.
Good morning. I'm Chandramouli. Let us start the proceeding with the disclaimer class. During the call, we may make certain statements which reflect our outlook for the future or which could be construed as a forward-looking statement. These statements are based on management's current expectations and are associated with uncertainties and risks, are more fully detailed ever annual report, which may cause the actual results to differ. Hence, these statements must be reviewed in conjunction with the risks that the company faces. Thank you very much.
Thank you, Mouli, and good morning to all of you. A very warm welcome to our third quarter and 9 months earnings call for the financial year FY '24. I hope all of you are doing well and safe and healthy. And in today's call, I have with me Mr. Padmanabhan, our CFO; Chandramouli, our Investor Relationship person; and Dinesh, our Strategy Planning Head.
We'll begin this call with providing an overview of the company's performance for the quarter and 9 months and then open for your questions. Before I start sharing the business performance, I am happy to share with you the news of CUMI declared as the best managed company in 2023 in India by Deloitte. They're running this program worldwide in around 45 countries, Deloitte started this program in India 3 years back. This is an acknowledgment of good work done by team CUMI over many decades. I'm very happy to share this achievement by CUMI.
I'll now start with the consolidated financial results. Consolidated sales for 9 months of FY '24 were INR 3,445 crores, growing at about 0.8%. Could I request there's a hissing sound coming. Can you take the headphone off, please? Growing at 0.8%, contributed by Ceramics growing at 4.4%, Abrasives growing at 3.2% and Electro Minerals with a negative growth of 5.2%.
Consolidated sales for Q3 FY '24 were at INR 1,130 crores with a sequential growth of 0.6% and a de-growth of 3.6% quarter-over-quarter. Growth in Q3 FY '24 over Q3 FY '23 was contributed by 3.1% growth in Abrasives, de-growth of 7.9% in Ceramics and a de-growth of 10.6% in Electro Minerals. Q3 FY '24 performance compared to Q2 FY '24 was 0.6%, mainly contributed with Ceramics segment de-grown at 8.1%.
It is important to bring the perspective of VAW here. VAW, our Russian subsidiary, on YTD basis represents 20% of the consolidated CUMI. VAW grew 25% in 9 months in ruble terms. However, when translated in INR, there's a de-growth of 9%. During the last year, on YTD basis, ruble was converted into INR at 1.27. And in FY '24, on YTD basis, ruble is converted into INR at 0.92. Had the exchange rate remained the same, the overall growth of CUMI on YTD basis would have been 8% instead of 0.8%. We'll discuss this in detail later.
PBIT for YTD FY '24 is at INR 453.8 crores with a PBIT margin of 13.2% compared to PBIT of YTD FY '23, which was at INR 383.8 crores at a PBIT margin of 11.2%. This is a growth of 18.2%. This was contributed by Abrasives growth, growing at 77.8%, Ceramics growing at 13.6%, Electro Minerals with a degrowth of 11.7%. PBIT for Q3 FY '24 was at INR 157.9 crores with a PBIT margin of 14% compared to PBIT for Q3 FY '23, which was at INR 147.7 crores with a PBIT margin of 12.6%. This represents a growth of 11.7% sequentially and 6.9% quarter-over-quarter.
Profit after tax on YTD basis for FY '24 was at INR 326.4 crores, growing at 7.9% (sic) [ 17.9% ]. And profit after tax for Q3 FY '24 was at INR 111.3 crores, growing at 9.2% sequentially and 2% compared to Q3 FY '23. I'll go standalone and then by segment. Standalone grew by 5% to INR 1,937 crores in 9 months of FY '24 compared to last year. The growth was majorly driven by Electro Minerals at 7.2%, Ceramics segment at 6%, Abrasives segment at 3.8%. The growth in Q3 FY '24 compared to Q3 FY '23 is almost flat at INR 635 crores and compared to Q3 FY '24, there was a degrowth of 1.4%.
PBIT on a YTD basis was INR 343 crores with a PBIT margin of 17.7%, which grew at 14.2% compared to PBIT of last year at INR 300 crores with a PBIT margin of 16.3%. The growth in PBIT margin came from Abrasives, which grew at 31.7%; Ceramics, which grew at 10.3%; and a fall from Electro Minerals by 29.7%. Q3 FY '24 PBIT was INR 110.2 crores, PBIT margin of 17.4%, which grew at 7.3% compared to Q3 FY '23. And sequentially, there was a degrowth of 0.4%.
Profit after tax on a YTD basis was INR 256.1 crores. There is an increase of 18.1% compared to FY '23. Profit after tax for Q3 FY '24 was at INR 80.15 crores, resulting in a 10.9% growth compared to Q3 FY '23 and 3.2% de-growth compared to Q2 FY '24. I'll now move on to segments.
Abrasives. Abrasives consolidated revenue on a YTD basis was INR 1,558 crores, growing at 3.2% compared to last year. It was in fact is considered, the growth should have been at 5.8%. Abrasives consolidated revenue for the quarter grew 3.6% (sic) [ 3% ] sequentially to INR 529 crores and 3.1% quarter-over-quarter. On a YTD basis, standalone Abrasives was INR 858 crores and grew by 3.8% compared to last year. Standalone Abrasives grew by 3.2% to INR 291 crores quarter-over-quarter and 1.9% sequentially.
VAW on Abrasives segment. On YTD basis, sales grew by 24% in ruble terms. However, in INR, this resulted in a decrease of 9%. During the 9 months FY '23, the ruble was converted at 1.27 last year and this year it's getting converted at 0.92.
Rhodius. Rhodius in Q3 achieved a net sales of EUR 15.5 million compared to EUR 14.9 million in Q3 FY '23 and EUR 15.2 million in Q2 of the current year. On YTD basis, the sales de-grew by 2% to EUR 46.2 million from EUR 47.2 million during the last year. Due to softening of the demand in parts of Europe, there was a drop in volume to an extent of 8%, while the mix and price enabled a 6% gain resulting in a net drop of 2%. On a YTD basis, the loss after tax at EUR 2.1 million against the loss of EUR 3.4 million during the last year. This means losses are coming down. We told earlier during our last earnings call that at full year basis, a similar loss as that of the last year is what we expect.
However, considering the better performance in Q3 and the positive outlook for Q4, we may lower the losses than earlier expected. The interesting point to note here is that if we exclude the PPA write-off of INR 2.1 million on YTD basis, Rhodius was close to breakeven operationally.
AWUKO. Coming to AWUKO's performance this quarter. We achieved EUR 2.3 million sales against EUR 1.9 million in Q2 of the current year and EUR 2.2 million in Q3 of the last year. Loss after tax in Q3 was EUR 0.27 million against a loss of EUR INR 1.36 million in Q3 of FY '23 and EUR 0.86 million in Q2 of the current year. On a YTD basis, we achieved EUR INR 6.6 million sales, which is 3% lower compared to last year and loss is at EUR 1.86 million compared to EUR 2.42 million during the last year.
As communicated earlier, we expect the losses in FY '24 will be around EUR 2.5 million. We expect AWUKO to breakeven by FY '25, we maintain the same outlook. In America, we had a good growth, I think close to double-digit growth that we have. Standalone abrasives on a YTD basis, we have grown 3.8% to INR 858 crores compared to last year. Industrial and Precision segment had a good growth. Retail segment is below last year. As communicated earlier, Retail segment is impacted due to dumping from China and competition from new entrants. We are working on addressing these challenges and expect recovery in 4 to 6 quarters.
On a YTD basis, the margin has improved significantly to 16.4% compared to 12.9% during the last year, mainly on account of product mix, softening in input costs, improvement in operational efficiencies and better realization. Consolidated upgrades of PBIT on a YTD basis was at INR 118 crores compared to INR 67 crores, resulting in margin improvement from 4.4% to 7.6%. This was mainly due to better performance in standalone, which we just covered, Rhodius and AWUKO, we also looked at it slightly earlier.
Q3 FY '24 PBIT was INR 50 crores against INR 21 crores in Q3 of the last year and INR 37 crores in the Q2 of the last year. The increase predominantly coming from standalone margin moving from 12.9% to 16.4% and lower losses at Rhodius and AWUKO. I'll now move on to Electro Minerals.
Electro Minerals on a consolidated basis for 9 months FY '24 had a sales of INR 1,164 crores compared to INR 1,228 crores during the last year. Electro Minerals consolidated revenue for the quarter was INR 369 crores versus INR 377 crores in Q2 of the current year, resulting in a decrease of 2.4%, and it de-grew 10.6% quarter-over-quarter.
I'll move to the standalone Electro Minerals. For 9 months of FY '24, we had INR 562 crores, and it de-grew -- sorry, grew by 7.2% compared to last year. The revenue for the year -- for the quarter was INR 172 crores versus INR 173 crores in Q3 of the last year and de-grew 10.6% sequentially.
On a YTD basis, the volume growth in aluminas was very high teens and SIC, double digits has been good, but price realization was hit largely by -- due to the dumping by Chinese product. Price realization was hit almost by 9%. Hence, we could not get the benefit of increased volume and sales, our focus will continue to secure volumes. We expect the short-term price pressure to continue.
VAW. Now I will cover the performance of VAW sales for Q3 FY '24. In local currency, it grew by 26% to RUB 2.47 billion compared to Q3 FY '23 and de-grew by 2% compared to Q2 of the current financial year. On YTD basis, sales grew by 25% to RUB 7.4 billion, 19% due to mix, exchange and price realization and 6% because of the volume. The operations are running well, and there has been an increase in sales volumes compared to last year.
When converted to INR, the story looks different and shows downward performance because of the stronger ruble during the last year where it was RUB 1 equivalent to INR 1.27 on an average for the first 9 months whereas it has become much weaker at INR 0.92 this year. They delivered a profit of RUB 392 million in Q3 FY '24 against RUB 411 million during the same period last year. On a YTD basis, profit includes to RUB 1.2 billion compared to RUB 890 million during the last year. Capacity utilization is very good. They are able to sell more in Russia. The mix is now moving to 58% domestic, which used to be 45% pre Russia-Ukraine conflict.
Foskor Zirconia. On a YTD basis, Foskor had lower sales of 23% compared to last year. This is a volume reduction. This is mainly on account of postponement of offtake by 3 top customers and price pressure from Chinese supplies. Sales in Q3 FY '24 had improved compared to Q2. We expect Q4 to be better. We expect Q4 to be normal, and we are working towards improving the sales volume and expect a normal business in FY '25. We're confident of achieving this order. Backlog that we hold as of now for Q4 tells us that it will be a normal Q4.
Overall, Electro Minerals. On YTD basis, PBIT was INR 186 crores compared to INR 210 crores compared to last year. This is a de-growth of 11.7%. This is due to the impact of INR 25 crores in standalone and INR 17 crores in Foskor Zirconia. We will cover this more in detail later for the quarter. PBIT at consolidated level was INR 50 crores against INR 62 crores in Q2 of the current year and INR 82 crores in Q3 of the last financial year. I'll move to Ceramics.
Consolidated Ceramics on YTD basis for FY '24 grew by 2.4% (sic) [ 4% ] to INR 795 crores. In Q3 FY '24, sales of Ceramics was INR 243 crores against INR 264 crores in Q3 FY '23 and INR 265 crores in Q3 FY '24. Standalone Ceramics and YTD basis, it grew by 6% to INR 661 crores compared to INR 623 crores during the last year. Refractory, Glass, Ceramics and Metallized Cylinder business grew around 22% on a YTD basis, but with the de-growth of engineered Ceramics business, the overall Ceramic business segment resulted in a 6% growth.
In Q3 FY '24, sales of ceramic was at INR 213 crores against INR 219 crores in Q3 FY '23 and INR 217 crores in Q2 FY '24. Subsidiaries in Australia and America registered a very good growth. Profit before finance costs and tax at consolidated level on YTD basis was INR 215 crores, growing at 13.6% compared to last year. Q3 FY '24 PBIT was INR 60 crores, a de-growth of 9.4% (sic) [ 9% ] compared to Q3 FY '24 and a de-growth of 18.5% compared to Q3 FY '24 at consolidated level. The PBIT margin has improved from 24.8% to 27% on YTD basis. All companies in this segment contributed to margin improvement.
Now I request Mr. Padmanabhan to cover PBIT margin, debt position, CapEx, cash flow and return on capital employed. Thank you.
Thank you, sir. In respect of the PBIT margin at consolidated level on a YTD basis it is at 13.2% in the current year compared to 11.2% during last year. This is mainly due to the better performance in Abrasives and Ceramics. PBIT margin for Q3 FY '24 was at 14% compared to 12.6% in Q3 of FY '23 and 12.6% in Q2 of current year.
Standalone. On YTD basis, standalone PBIT margin is at 17.7% in the current year compared to 16.3% during last year. This was majorly driven by Abrasives from 12.9% to 16.4% and Ceramics from 24.6% to 25.6%. But there is a drop in Electro Minerals segment from 16.1% to 10.3%. PBIT margin for the quarter improved from 16.2% in Q3 of last year to 17.4% in the current year and improved by 17 bps sequentially. I'll move on to the segments.
In respect of the Abrasives segments, on a YTD basis, consolidated PBIT margins improved from 4.4% to 7.6%, mainly contributed by standalone Abrasives business, margins increasing from 12.9% to 16.4% and losses coming down in the German entities, Rhodius and AWUKO. At consolidated level, PBIT margin for the quarter improved from 4% in Q3 of last year to 9.5% in Q3 of the current year, also improved by 221 basis points sequentially. This was due to the increase in margins of standalone business from 14.2% in Q3 of last year to 17.2% in Q3 of the current year. This is on back of the better realizations and improved operational efficiencies.
Standalone Abrasives margins improved by 50 basis points sequentially as well. In respect of Electro Minerals. On YTD basis, at consolidated level, PBIT margins has decreased from 17.1% during last year to 16% in the current financial year. This drop is a result of standalone business and the South African subsidiaries performance. The margins of standalone business dropped from 16.1% to 10.5%. On a year-to-date basis, volume growth in alumina and silicon carbide has been good. However, price realizations were lower due to dumping by the Chinese producers. This has resulted in drop in PBIT to the extent of around INR 25 crores. PBIT margins at a consolidated level for Q3 of current year was at 13.7%, dropping from PBIT margin of 20% in Q3 of last year.
Sequentially, it dropped by 264 basis points. The margins of standalone business dropped from 15.5% in Q3 of last year to 7.8% in Q3 of the current year and 410 basis points sequentially. The drop in margins is mainly due to the lower price realization despite securing higher volumes.
In respect of the Ceramics segment, on a YTD basis, consolidated PBIT margins improved from 24.8% to 27%. This is mainly contributed by standalone Ceramics business margins increasing from 24.6% to 25.6%. American subsidiary did significantly well compared to last year. At a consolidated level, PBIT margins for the quarter dropped from 23.1% in Q3 of last year to 24.7% in Q3 of the current year and dropped by 314 basis points sequentially. The margins of the standalone business dropped from 23.1% in Q3 of last year to 23.7% in the current Q3 and by 259 basis points sequentially. This is mainly on account of the mix between the industrial ceramics and refractories and product mix within the industrial Ceramics.
On the debt position, the standalone has no debt and it is a debt-free company now. And the total debt at consolidated basis was at INR 119 crores compared to INR 140 crores as of September 2023. The debt-to-equity ratio was at 0.04 at consolidated level. Cash and cash equivalent net of borrowings was at INR 342 crores. On the CapEx, CapEx spend so far at consolidated level is INR 154 crores. At the full year, the investment in CapEx program was INR 300 crores at the consolidated level, as communicated earlier. We expect for the full year we will be incurring a CapEx of around INR 240 crores to INR 260 crores.
In respect of cash flow, our free cash flow on a year-to-date basis during the current year at consolidated level is at 73 percentage of PAT compared to a negative 33 percentage of PAT during last year. At standalone level, it is at 80 percentage of the PAT compared to 10 percentage of PAT during last year. This improvement is mainly on account of the significantly higher net cash inflow from operations and better working capital management compared to last year.
In respect of the return on capital employed, on a YTD basis, at the consolidated level, it is at 18.3% compared to 15.8% during last year. At standalone level, it is at 20.5% compared to 18.3% in last year. On a year-on-year basis, for consolidated businesses, return on capital employed for Ceramics has improved from 38.3% to 46.3%. For Electro Minerals, it has decreased from 29.9% to 27.1%. And for Abrasives, it has improved from 6.6% to 11.4%. For standalone businesses, the return on capital employed for Ceramics has improved from 42.5% to 51.4%. For Abrasives, it has improved from 36.4% to 42.9%. But for Electro Minerals, it has decreased from 38.2% to 27 percentage.
And in respect of the unallocable expenses, basically, it is the difference between the income and the net at the other corporate level, which -- this is not included in the respective segments. The unallocable expenses at the YTD level, there is a difference of around -- there is a reduction of INR 18.5 crores. On a quarter-on-quarter basis, there is a reduction of INR 19.5 crores. And sequentially, it was lower by INR 27.38 crores.
The broad reasons are withholding related to the dividend from our Russian subsidiary accounted in the current year in the FY '23, but not in the current year. That is why the difference is coming. And the second reason is higher exchange gain in the current year and lower project-related employee costs and the completion of the consultancy engagement in the last year itself. There is no expenditure -- similar expenditure in the current year.
In respect of the standalone also, there is the unallocable expenses, there is a reduction on YTD basis. The expense is lower by INR 17.91 crores. Similarly, quarter-on-quarter, the expense are lower by INR 15.5 crores. And sequentially, the expenses are lower by INR 13.36 crores. In all the 3 cases, the broad reason are higher dividend income in the current period, lower project employee costs and the completion of the professional engagement in the last year. And these are all the reasons why we had reduction.
I would now request Mr. Sridharan to summarize.
Thank you. I would like to end the opening remarks with a small summary. In standalone business, volume and price growth is good in Refractories, Ceramics, Industrial and Precision Abrasives. There's a good volume growth in core products in Electro Minerals business, the price realization was impacted due to China dumping.
Reasonable volume growth and strong price realization in Russia. South Africa was impacted by low order intake and partially by China dumping. We are confident in Q4, they would get back to normal sales. Rhodius would breakeven, excluding PPA, losses in AWUKO lowering. CUMI America and Australia are doing well. Free cash flow to PAT is good, and the company is debt free.
PBIT margin of Abrasives India has gone -- has grown from 12.9% of the last year, and we expect this could go up by 350 to 400 basis points. PBIT margin of consolidated appraisal will go up. Our expectation is 200 to 220 basis points. PBIT margin of Ceramics in India was at 24.6%, and it could be at the same level as the last year. PBIT margin of consolidated Ceramics from 24.4% of last year, there could be a pickup of 150 to 180 basis points. PBIT margin of EMD will go down from 14%. We expect at least in the range of 350 to 400 basis points, it will be lower.
Overall, PBIT margin last year was 11.8%, could go up by 100 to 120 basis points. We feel standalone growth could be in the range of 5% to 6% as against what we communicated last time at 10% to 12%. And consolidated sales could be flattish or marginal growth against 5% what was earlier shared. This is largely an impact of the -- exchange impact coming from ruble.
In summary, major parts of the business, volume and price growth is there. Margins are improving. Good cash flows, recovery in Foskor is in place. Growth needs to happen in Abrasives domestic business. Rhodius and AWUKO is on track. With this, I will complete the opening remarks, and we'll be happy to answer your questions. Thank you.
We will now begin the question-and-answer session. [Operator Instructions] We have our first question from the line of Bhoomika Nair from DAM Capital Advisors.
Sir, my first question is on Ceramics. If I see this quarter on both standalone and also on a consolidated basis, there has been a decline in the revenues. I remember the previous quarter, you had highlighted there was some inventory correction, which was happening by the client. So just wanted to understand what is the status of that right now? And how should we look at the ceramic business going forward, given that we are doing a lot of initiatives to grow the same? And also, if you can talk about how metallized cylinders and some of the other wear and industrial ceramics are also performing out here. That's my first question.
Thank you, Bhoomika. I think it's a good question and concern. And I think as we said earlier, it was one customer inventory correction that they were going through, which I think is what currently we are facing. That's why in my opening remark also, we said there's a growth which is substantially high at about 22% in all other business segments of the Ceramics and a de-growth in engineered ceramics, which caused the overall growth of 6%. We believe that once this correction, which I think would get addressed by this year, we will get back to an overall growth of 20-plus percentage as normal that we used to have in the past.
Okay, sir. Sir, can you quantify what has been the decline in the engineer ceramics and in some manner so that we get a sense of what has been the 22% kind of a growth, what is the base number that it can possibly decline to?
No, no. 22% is the growth in rest of the ceramic business. [Techincal Difficulty] metallized cylinders, engineer, wear ceramics, those are the businesses which are growing at 22%. While this is having a de-growth. We expect this correction to get completed. And in the next year, we will have overall growth of about 20 plus percentage.
Okay. So sir, I mean, the question is from a year into the fourth quarter, will there be a further decline in the Ceramics revenue, do you think? Or is this quarter you think that this is the bottom and should not decline further from you?
I don't think we expect further decline. I think we already have seen all the corrections, et cetera. So it should be fine. And I don't think we would get back to any further challenges coming in.
Understood. Understood. Sir, the other question is on the EMD segment, you said and spoke about the Chinese competition and the dumping, which is impacting pricing both in India and also in Africa. That's been a fairly weak, a couple of quarters out there because of this aspect. Are we seeing further reduction in prices out here? Or if you can just give some trend on how the SIC prices are trending and how are we trying to contain this so that our profitability doesn't decline on an overall basis?
Yes. So I think we have, first of all, good volume growth, both in alumina as well as in silicon carbide. Our aim is to definitely secure volumes, and we don't want to lose any opportunity. That is we are very clear.
But the unusual price dumping is what is causing the current problem. And that is how the margins of the Electro Minerals is going down. But I expect that as a business, they have probably bottomed out. But I am not saying that Chinese are going to stop further dumping. We expect this trend to continue maybe for the next 4 to 6 quarters, we need to wait and watch.
See largely, this is not a situation that we are seeing only in India. We are seeing this across the globe. And I'm sure you guys noticed this across industries as well. It is just not in our industry. So that's why I said that the price pressure will continue. We feel that we have bottomed out. There could be some minor change, but I don't think it will go any further down. And I think -- so last year, we ended at 14% PBIT margin. And this year, we could end in the range of about 10%. And that with the -- let's say, if you look at the Q3, we were lower because there are some mix play also there. But I think 10% to 12% is something we should expect.
Okay. Okay. And on the VAW side because, obviously, there's been also a further impact on the consolidated basis because of the ruble translation. So how should we look in terms of VAW revenues growing? I mean they have obviously done very well, as you mentioned, almost a 26% kind of growth for the current quarter in ruble terms. So how should we look on consolidated basis for VAW to continue doing well? And any update on both in VAW and in India on the specialty bit, which can offset some bit of this impact of the Chinese dumping?
So as far as VAW is concerned, the company is doing fine. And I think they are having both volume and price growth. I expect -- see, the conversion rate of last year was abnormal. Conversion rate of this year is not abnormal. This year, it is in the range of kind of 0.992, in that range. Normally, if you have observed the last 5 years, we will be in the range of 0.921. This is the normal trend as far as conversion of ruble to INR is concerned.
Last year, you must have noticed that when the oil prices were going up, Russian ruble had the benefit and then they had really kind of shot up. That is why it went up to as high as about 1.27 or even as high as 1.3. So hence, we had the benefit of higher conversion in last year, which is not forthcoming this year.
Yes, sir. That part of the translation bit I understand. I was asking more in terms of ruble term, this performance that we've seen is sustainable or not...
I think ruble terms, the 10% to 12% growth is sustainable. What they have grown, 23% now, there's certain element of these type of benefits getting passed on. But I think a 10% to 12% growth should be expected.
Right. So sir, on a consolidated basis, one should -- because of this whole translation impact, plus the China dumping that is happening in the other markets, one should kind of building kind of a -- even for FY '25, because this pain might continue for some time, would it be fair to say that we should look at single-digit kind of a growth and 12 odd percent, 10%, 12% margin profile on a consolidated basis?
Are you talking margin profit or a growth profit?
Sir, for FY '25, if I were to build in like a single-digit growth on consolidated revenues and margin profile of 12-odd percent, would that be fair? Or you think there is some upside out there?
Look, I think we -- this year, my guess is that we could end around 12.5% plus, 12.5% to 12.8% type of the growth that we could end. And at the same time, we also had losses this year from Foskor and we also had some challenges forthcoming because of issues in AWUKO progressing in terms of the recovery, et cetera, and the losses in AWUKO and Rhodius to further come down. So if I look at it, I feel that these are losses that would go away and probably we will be in a better wicket. Those are the additional upsides that one needs to consider. As far as the growth is concerned, I will probably come and share with you more when we meet in April or May.
[Operator Instructions] The next question is from the line of Bhavin Vithlani from SBI Mutual Funds.
Good performance, especially on the bottom line front. So I have a few questions. When we acquired the German companies, at that time, we had outlined path to double-digit EBIT margins. So the question here is the same I had asked previously is, do you believe that those level of margins are achievable? Are the timelines that we anticipated are same changing while we are moving in the same direction? And qualitatively, if you could talk about what makes you believe that from a loss to breakeven, we could get to a double-digit margin level? That's the first question.
Second is, if I look at the standalone Abrasives as a segment is -- and after first quarter of '23, fiscal year '23, prior to that, we were clocking high teens growth rate. The underlying growth rate has nosedived to low single-digit, sub-5%. And you alluded to some competitive pressures, especially in the thin wheels segment, while we have seen the margins going up.
So if you could talk qualitatively on the standalone Abrasives segment, it seems that the margin expansion is driven by the mix change towards a higher share of bonded, which is a better margin segment. And how do you see this growth rates coming back? The effort that the company has been taking underway last time, you mentioned that there is a lot of effort being taken to kind of take the growth rate up to double-digit or midteens. So if you could kind of talk about this.
Last bit is you -- in the previous participant's question, you did kind of alluded. But if you could talk about the green energy segment, the hydrogen, where in the previous instances, we have mentioned that as the customer moves to version 1 to version 2, there could be an intermittent stop. But there is a significant increase in the content for CUMI. Consequently, there could be a geometric growth from an arithmetic growth. So if you could talk more about it qualitatively. And that you said that next year, the growth rate for the segment as a whole can jump to 20%. And how does that lead to profitability? These are my 3 questions.
Thank you, Bhavin ji. I think, first, let me take the Rhodius question. So we said that we would take 5 years to get back to the double-digit PBIT margin, and we feel confident of that trajectory. So what is happening in the current context is that, one, Europe is going through demand challenges, which I think you all will know and you're all seeing in -- across many industries. Plus Germany especially went through the huge cost pressure, particularly coming from the energy and similarly on the other raw materials, which are all now slowly coming to -- get back to normal, except energy cost, which is still on the higher side.
So -- but for these 2 blips that they have to face, I think once these things get addressed, we're still confident that we'll get back to the trajectory that we were sharing at the time of acquisition. In fact, the integration and the work that we are also doing is really good because there are a lot of projects that we are working closely.
In terms of Electro Minerals supplies to Rhodius has significantly increased. Similarly, we are able to work closely on various technology projects that we could work together on the thin wheel area, which I think probably we'll share more in the next, say, 18 months, 24 months as we start making use of it.
To your second question, which is largely on the Ceramics side -- Abrasives -- sorry, let me go to Abrasives standalone. Abrasives standalone, I think. So we look at the Abrasives standalone in 3 broad segments: abrasives that goes to the industrial application and precision abrasives and abrasives that goes through the retail segment. The first 2 segments are growing well. And we think that, that growth rate should really pick up, and we should be able to put our acts together well.
As far as retail, the challenge is we are below last year, and that is what is pulling us down. And we are putting a set of various action in terms of retail initiatives. And that is why I said that we will take about 4 to 6 quarters to put our acts together to get back to the normal growth rate of Abrasives that we used to have. So I won't call that just as the demand challenges or competition challenges, et cetera. I think majorly is an internal challenge that we need to start addressing. Definitely, there's a challenge of Chinese dumping and the price per share that we are facing. So that is definitely there. But besides that, we clearly face the challenge of -- our own internal challenges, which I think we will work and put together in the next 4 to 6 quarters.
As far as the Ceramics goes, you were talking about hydrogen-based ceramics. I think perhaps you are talking about ceramics that goes into hydrogen economy, perhaps that's what I'm inferring from your comment is -- yes, so we are working with certain customers who are in the field of solid oxide fuel cell manufacturers. They use a similar technology for the hydrogen and they're using our product, testing, bringing their own products, et cetera. So we will get to that. I'm not sure about your comment of geometrical progression. If there is some impression like this, I would probably ask you to take that away. And we will get back to you once we have clarity in terms of how the product gets established. And then we will -- but definitely, our products is getting used, tested by them. We will share more as we establish our product.
Just a follow up on the last bit is in our previous discussion, we understand the content, like in auto, we say content per vehicle. Is the content per SOFC for Carborundum going up for that product and that itself can lead to further significant growth for the segment as a whole? As you are guiding 20% growth for the segment is in itself a substantial growth?
Yes. I mean we used to be more than 20% growth. It's just 1 customer correction is where this challenge has happened. But I think once that is addressed, we are also putting together a program where how do we address such a thing not to affect us in future. There are 10 different initiatives you're working on to counter that. So considering all that, I am saying that we will get back to the 20% growth trajectory.
The next question is from the line of Harshit Patel from Equirius Securities.
Sir, my first question is on our Ceramics segment. Sir, could you give a flavor on the exports that we do from this particular segment. So what would be the share of exports within, let's say, refractories? And similarly, what would be the share of exports within the ware ceramics, technical ceramics that we do? And over the past few years, have you seen any change in this mix between domestic to exports? Because I reckon seems a lot of newer industries, which are growing in India, let's say, the renewable energy, a lot of new wind capacities coming on board, where we supply those lease and covers. We do quite a lot of business into metallized cylinders as well, which go into the high-voltage equipment.
So since this kind of industries are growing, is there a case for domestic revenues to grow faster than the exports or we will continue to grow faster on exports because we are acquiring new customers over there? So if you can give some idea about the exports within this segment, that will be very helpful.
Yes. So thank you, Mr. Harshit. So as far as the mix change that you are asking, definitely, within the overall ceramics, industrial ceramics is highly export oriented. I would say 80-plus percentage is exports, and that continues to be in that zone. I don't think any major changes happening.
As far as refractory is probably 20% to 25%, but that is where the mix is changing. There is more exports happening. And the orders on industries where we have established in India, people are looking at using similar applications elsewhere. That is how the growth also is happening on the refractory side. So I think your observation of the demand for such products outside, this is a correct observation, and it is increasing more towards export.
Understood. Sure. Sir, my second question is on VAW. Since you have mentioned the pricing is under pressure, especially in India with respect to the fused alumina business, have you seen a similar kind of pressure in the silicon carbide business as well at VAW? Or because we are the largest producer of SIC over there and one of the lowest cost producers, we are still insulated from those kinds of pressures. And given that you have mentioned that we could grow our revenues 10% to 12% in the ruble terms over there per annum, do we have sufficient capacity to grow or we have already put in motion the expansion plans over there?
Yes. I think as far as VAW is concerned, it's just not price alone. I think the ability for them to work with the customer and application basis product allows them to be really competitive, both in terms of the lowest cost manufacturer as well as highly technically capable manufacturers. So these 2 factors allow them to compete in the market so well. And that is also the reason where we feel that this trend could continue.
Sir, in terms of any CapEx plans over there apart from the usual debottlenecking that we do?
Yes. I think we have the normal CapEx plan. Plus I think the last couple of years, we have added a few capacities more in the silicon carbide fusion capacity, which we shared earlier is good enough to cover and address the growth rate that we are looking at.
Understood, sir. Just last one bookkeeping question. Could you quantify what was the sales and profit for Foskor Zirconia for the 9-month FY '24? That would be my last question.
It's about INR 115 crores of sales and INR 10 crores of loss.
The next question is from the line of Amit Anwani from PL Capital.
My first question is on the German subsidiaries. In the past, we did talk about the energy cost contracts on the energy side will be terminating and that can also lead to significant improvement in these subsidiaries. So any update on that? And second thing, despite the volume growth of -- volume decline of 8%...
Could you please repeat your question, sir. You are not that audible.
Am I audible now?
Yes. Better, yes.
Yes. So my first question on the subsidiary -- German subsidiary. Just wanted to understand in previous quarters, you did talk about the energy contract getting terminated, the high-cost energy contracts, and it will be getting into the new contracts. So any update on that? And second thing, despite volume growth this quarter in the subsidiaries, what exactly led to the performance improvement this quarter?
So I think -- thanks for your sharp remembering of this earlier comment. And yes, the contracts, as they end, we get to the normal contract. And the normal one prices are at lower price, which is also is giving us a benefit.
Why the better performance is, I think, see, we picked the cost increase, and it is start softening. And you might have noticed that the prices are coming down in terms of the commodities as well as the energy cost is coming down. And these 2 helped us to bring this benefit in terms of lower losses.
And they have also improved the mix, particularly in terms of the private label customers that they could get more, and that is where it's helping them. Plus, the subsidiaries in Australia and America is doing very well and because of the higher order intake in these 2 geographies. So it's a combination of all these factors helping them doing better.
My second question on lot many companies announcing the semiconductor manufacturing, ensuring L&T also did announce the fabless semiconductor facility, which they will be putting up. So any sense on your business outlook or product basket improving? Will this be incremental growth market, which is going to come? Any assessment on this front for CUMI?
So I think the announcements so far, we have seen are all on the silicon-based fab. So far, we haven't seen any silicon carbide-based fab. So we'll wait if there are better opportunities for us.
Sure. Sir, my last question on the Red Sea crisis. Since you explained that the Ceramics business is more than 80% exposed and overall, we have subsidiaries and we're supplying raw materials to the German subsidiaries as well. So any impact of Red Sea crisis, which are tempting in medium to long term?
Yes. So I think one, in the last quarter, there are some delays in shipment we are looking at largely because of the container availability, those type of challenges. The other challenge is the freight costs going up, shipping time going up. So it's the customers who are trying to get adjusted to this, how they would like to look at it. A lot of them are looking at how can they ship using Asia to get into U.S. and avoiding this route at all. But all these takes customer by customer, as well as their own challenges in terms of urgency versus costs, how do they balance, et cetera. But it is a concern, and we are working customer by customer.
Sure, sir. Last question, if I can squeeze in about the 20% growth which you mentioned in Ceramics for the non-industrial -- nontechnical ceramics. I wanted to understand the technical ceramics contribution this quarter, if you can highlight?
We don't share individually these details.
[Operator Instructions] The next question is from the line of Ravi Swaminathan from Avendus Spark.
Most of my questions have been answered. One is on -- once more on the Chinese dumping that we are seeing. So I mean, if we recall from 6, 7 years ago, China had shut down many of the facilities which were there in the Northern Mongolia belt and that had led to better realization across the world for Electro Minerals. Now this dumping is because are they opening up those facilities? Or is it like what is happening over there? What is resulting in this dumping over the past few quarters?
I think those days, the Mongolia is largely a silicon carbide shutting down, is a story on that. Right now, we face this primarily in the aluminas. And yes, there is a pressure on the silicon carbide as well, but not to the extent of what we are facing it in the aluminas. So I'm not an expert on Chinese economy and difficult for me to comment.
But I think what I see is there is definitely a pressure what we see from the Chinese economy. They want to sustain at whatever the cost. And hence, they want to price it, which I don't know how they are getting compensated, et cetera, which is a very difficult thing for us to understand. But this is the reality.
Understood. Alumina will be what percentage of the Electro Minerals, sir?
Sorry?
Alumina would be what percentage of the Electro Minerals business, overall revenue?
It's a significant percentage.
Understood, sir. And the second question is with respect to you commenting that you can grow the second segment, that is the Refractory and Ceramics business by 20%. Is it going to come from overall market growth, and we have products over there and back driving? Or is it like new product introduction, our efforts into getting into newer markets. Can you explain some more on how the 20% would be achieved? Is it just pure category growth that is going to help us? Or is it a bit of market share gains in the production obviously?
The market itself is growing. And look at the history of us for the last 4, 5 years, we have been doing this. So it's a market and a combination of products what we have done. And the third factor is that higher export as one of the participant was also asking. Refractories, we are able to get into newer geographies, which were never there. So these factors are giving us this feeling that we could do 20%.
And 20% growth is more of volume growth that we are talking about?
It's a combination of volume and price.
That was the last question for today. I would now like to hand over to the management for closing comments. Over to you, sir.
So thank you for all of your time. I hope we could answer all your questions. We tried our best in terms of putting up a decent opening remarks with all your concerns that you may have. But I think I just like to summarize is that I feel that a major part of the business, volume and price growth, is there. Margins are improving, good cash flows and the return on capital employed is improving. Recovery in Foskor is in place, and Rhodius and AWUKO are on track. We need to put our acts together on domestic abrasives. These are some broad sense of summary that I could share. Thank you.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.