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Ladies and gentlemen, good day, and welcome to IFGL Refractories Limited Q4 FY '22 Earnings Conference Call hosted by Monarch Networth Capital.
This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Sahil Sanghvi from Monarch Networth Capital. Thank you, and over to you, sir.
Yes. Thank you, Faizan. Good evening to all. On behalf of Monarch Networth Capital, we welcome you all for the IFGL Refractories Q4 FY '20 Earnings Call. We are delighted to host the management and from their side we have their MD, Mr. James McIntosh; and their CEO, Mr. Kamal Sarda. So without any much time, I'll hand over the call to Mr. James McIntosh for the opening remarks. Thank you and over to you, James.
Okay. Thank you. Good evening, ladies and gentlemen. Thank you for joining us on the IFGL Refractories Limited Q4 and FY '22 Earnings Conference Call. I hope you and everyone around you are safe and in good health. Along with me on the call we have Kamal Sarda, Director and CEO; and SGA, our Investor Relations advisors. We have uploaded the results presentation on the stock exchanges, and I hope everyone has had a chance to go through the release.
Now let me share some of the business highlights with you for the year that's gone by. During the year '21-'22, our global business was impacted by the COVID-19 pandemic, which led to disruptions to a greater and lesser extent for our company worldwide. The pandemic, combined with other well-documented conditions, resulted in disruptions to our global supply chains and caused unprecedented cost increases in a number of areas. First one is freight, particularly for vessels originating in China used in supply of our products and receipt of raw materials and also from our manufacturing plants in China. Cost increases in all raw materials, plant consumables, and components used in the manufacture of the products, irrespective of the location of supply shortage of certain key raw materials leading to supply and demand issues resulting in costs doubling or even tripling prior to our cost before, energy cost increases across all sectors needed to run our plants and equipment, and inflation costs leading to labor cost increases. But despite all of these cost increasing and supply chain issues which we faced during the year, our company posted its highest ever yearly revenue in the financial year on the back of strong demand. A special thanks has to go to all of our employees worldwide as this growth is a testament to our tremendous team as they worked long hours to ensure that we continued supply at elevated levels throughout the many challenges faced.
It's also very important to note that we had received strong support from our customers worldwide for price increases in the products we supply. However, as we have said before, there is always a time lapse between our receipt of cost increases from our suppliers. So when we realize the increased revenue from the price increases received from our customers and this has contributed to a slightly reduced profitability.
[indiscernible] between Ukraine and Russia has resulted in an unprecedented situation which has adversely affected operations of 2 of our customers in Ukraine located in Mariupol area where hostilities are still continuing, and we've been unable to make contact or have any news through reputable third parties regarding the current standing. As a consequence, the company, as a matter of abundant precaution, have made provision for these, and whilst the company is hopeful of the ultimate recovery of [indiscernible], we decided to follow a conservative accounting approach.
The World Steel Association forecasts that steel demand will continue to grow through 2022 and into 2023. However the outlook for 2022 has weakened due to inflationary pressure, which is further reinforced by the events surrounded by Ukraine. The impact of the war will be particularly pronounced in EU due to its high dependence on Russian energy and [ refugee influx ]. Steel demand in the developed world is forecast to increase by 1.1% and 2.4% in 2022 and '23, respectively, after recovering by a quite large 16.5% in 2021.
Further comments regarding the main markets affecting IFGL business worldwide are as follows: in the USA it is expected the economy will maintain strong momentum, although high inflation is a concern with inflation at 8% in February 2022, the highest since the early '80s. The recovery is expected to continue in 2022 and '23, albeit at a slower rate, reflecting the high base effect and monetary policy tightening to tackle inflation. Steel demand will be supported by a recovery in nonresidential construction, auto production, and investment in the energy sector as well as capital investment projects as a consequence of the infrastructure build. In India, in 2022, construction and manufacturing will likely be supported by spending on infrastructure and a gradual revival of the automotive production, which is expected improvement, and the semiconductor supply expected raw material supply constraints in the international market will result in higher domestic mining output and the support of capital goods sector. Infrastructure in 4 key areas: national highways, railways, water infrastructure, and government housing will remain the main driver of construction growth. New projects in the residential real estate segment are all expected to gather pace. In Europe, the impact of the war is expected to be larger due to Europe's close trade and energy links with Russia. Russia is the fifth largest trade partner of the EU accounting for 5.8% of the EU's total trade in 2021.
Energy makes a lion's share of the EU's import from Russia. About 45% of their imports and 25% of their oil come from Russia. Italy and Germany appear the most vulnerable amongst the major EU countries as their dependence on Russian gas exceeds 45% of the gas consumption. The war in Russia and Ukraine will however delay the manufacturing sector's recovery from the shortage of [indiscernible] with the automotive industry the most vulnerable sector. Construction activities will be affected by high material costs. As a result, the EU's steel demand in 2022 is expected to contract slightly. In 2023, the World Steel Association expects the situation to stabilize, and accelerating investment in the energy transition will provide some positive momentum for steel demand [ increasing ].
It is evident as refractories are a key product used in the manufacture of steel that our company operates within a growing market and demand especially in India where the growth predictions for the industry continue to outpace the rest of the world. It's, therefore, important that we continue to improve and invest in our capability both technologically as well as in capacity. In all areas of our company globally we plan robust investments. We will see this in our presentation which follows. And our 3 domestic manufacturing locations in Odisha, Gujarat, and Andhra Pradesh we continue our expansion plans which aim to strengthen our position in currently supplied market sectors, expand our product line capabilities into commercializing new products, improve the technological capability of our products, and improve the cost effectiveness of our operations. We have also started construction of our new state-of-the-art Research and Technology Center, which will be built within our core manufacturing location in Odisha. This will enable the company to improve its own material intellectual property database, expand its products, and improve our technological approach through sustainable, material, and technology development.
We will also be shortly announcing an exciting modernization of our corporate identity and incorporate this within our new modern website, improving our interface with customers, prospective employees, suppliers and all of our stakeholders. Also, our approach in the area of ESG will be strengthened, and we have recently signed an agreement with a global consultancy leader in this area, which will focus initially on our Indian operations to bring our approach to a level commensurate with our standing within the industry, and then be rolled out globally. At our locations in Germany, U.K., and the USA, we are also investing in our manufacturing capability, and we'll share more about this in the forthcoming quarters once our investment approach is clear and decided upon by our local management teams. We are confident that we will successfully navigate the volatility of the commodity markets in general, and the steel market as well as ongoing Russia-Ukraine situation, and also the most recent outbreak of COVID in China, which all added to the complexity of the supply chain. Our future plans will enable us to continually expand our business with a focus on quality and technology, supported by our long-established foundation for cost effectiveness to optimize profitability.
With this short speech, I'll now hand over to Mr. Kamal Sarda for his comments.
Thanks, Jim, for the quick overview of the business. Let me give you a brief on the business performance for the financial year '21-'22. As you must have seen, our company has recorded its highest ever revenue in FY '22 on the back of strong demand from India as well as from the international businesses. Our margins were impacted on account of sharp inflation in raw material, operating cost, freight, energy cost as explained by Mr. Jim. But as the economy continues to expand, we anticipate the need for refractories to remain buoyant. With improved capacities and additional production capabilities, we aim to increase the business's scale leading to operating leverages benefit over the long run.
Let me give you a brief update on the capex front, as mentioned by James in his comments. So FY '23 and FY '24 put together, we plan to invest about INR 50 crores in our Odisha plant, which includes almost INR 20 crores for the new research and development -- Research and Technology Center. We are also expanding facilities of our Kandla plant with an approximate cost about INR 44 crores and about INR65 crores will be spent in new product lines in our Visakhapatnam plants. Our focus now remains to complete these new capex plans in a timebound manner and continue ramping up the existing capacities as well as new products.
Let me come -- let me give you a brief on financial highlights. On a standalone IFGL, total income increased by 36% year-on-year to INR 240 crores in quarter 4, and while it went up by 22% year-on-year to INR 801 crores in FY '22. So both are the highest. EBITDA was down by 8% year on year to INR 34.2 crores in the last quarter. For the year also it was down by 8% to INR 131 crores in FY '22. This was after the INR 13.8 crores provisions which we took on account of Ukraine effect. EBITDA margin stood at 14.2% for the quarter and for the full year it was 16.4%. During the financial year '21, our PAT was impacted by one-time deferred tax adjustment on account of goodwill. Hence adjusting for that, PAT was up by 46% year-on-year while it was down by 3% year-on-year for the full year FY '22.
Moving on to the consolidated financial highlights. Total consolidated income increased by 27% to INR 366 crores for the quarter and INR 1,275 crores for the full year, both are also highest. Consolidated EBITDA was down by 12% to about INR 43 crores for the quarter and about INR 158 crores for the full year. Full year it was down by about 10%. Consolidated margin was 11.6% for the quarter and 12.4% for the full year. As mentioned earlier, adjusted for deferred tax goodwill impact in FY '21, consolidated PAT was up by 8% for the quarter, and it was about INR 77.54 crores, down by 10% for the full year. Also, happy to share, the Board of Directors have recommended a final dividend of INR 7 per share which translates to about 40% dividend payout of the standalone PAT. With respect to liquidity position, we remain net debt free with a strong balance sheet. Cash at March 22, stood at about INR 263 crores in nutshell, and I think rest of all -- the rest of these you must have seen in the presentation.
With this, I now leave the floor for any questions we'll be happy to answer. Thank you.
[Operator Instructions] The first question is from the line of Gunjan Kabra from Niveshaay.
Sir, firstly, I wanted to understand what would be the potential impact of steel export duty on the refractory industry and have the CapEx of the steel industry -- can it get postponed for some time because of the duty?
I think what's our understanding is this export duty is just to control the prices and the inflation. And I think this should be pretty short term, maybe 1 month to 3 months' time. It should not affect any performance of the industry as such. And we have not heard any development of CapEx plans.
Okay. Sir, also if you could bifurcate it would be great that growth in revenue between volume and price quarter on quarter. And has the raw material pressure eased out with respect to previous quarter? What is the outlook on the raw material side going forward?
We don't have the figures between volume and price, but both have grown significantly I would say. Both contributed quite good. And the raw material prices have not eased out as such. There are maybe some prices are stable some prices are still going up.
Okay. So just one more question how is your business model different from our competitors who are having almost double EBITDA margins than us? Do they have advantage that fares well for them on margin front? Just trying to understand the working of the industries and nothing else.
There's no difference between the business model as such. Maybe the products, I would say, portfolio may be slightly different here and there. That's it.
Okay. And sir, there were power cuts in Andhra Pradesh in April. So did that impact our production at the Vizag plant?
There's a power cut for about I think one day a week, and I think we have readjusted our production facilities accordingly.
Hello? Sir, sorry, I didn't get your answer.
I said there is a power cut for a day in Vizag plant. We have readjusted our production plan schedule according to that.
The next question is from the line of Chirag Setalvad from HDFC Mutual Fund.
Could you give us the revenue, EBITDA, and PAT for the 3 subsidiaries for the full year?
Chirag, can we talk separately? Can I call you after this?
Sure, sir. But would you not -- the Annual Report would have these numbers in any case, right?
Annual Report will have it, yes. The printed Annual Report will have it.
Right, okay. Fair enough.
Maybe we can talk separately, Chirag.
Sure, sir.
If it is okay with you.
Sure, that's fine.
The next question is from the line of Raj Shah from Statheros Capital.
Congratulations on good numbers. I just wanted to know what would be your capacity…
[Technical Difficulty]
This is the operator. There is a disturbance coming again from your line. Please check.
Yes. I would like to know what would be your capacity utilization for Q4 and FY '22.
Q4 I think we were at about 80% plus levels.
Okay. And I would like to understand that we have done like INR 360 crores for this quarter. So is it fair to assume that going forward from here, we would be on that run rate around INR 350 odd crores on quarterly basis?
I'm sorry, I could not hear your question.
Hello. Am I audible now?
It is there, but your question I could not hear properly.
Sir, now that we are at 80%, I wanted to know if it's fair to assume that we'd have a quarterly run rate of INR350-odd crores in sales?
I think that will be our target, yes.
Okay. And just last one on the price hikes. Have we received all the price hikes or there are a few price hikes that we might undertake going forward?
The discussions are a continuous process. I think there will be some more price hikes requested for with the customer.
Okay. That's it from my end.
[Operator Instructions] The next question is from the line of [ Varun Jain ], individual investor.
Am I audible?
Yes, please.
Yes. So my first question would be like this year our cash conversion is very less. Historically, we have been a very cash-rich company converting all of our EBITDA into cash. But this year it's been very disappointing to see that our whole cash is crunched into inventories and receivables. Any particular reason, like any problems on the client side, we are not receiving the payments and all?
Because of the logistics and all other situations, we explained in our speech that there had been a shortage of raw material, and there were some logistics issues and all, we had to keep high inventories. And that's the reason inventory has gone up, and then you're seeing the cash conversion to be slightly different.
Why are the receivables so high? It's like INR 70 crores money stuck in our receivables?
Our sales have gone up. If you look at our sales have also gone up significantly. There are no bad issues there. We have a very...
So it will be recovered eventually.
Yes, yes. Everything will be recovered.
And out of it, INR 25 crores, INR 30 crores are stuck in Ukraine, Russia. So would it be recoverable or that's already into provision and all?
No, that's already -- not INR 25 crores. We have had a provision of INR 13.8 crores.
Okay, sorry.
If you look at the published results. But we hold that once the situation resumes, we will be able to, because they are our long-term customers. I think once they resume their operation, we should be in a position to recover that.
One more issue which I see in the company is, there is lots of cash, and it's in the current account. And it's not in the standalone balance sheet. It's on the consolidated balance sheet. Around INR 120 crores of cash is in our current account, and it's been increasing for last 2, 3 years. The current account doesn't give any yields. What are your plans for that cash? Are you looking for any inorganic acquisition, or are you planning to invest it somewhere so that we can at least have a good yield out of it?
In the overseas segment, I think the fixed deposits do not give so much of [ yields ]. So I think they are in mix and match in the cash balance. And obviously, the cash is lying there. If we get a good opportunity, well, I think...
But it's been 3 years. When are we going to deploy it? Because it's not yielding anything. It's like 0% yield on so much amount of cash.
We have to have opportunities to invest.
Okay. So are you planning to like shift that money into India and use that money to fund the expansion?
No, that money will be there.
Is there any plans...
Sending the money to India will be a double taxation only.
Okay. That's why. And are there any plans like to invest in bonds or some mutual fund overseas itself in America and Germany and all?
No, no, there are no major returns there. So we will keep that as it is. There's no major advantage.
Thank you, Mr. Jain. May we request that you return to the question queue for follow-up questions. We'll take the next question from the line of Keshav Garg from CCIPL.
Sir, I wanted to understand, sir, when our American subsidiaries will stop underperforming. Even on a low base of last year, we have still registered a decline year-on-year from INR 15.5 crores PBIT to INR 4.4 crores. And the operating margin in this business is 2% and return on capital is 3%. So why are we putting so much time, effort, and management bandwidth over there? Why don't we just dispose of this business while the going is still good? Because as soon as the steel cycle turns, this business might start making losses.
Jim, would you answer this, or shall I?
Sure. Could you repeat the question, please? I think you said why don't we dispose of the businesses in the U.S. Is that correct?
Yes, because this business is not giving us anything. No return on capital, no margins.
Yes, I would say that that's a correct statement for perhaps the last financial year. We still managed to get margin from that, but certainly not at the levels that we're normally used to. And the U.S. businesses normally provide us with profitability which is amongst the highest levels in the group. But over the last year we have seen a deterioration in that. We are very confident that we will see a return to the normal levels throughout this financial year. In fact, we're looking to grow the business in the United States, which we believe is a very strong market for the group. We are #2 supplier in the products and then certainly the problem that we faced in the United States has been quite unprecedented cost increases and the level of increases that the company has faced in all aspects of business, raw materials, labor, energy cost. But we feel very confident that we have a plan in place to mitigate those cost increases and particularly with the support of our customers, and we are fully committed to the United States in the future. And I hope to continue to expand our business there.
Sir, I also wanted to understand that our stock is almost trading at our book value now, and we have a next cash position of INR 175 crores. And we have a total CapEx across the next 2 financial years of around INR 150 crores, INR 160 crores, whereas our annual operating cash flow itself is around INR 150 crores in a normal year. Sir, so in that case why are we sitting on so much excess cash? Why don't we use those cash proceeds to buy back and extinguish our own shares so that our equity cap rate can contract and our earnings for share will permanently increase? Sir, what are your thoughts on this?
Okay. See, we have been giving a good dividend. You must have seen last year, we paid a dividend of almost 100%, which is INR 10 per share. This year the Board has announced INR 7 a share. So that's a good payout. That's number 1. Number 2, we have announced an expansion plan which will also require a lot of cash, and we personally believe that with the expansion, the values will automatically increase. With buyout, it's only a one-time transaction. With an expansion and increasing the value of the company, which will be a permanent increase of the valuation. So I think, as of now the amount of cash which we have, buyback is not in our thought processes.
Sure, sir. And sir, lastly if I can just ask you that broadly what will be the replacement cost of all our plants that we have, all the infrastructure that we have set up at today's market price if we are going to recreate it?
A very difficult question. We have not thought about it as of yet.
Sir, but surely it will be more than the book value, right?
It will be.
Sir, so then in that case, when our stock is already trading at book value and the real value of our assets is far higher, so rather than go out and construct a new asset, it's better to just buy back our own shares because behind every share is the capacity of the company. And as the number of shares decrease...
Possibly there's a different thought in this. We believe spending within the company will give more value to the shareholders. And as I said, the cash is not enough to give a good buyback scheme as of now. We'll come out with a buyback as and when the thought processes are clear with the company. As of now, we are in the expansion mode. And I think we feel that will give more benefits to the shareholders.
Okay, sir.
We'll move on to the next question from the line of [ Priyanka Shah ] from Enam Securities.
I have 2 questions. Sir, can you share some insights on the refractory demand from Indian market?
What do you want to know, please?
The refractory, demand for that.
Demand?
Yes, demand.
I think the current Indian market will be close to anywhere between INR 12,000 crores to INR 15,000 crores. I think there are no authentic data which I have, but I can only just give you the guesswork, which will be...
I think we always talk about the Indian market as growing at a pace which is larger than any other market -- or certainly, India is the #2 producer of steel in the world. I think in 2022, the production of steel will grow a further 6.5% to 7%. And in 2023, it will be up further 7% I think I'm correct in saying. These are levels which are much higher than any other country in the world. Steel increase is directly related to our refractory business because IFGL is 100% in the steel industry refractory business. So as Kamal said, we've got a market there at the moment which is substantial, but the growth of the Indian market is amongst the highest of any country in the world. Sorry, Kamal?
Yes, it's okay. So the other thing is that India, if you look at the national steel policy, it talks of going to about 300 million metric tonnes by 2030-'31 from the current capacities of 140 million metric tonnes, 145 million metric tonnes. So you can imagine we are talking of doubling the capacity in the next 7, 8 year -- 8 or 9 years' time, which is a significant growth anywhere between 7% to 8% or 9% CAGR. So the refractory market is one of the most exciting markets amongst any of the countries involved today. If that is okay with you the answer.
Sir, one more question. How is the new resource center help us in our business?
Sorry?
New resource center will help us in our business?
Jim, will you -- I think you are the best person to answer that.
Yes. For any company, which is in a technical area, and refractories is a technical area, research and development is very, very important. Our company till date has operated very successfully, I would say, [ compared to ] others in terms of the refractories that we wanted to produce. The research center basis is to increase the technology capability of the company to bring us new products and also new high-performance materials, but also sustainability is a very important area for any company in today's world. And the design of refractory products requires research into the use of materials, which will enable us to improve our sustainability in the refractory market. And then this is something which really requires a very high-tech approach. It's not something that you can do without state-of-the-art equipment. So our objective for the research center as a multifaceted aspect. One is new product development; two, is a high-performance material development; and three is the development of sustainability material designs, which will enable us to improve our cost effectiveness. And this area will be in the 4 main refractory parts of the company. So it's a very exciting project for us. And obviously, from an investment standpoint, it's an investment which is going to be providing a very good fundamental technical base to the company for years into the future.
The next question is from the line of [ Saket Kapoor ] from Kapoor & Company.
Sir, firstly, if you could give some more color on how the raw material basket is behaving currently? Has the escalation in prices still stand unabated or have they plateaued out?
I think I just mentioned that for some raw material, they have flattened. I think they are coming to a stable situation. But there are some raw materials where the price is still increasing. Because that China the situation of COVID is still very unclear. They have on and off COVID-related restrictions in some place or the other. So till that situation, I think the size for the next 3 to 6 months would remain -- for some raw material it will remain on the higher end.
Sir, for the geographies, what has been our utilization levels currently for India, Europe, and Americas? And how are the things looking up for the current year in terms of what volume growth are you looking for FY '23?
I mentioned about 80% plus levels of utilization in India in the 2 plants, Odisha and Gujarat plants. Vizag is still new. So Vizag our utilization is still to peak out. And for the rest of the world, it should be somewhere around 70% to 80% plus only. And the current year looks also similar promising.
And current year also looking at the same trajectory?
Yes, yes.
And from the Visakhapatnam plant on the ramp-up part, what kind of additional -- volume addition -- whether any meaningful volume additions will happen for this year?
Yes, that will be there. That's why the plant has been put.
Sir, could you quantify in percentage terms what would be...
I think we should be looking at 25% to 40% utilization levels in this financial year.
And an overall mix, what would be that translate into the volume growth for India as a whole?
I have not worked out that figure. That will definitely give a jump in the turnover, but I have not worked out that figure.
Because I was just looking at the -- if you could give me in terms of quantity volume growth, that would also suffice.
I think the quantity information are difficult. We can discuss offline sometimes. You can speak to Shrenik, and we can have a discussion separately.
Mr. Kapoor, may we request that you return to the question queue for follow-up questions. The next question is from the line of Sahil Sanghvi from Monarch Networth Capital.
Sir, my first question is regarding Hofmann. This year we have seen the margins remaining very healthy, more than 12% and the last quarter was a record high. So what are the reasons for such healthy margins? And how do we see this subsidiary performance going ahead? What margins can it maintain going ahead?
Jim, will you take this question?
Sure. We believe that Hoffman over the past year, we have introduced a very dynamic young organization, has I think allowed us to grow the company on our basis, which we believe we'll be able to sustain the margins that we see today. And in fact, to grow these with extended manufacturing investment, which we hope to do during the coming year. And we believe that, obviously, the product mix that we have there is such that we are benefiting from the local customers in Europe reluctance to buy especially from China. There was in the past a great focus of the European customers, especially in the foundry area to buy from China. And a lot of these customers are now looking at their local options of domestic options or European options rather than buying from overseas. And Hoffman has been in a position to enjoy a growth at some of these customers due to that reason. But as I said, from a company viewpoint, we believe that we are strengthening our team. We are strengthening the approach to the future market, which will enable us to sustain the performance that we're seeing now and the future.
My second question was regarding these 2 customers in Ukraine for which we have realized these provisions. So on an annual basis, what was the revenue that we got from these customers, which is at risk going ahead in FY '23?
So that's about [ INR25 crores ] or so from these 2 customers.
That's the annual number, right, sir?
Yes, that's an annual number.
So there's a good possibility that in FY '23 we might not have this number.
If these plants do not open at all.
Yes. At the end of the day no one has that crystal ball. The Ukraine market, other than the Mariupol area, which is the area where these 2 customers are located, and the rest of the Ukrainian market has started to open up and produce product on a regular basis and is opening up tenders and supply of product to those. But the customers in the Mariupol area due to the conflict being at its height in the Eastern Ukraine are affected obviously by that. We cannot say today where that conflict is going to go. And indeed, once the contract is over, what the state of the plants has been was the reason why we have taken the provisions that we have out of an abundance of caution. Obviously, we hope that everyone in that region is safe, and we can see a reopening of those customers, but we have more capability of predicting it one way or the other. I'm sorry, we just can't answer that question.
No, got it, sir. And my last question is regarding what was announced for the Vizag facility that there will be a new product line that we are introducing. So can you just throw some more light on what is the product, what is the kind of market that we see in India, and what could be the potential revenue that we can expect? If not a number, just a bit more light on what are we targeting as such when it comes to the product.
So we are talking of a few products introduction and some expansion in the existing product base. So one is the precast shapes. It will basically be large shapes, which we want to introduce in Vizag. So that construction or that plant is under construction right now. And then we would also go into brick business. We are not into brick in a big way. We have a small pilot production in our existing plant in Odisha. So we'll get into that business just to take care of our existing flow control business to that extent. And we would expand our capabilities of the [indiscernible], which we manufacture in Rourkela will have a more automated -- a fully-automated plant in Vizag.
Right. So this will be alumina or magnesia bricks?
Magnesia carbon bricks.
Okay. And [indiscernible] is exactly -- that's a kind of refractory or is it kind of a [indiscernible]?
That's a refractory.
Okay. Got it, sir. That's all from my side. All the best.
The next question is from the line of Vineet Gala from Monarch Networth Capital.
So last 2, 3 quarters, the listed players have expanded their gross margins by around 200 to 300 bps on their [indiscernible], while our margins are under some pressure. So I was just curious to understand why is this happening?
See, if you look at our quarter 4 notes to accounts, we have taken a provision of INR14 crores on account of Ukraine. So that...
I'm talking about the gross margin. So I'm just comparing the material cost there.
Material costs have always been on a higher side only. It was never on a lower side. So it all depends on the product mix. I don't know with whom you are trying to compare. But if you look at our gross profit margins, the way you are looking at, our gross profit margins are higher compared to the other 2 listed entities.
Sir, if I just compare the material cost of sales, right, so if I just do that, so what am I saying is that our material cost to sale is increasing by 200 to 300 bps, while both the other listed entities of considerable size, theirs has reduced by 200 to 300 bps. So I was just comparing that. So what I thought is hitting on the pricing pressure or if they are passing it on to the customer of anything of that sort. So if you could highlight?
I don't know about them, but definitely, pricing pressure has been there. I think we spoke extensively, Jim, in his speech has mentioned the impact of the price pressures, including the ocean freight for all imports from China. The pricing pressure has been there and also we spoke of the timing difference between the cost increase and the time when the customer gets increases, there's always a time lag. It can be 3 months, 6 months, it can be slightly more also. So that has resulted in higher raw material cost to sales.
Fair enough. So, sir, we can expect anything over the next 2 to 3 quarters wherein we will take the price rise or that will come down to our P&L.
Yes. So we are pushing very hard to increase our price and then most of our customers have supported the price increase, and we are asking for a bit more. And we are in dialog. And I think they should -- there will be some price increases in this quarter also.
Fair enough. Sir, also one more thing. I just wanted to understand on your timelines for goodwill amortization adjustment. So where are we in terms of the NCLT process on this?
It will take a bit more time. I'll not be able to predict that.
Any hiccups on that, like ideally I think...
No, no, we'll not be able to give you any timelines. There's a lot of things on the parts to do for us. So we'll take a call in the next quarter, by next quarter we'll take a call on this, how far we are on this process?
Sir currently, our goodwill amount is around INR 220-odd crores as on FY '22 balance sheet?
It should be about INR 107 crores or INR 108 crores. It's 4 years left.
Sir, and annual amortization is, if you could articulate that amount, like what is...
INR 26.7 crores.
Sorry?
INR 26.7 crores each year.
INR 26.7 crores. okay, sir.
The next question is from the line of Varun Jain, individual investor.
Sir, just one question I had to ask. You are also entering into precast, brick, and monolithics. Basically, we are the specialty refractory player. So how it will impact our gross margins going ahead? Would it decrease or would it be stable around the same level?
No, these are also profitable products.
No, I know that these are profitable. But specialty refractories we don't face any competition from Chinese imports and we are one of the -- we are the market leaders in specialty. Obviously, they will come with more benefit, and we'll have more profitability...
Magnesia carbon manufacturing in India comes from the Atmanirbhar Bharat and Make in India plan. So most of the steel companies today wants to buy products made locally. So you will see in the next 1, 1.5 year time, I think the entire magnesia carbon will be served by manufacturers.
Yes, that I'm observing as like [indiscernible] refractory, they are also opening the magnesia liquid plant in [indiscernible] I think so.
Correct.
And also one more question from my side. There is recession, which we are going -- there are talks about recession coming in U.S. and Europe and all these countries. So how it is going to affect our company some going ahead?
Again, all we can do is look at what the predictions are for the steel industry, which is the industry that we serve and one of the best bodies with regard to predicting the steel outcomes for the future is the World Steel Association. And the World Steel Association believes that in each of these areas, for the next 2 years, we will continue to see growth. And for us, this is -- they'll be important [ message ].
Just one last question I have. I was going through RHI Magnesita annual report, they were talking about coming with a concept called a Total Refractory Management, wherein it would be fully integrated process. They would provide the refractory and they would recycle it, and they will again provide. That would bring more customer loyalty. So are we looking to have this say in our business model also implementing TRM and all?
Well, there was quite a difference in company size and structure between IFGL refractories and RHI Magnesita. Obviously, RHI Magnesita is one of the largest refractory companies in the world, but not the largest. And their product mix is throughout the complete the refractory range. They have recent acquisitions into the recycled materials and various other elements have allowed them to view our strategy, which is based around a more complete approach to business. Our company doesn't have that size or range of products to be able to do this.
As we are continuously growing and continuously doing expansion. So in future, we would have also a good product basket. So can we also implement same kind of thing?
I would say, it would be some years off. I think that, for us, the main focus is to expand the areas that we're involved in right now, expand our technological capability, and improve our product performance. And by that, grow our business. But the business models at RHI Magnesita as discussed would be completely different from the business models for IFGL refractories, completely different.
Correct. That's from my side. Thanks a lot for entertaining my questions. Really means a lot. And all the best for the future.
Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments.
Jim, I'm doing it. So okay. Thank you, everyone. So thanks for attending this call, and it was a wonderful question-and-answer session. Some of them I think we could answer quite well. And some -- if there are any queries, you can contact our SGA Investor Relations advisors and look forward to your participation in the next call. Thank you very much and have a nice evening.
Thank you.
Thank you. On behalf of Monarch Networth Capital, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.