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This graphite electrode maker expects margin pressure to persist for 2-3 quarters

Noida-based graphite electrode maker HEG expects margin pressure to continue for at least the next 2-3 quarters. In an interview with CNBC-TV18, Manish Gulati, executive director of the company, expressed concerns over the falling prices of electrodes and needle coke.

The company’s margins for the third quarter of the current financial year (Q3FY24), at 15.6%, were the lowest since March 2021.

“When we talk about margins, we worry more about the price of electrodes and the price of needle coke. Both have declined and although we still have this lag effect where the price of electrodes falls earlier and consumer prices of needle coke follow later, the margins are indeed small. And as I have always said on your channel, it will be at least another two to three quarters more that we will see lower margins or margins under pressure,” he said.

In the third quarter (Q3FY24), the company reported an operating revenue of ₹562 crore, with an operating profit of ₹88 crore compared to ₹132 crore in Q3FY23. Other income for the quarter stood at ₹23.22 crore, down from ₹37 crore in Q3FY23.

Gulati had previously highlighted the sector’s challenging outlook for the coming quarters, citing subdued pricing trends. He attributed the drop in prices to ongoing geopolitical uncertainties.

He expects the company to end FY24 with a volume of around 70,000 tonnes. For FY25, volumes could be 75,000 tonnes. “Last financial year, we were operating at 75% of our capacity utilization. This financial year, the first three quarters, we are at 85%. And next year we have planned to reach 75% of the new capacity of 100,000 people,” he said, adding that the company managed to sell its entire production for FY23- 24.

Regarding revenue prospects from Li-Ion cell manufacturing capacity, Gulati mentioned ongoing construction plans, with the factory expected to begin operations in mid-2025. The increase in revenue from this plant is expected to start in the second quarter of FY26.

The company, which has a market capitalization of ₹7,507 crore, has seen its shares gain 67% over the past year.

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William Dupuy

Independent political analyst working in this field for 14 years, I analyze political events from a different angle.
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