AIA Engineering Limited (NSE: AIAENG) Q3 2025 Earnings Call dated Feb. 07, 2025
Corporate Participants:
Unidentified Speaker
Kunal Shah — Investor Relations
Sanjay Bhai — Director
Analysts:
Bhoomika Nair — Analyst
Priyanka Biswas — Analyst
Yash Nerurkar — Analyst
Anupam Gupta — Analyst
Suraj Sonulkar — Analyst
Presentation:
Unidentified Speaker
Yes, hello. A very warm good evening to everyone and thank you for joining the call. I have Sanjay Bhai.
Operator
Good evening ladies and gentlemen. Thank you for standing by. This is Lizan, the moderator for your call today. Welcome to the post results conference call of AIA Engineering Limited. We have with us today the management team of AIA Engineering Limited. At this moment all participants are in the listen only mode. Later we will conduct a question and answer session at that time. If you have a question please press star and 1. I would now like to turn the conference over to the AI Engineering management team. Please go ahead sir.
Kunal Shah — Investor Relations
Yes. Hello. A very warm good evening to everyone and thank you for joining the call. I have Sanjay Bhai, this is Kunal and we have Sanjay bhai also here with me on the call. As usual we’ll start with a quick update on the highlights of this quarter and we will get into Q and A thereafter.
Headline numbers are Sales tonnages are at 65, 780, approximately 66,000 tons up from 60,000 tons in the sequential second quarter and down from about 74,000 tonnes in third quarter last year. So for the nine months to date our total tonnage stands at about 187,000 tonnes. The revenue for the quarter is at 1050 crores.
Our EBITDA is at 354.57 and our profit after tax is at 259. So for the total profit and that compares to 256 crores in the sequential second quarter and it’s a little lower from 280 crores approximate in the third quarter last year. So with that our full year volume which is 187,000 tons for the nine months looks to be between 250 and 260 depending on invoicing etc. Is the guidance for the full year.
And there is some amount, some strategy, you know, announcements that we’ve done through the quarter. We would love to expand a little more on that. As far as a few other numbers are concerned. Our other operating income is at 16 crores mostly from export benefits and you know, few other operating other income. Our non operating income includes our treasury income of 58 crores and Forex gain of about 8 crores for a total other income of 67.32 crores.
I think rest of the other numbers remain at par with our working capital Cash on the block after, cash on the books after the buyback, proceeds were paid out. I think everything else is in sync. I think I’ll head on to the important numbers, the important announcement, sorry, before that. Our realization for the quarter is at about 160 rupees per kilo and again in line with what we have done for last few quarters. I think raw material continues to be but is a little stable for last two quarters. So our raw material cost as a percent of sales adjusted for inventory I think is broadly in line with the sequence of second quarter. So I think that volatility looks to have easened out. Also on the freight, you know, the shipping side of things, it looks a little better. Some corridors still continue to have elevated freight rates but you know, it is starting to reduce or ease up in many sectors. So that is also a positive. Moving on, the big important announcement was around our change in mindset for carrying out production outside of India and get plenty of questions on the context and you know, where does this lead to? So I’ll share a little bit of insight into that and I’ll have then Sanjay bhai expand a bit on after that. We are now staying put with our current capacity in India which stands at 460,000 tons. We had earlier announced a plant in India for 80,000 which we scaled down to 36. But now with our intent to do to set up production outside of India, we are now staying put and pausing any work on any further capacity addition in India. So 460,000 ton of current capacity in India now looks to be, you know, the number. The two facilities that we have announced, you know, for branding media production are in China and one in Ghana. Both have their own respective strategies. The change in mindset comes from five years of facing volatile and volatile freight environment where you know, freight rates have gone up as high as five times, corrected back and then went up again. I think it’s an acknowledgement that we live in a very, very fragile environment. There were two wars in recent history, one still continues on and there are volatile regions in the world and anything that, you know, anything that escalates affects freight rates and that affects our whole conversion narrative or the strategy that we have. And also some of the markets that we are targeting like South America have a very long or have a reasonable Lead time. And so the plant in China feeds into, you know, the, the ability to ship with, you know, less than half the time from India to important corridors that we are looking at. While the plant in Ghana, you know, caters to the west Asian opportunity for mainly for gold customers. So with that, having said, we are looking to set up modular plants, not scale up at 1, but the idea is to go up to 50,000 tons and the total capex for both plants is currently estimated at US$50 million. Now we are using the latest manufacturing technology, you know, which allows us to reduce capital investment or do it in a modular fashion while, you know, being capital efficient and you know, utilizing the best automation methods currently available in our space. So that is where we’ve been able to reduce the spend, the capex and the ability to not do very large plants. These will be modular plants and depending on, you know, how the markets and how that picks up, we can decide on further investment. So at this time the board has approved these two plants. We have started work on both the plants. Given that there are new geographies and given that we want to start in a modular fashion, we will be short on details right now to share. You know, you’ll have to, we’ll need a quarter or two to get a little better handle on, you know, what are the timelines, how are we looking at on the early stage? But think of these as our attempt to get production closer to markets which improves our access to certain markets, reduces freight cost and the shipping, transit time. And once we create that beachhead, we can still utilize the capacities from India to fulfill the growth in those markets. So I think there’s a little, there’s a quite a bit of strategy linked to it, but it will play out over next two years and we’ll keep sharing updates as things mature. So beyond the point, we may not have much to share, you know, on the specifics of exactly what capacity, when will it come along, etc. So having said that, we’ll have Sanjay Bhai share his update and then we can go on to Q and A.
Sanjay Bhai — Director
Thank you Kunal. Just on so Kunal explained the logic. Now going back to the basics about our core business from India. While we explained in the earlier calls that yes, this year we do clearly see a degrowth which is evident, the fact of the matter is that it is nothing structural or permanent to read about the opportunity, the business prospects and all our endeavors for conversion continue to remain completely focused on several mines. We do expect some good conversions to happen Within a reasonable period of time, say hopefully next one or two quarters. The way we are working on some several very, very important mines. And therefore from that perspective, while China and Ghana obviously will add to a medium to long term strategic repositioning of companies, initiatives and endeavors and abilities to convert the maximum number of mines into our Hy Chrome solutions going forward, till this happens, our business and our growth targets remain more or less the same. So we do expect on a rollover basis at least 30 to 30 to 40,000 tonnes of incremental annual volume growth from conversion from new mines and these new endeavors that Kunal talked about. And that what we have announced will help us from a two to five year perspective to become a very, very solid player in this field with massive opportunities that can be converted after effectively facing the challenges that Kunal has elaborated more on the supply side and the supply chain related issues as a permanent repositioning strategies. So with this I would request the moderator to open the house for Q and A.
Questions and Answers:
Operator
Thank you, sir. Ladies and gentlemen, we will now begin with the question and answer session. If you have a question, please press Star and one on your touchstone telephone and await your turn to ask a question when guided by the facilitator. If your questions have been answered before your turn and you wish to withdraw your request, you may do so by pressing the Star and two key. You requested to use handsets while asking a question. The first question is from the line of Bhumika from Dam Capital. Please go ahead.
Bhoomika Nair
Yes, sir. Good evening, sir.
Sanjay Bhai
Good evening.
Bhoomika Nair
Yes sir. In terms of, you know, you mentioned that shipping, you know, freight rates are starting to come down. So, you know, while obviously the China and Ghana plant will come in, but it’ll take some time for those plants to be operational. I don’t know what the timelines are, if you can elaborate on that. And in the meanwhile with the shipping freight rates coming down, does that really help us in terms of scaling back the volume?
And by when do you expect expect that we come back to our 300 plus and you know, you spoke about the incremental 30, 40,000 tons.
Sanjay Bhai
So Bhumika, I think like I said, the environment is improving. We have a few other challenges as we’ve been explaining in the whole conversion journey that we are undertaking from we are still not, you know, ready for sharing and a guidance on volume But over the next 2, 3/4, it looks like that we should be back on a 25, 30,000 ton annual addition on a rolling basis. So I think not yet ready to give a. I mean at a place where we’re ready to give a guidance and as soon as we see some green shoots, you know, we’ll be in a better place to give a better guidance. But from where it appears now, in a few quarters we should. In a few quarters, the visibility seems to be opening up for us to be growing at 25, 30, 35,000 tonnes a year. I think we should be back on track soon.
Kunal Shah
In terms of timeline, I think of course they will be making announcements, but China should start contributing something in the second half of next year. That is what the target is. But let’s see, we are working very hard, our teams are already there. Ghana should happen over next 18 months. That is how it looks like. But this is just broad indications. We will go and make specific and also it is modular so we’ll have specific guidance come out. As, you know, the progress is little more clearer.
Bhoomika Nair
No, sure. Then definitely helps because we at least get a trajectory that, you know, towards the end of 26 or sometime in 27, these plants will get operational. So that definitely helps. I understand, you know, that timeline might not be exact, but at least it gives us some direction.
Sir, you know, you know, on the incremental. Sorry to harp about this incremental volumes a little bit more. While I understand the challenges, continue conversion rates are slow and you know, shipping is just off rate, starting to ease off, etc. But you know, this year we’ve seen a very steep decline when we’re talking about 250, 260. So do we take that as a base and then look at the incremental volumes, do we take, you know, it come back to 300,000 and then take the volume increase?
Sanjay Bhai
It should be. Listen, whatever is reduced is not structural. But it’s just a little more complex to say this is from what we did last year. I mean consider 250 and getting us from growth from here. Right. There is volume in Canada that we’re expecting to come back, but that was from two years or three years ago. So all I’m saying is that when do we get back to a little more predictable growth path?
I think we should be there in the next few quarters and we’ll share what those volumes look like and the starting point has to be this year.
Bhoomika Nair
Got it, Got it. Okay, so the other aspect is in terms of our international, foray when we decided to go to China, Ghana, why are we not looking at Chile? Because that’s much larger market for us in terms of our potential conversion. So is there a reason why we’re not going directly to Chile? Is there some challenges out there that you foresee, which is where Looking to kind of service market out of China.
Sanjay Bhai
We are spoiled for choice in terms of where to go. Right. So the, I think today marks the day where our mindset is changing, our approach to growth is changing. I think just take it with that. Right. There will be more plans, there will be more announcements around that. We have to be careful. We don’t want to announce and not do it. Right.
So, and this is, there are learnings built into it. So I mean there is a certain strategy with which we are working and there will be more plants. A plant in Chile could also be a possibility. But allow us some time. Right. This is where we were little better prepared. Our teams were a little better prepared. You know, there was some work done ahead of others. And that is where we are saying, let’s start with these two markets.
Bhoomika Nair
Sure, sure, understood. And you know, just on the current business profile, we see seen margins actually, you know, hold up quite well for the last couple of years. You know, I remember earlier we used to guide for a more structural 21, 23% kind of a range. But over the last two years we’ve kind of worked a lot in terms of our pass through of the shipping freights in terms of power and fuel as also more domestic availability of raw material.
So does that structurally change our market margin profile more towards the 24, 26% kind of a range?
Sanjay Bhai
So, Bhumika, you’re right. We have been consistently doing giving better margins. Even if you knock off my treasury and other income, we are talking of operating margins in the range of 27, 28%. We do believe that this is helping us through multiple factors, product mix being one of them.
Again, why we have been a little more conservative than we should be is because of the fact that we still anticipate that when there is a considerable increase in volumes coming through, increased conversions, there could be price challenges. But you are right, a 21 or a 22% looks to be much lower than what we can do. History is with you. Let us not speculate.
But yes, we should do. I personally believe we should do definitely better than 2122 on a medium to long term basis. Having said that, strategically we are not guiding anybody for the margins and we want to maintain that for at least a few more quarters.
Bhoomika Nair
Sure, sir. Sure, sir. Understood. Understood. I’ll come back in the question queue. Thank you so much and all the best.
Operator
Thank you. The next question is from the line of Priyanka Biswas from BNP Pariba. Please go ahead.
Priyanka Biswas
Yeah. Hi, Kunal, Sanjay. Good evening. So, sir, my first Question is, if I recall from your statements in the previous quarter, there were some destocking related impact at certain large customers that you had highlighted. So what’s the status on that and when can we see those volumes coming back? So that’s the first question.
Kunal Shah
I think at least for one customer. We expect that to come back from the June quarter. Some, some in March, but mostly in June quarter. So should it be fair to say that from June quarter and let’s say the Fed disruptions being largely behind so we should be back to earlier normal quarterly run rates.
Yeah. So that is what we explained to the previous, on the previous question by Boomika that consider the current year, let’s say 250, 260, whatever we close as a starting point. There are, there are a few, you know, several things that have happened over the last three, four years. I mean it will be difficult to go, you know, reconcile with each customer or each event.
I’m saying going forward and we are saying that in next two or three quarters it looks like that we should be back to 25, 30,000 annual predictable growth rate. Right. We are not in that shoes yet, but we should be getting there in next two quarters is the current sense. So for now we are at 250 and no clear guidance for exactly the next four quarters or the, or the FY25, 26.
But we as we, it looks like that whatever headwinds are settling down a bit, we should have better clarity in next two quarters. So allow us that time to give you a firmer data point.
Priyanka Biswas
Okay, that’s very clear. The second question from my side is see if we are let’s say putting up, let’s say plants in China, Ghana and maybe later on Indonesia as how it’s planned. So it would be very similar to let’s say the strategy which our peer Megatov was following earlier. What we had observed is that their margins are not that great when we compare versus yours.
So how will our business model be different from theirs and how will we be able to protect our margins? That’s my question. You are asking me the nuts and bolts of our strategy on no, just, just how will it be different from Megatos because they don’t fit margin?
Sanjay Bhai
I mean we are plenty conscious of margins. We believe the purpose of business is to create value for the customer and so that we also make a reasonable return on the efforts and you know, resources that we invest inside it and rest assured that we are mindful and we learn from mistakes that we or our competitors have made. We will make sure that what we are doing is margin accretive rather than negative.
Priyanka Biswas
This is just one last question here. See, we In recent times, we are seeing a lot of talk about US Tariffs on various countries. So especially like there is the possibility of, let’s say, tariff wars between US and China. In that context, can you throw some light? Do you expect some impact on our volumes or, or let’s say on our investments that we may be doing at China? So that’s my final question.
Sanjay Bhai
Not really. I mean, US Is not, may not be the destination country for. From China. I mean, there is, we’re trying to do a few things and today, you know, it is considering that US May not be the top destination from that plant.
Priyanka Biswas
Okay, thank you so much. Thank you.
Sanjay Bhai
Thank you.
Operator
Thank you. We’ll move on to the next question that is on the line of Yash Nerolkar from Ionic Wealth. Please go ahead.
Yash Nerurkar
Yeah, hi. Thanks for the opportunity. I hope I’m audible. Yes, you are. So the first question that I had was, so what made you go global? Like in terms of the plants in China and Ghana? So do your customers see this as positive as, you know, as you being closer to the mines? And is your global competitor making similar moves to tackle the freight issue and higher lead times?
Sanjay Bhai
I don’t want to comment as much on what the competitor is thinking about it for us. All we are saying right now is that our model was making India and then shipped to the world. Now a large part of the world still will operate under that model. But we do recognize that there are merits in having plants, you know, where you. There are some benefits linked to that.
And whether we do two plants, we do two full plants, whether we do 10 plants, these are works in progress because we also have to have the learnings from that in terms of what works, what doesn’t work, you know, so today what we have announced are plants where we are going to be modular. We are looking at them being automated, we’re looking at them that they don’t eat into margin, but they feed into that.
There are several things that we need to work upon and which is where over next two years we will have clarity on what that means. What is the form and shape of this strategy. But for now, it looks like that for certain markets where there is exposure to high freight rates or volatile freight rates, the plant in China can help us with that. That is one assumption that we are working with, you know, while keeping the benefits of, you know, efficient production base.
So, and making sure there is market access. Right. So there are, that’s a three pronged strategy that we are working with. We are going to make sure that the capital invested is limited. We are not dependent Dependent on one or two customers. But there’s a little wider, you know, approach that we can do from that and making sure that the margins are, the cost structures are not haywire. So that’s, that’s what, where we have approached this from ultimately that should translate into higher sales. Right. So and that’s still some time away today I think the focus is going to be to make sure that we don’t, you know, we are efficient with our investments and the location and things like that. Right. So that’s, that’s the current effort based and we will share more information, you know, in the coming year as we get more information.
Kunal Shah
So just to add very quickly, let me expand one point. When we say modular we mean that there’s a huge amount of investments in R and D knowledge bank, knowledge base, infrastructure support, technical support that is available from India. So for these plants you don’t have to go too much on the capex side and they are very efficient. So that way things will be much better and we will be able to control the costs and margins both.
Yash Nerurkar
Right. So actually I was about to ask you on the profitability as well because India, your manufacturing units in India considers a low cost unit. So how will the profitability look like for these units in China?
Sanjay Bhai
That is what I told the previous participant as well. That’s I. It is, this is the strategy, the nuts and bolts of strategy. It will be difficult for us to explain on a call this way. Please allow us the credit that we will make sure that there is everything right about it when we go forward with it, you know. Right, absolutely.
We are working accurately, we are acutely aware about that and we’ll make sure we learn from mistakes we’ve made or others have made when they go venture out in other countries. So these are all. This is where modular and being cautious about it. Right.
This is. So today again, I’ll reemphasize for others who have this question that it is a change in mindset that maybe there are, there are locations and there is a method and approach to setting up sharp cost efficient plants which allow us to get market access. That’s the direction now. There’ll be learnings within that there will be change in strategy. There’ll be other things that will happen that will happen over next two years and we are working actively in that direction.
So which is where sharing too much information today would be a little premature. And at the same time our current business which is dependent on, you know, there is a freight exposure, it looks like that, you know, the Red Sea and all of that crisis is abating, and to that extent, at least that headwind, you know, is softening. But whether it will mean immediate sales, we don’t know which is where we will have another.
It looks like we’ll take two or three quarters before we are. We feel confident enough to say back to 25, 30,000. Predictable growth. We are not there yet.
Yash Nerurkar
No, makes sense. Makes sense. Absolutely. So just another question that I had on this plant is it’s okay if you can’t share too much of detail, but just wanted to know in which region in China Is this plan going to be. And see, I mean most of the countries, they are kind of diversifying the supply chains away from China. So what was the reason for you to get into China in the first place? And which market is that plan going to serve?
Sanjay Bhai
Like I said, it’s a little bit nuts and bolts of strategy. We would like to, you know, there is a lot of consideration done on, on why the plant in China. You know, in our business it makes sense to go there. I may not, I may not be the liberty to share much more, you know, color on it today or at this time.
Yash Nerurkar
All right, all right. No worries. Probably in the coming quarters you will probably get to know about it anyway. That’s it from my side. And thank you so much.
Sanjay Bhai
Thank you. Thank you.
Operator
Thank you. The next question is on the line of Anupam Gupta from IIFL. Please go ahead.
Anupam Gupta
Yes. Yeah. Hello. Yeah. Sir, a few questions. Firstly, the US Tariffs came into being in the third quarter. Any impact we have seen of that so far?
Sanjay Bhai
Not really. Not really. No. No, no.
Anupam Gupta
Okay. Okay. With the second question is on the, on the volume commentary which you said that let’s say two, three quarters down the line, possibly you’ll come back to that run rate of adding 30,000 incrementally every year. But just to dwell there, what is. So let’s say if it was a problem of destocking of certain customers which you said will come back in let’s say March and June sort of quarters, what is stopping us from recovering the volumes which we lost versus last year?
So let’s say we were at 290 last year. Has there been a customer loss which has resulted in a reset to 250, 260 or what is it that is resetting it at a lower level versus recovering it faster?
Sanjay Bhai
This is Sanjay here. Just to elaborate a little more on what your questions are. So as we said in the previous call, there are multiple factors that we feel are attributable. So all our teams have already very aggressively taken up with all the customers. And as Kunal explained, we do expect the order book or the order inflow from the existing customers to start coming at a regular level in next one or two quarters.
Primarily because of the fact that things look like stabilizing, even freight rates are normalizing and more or less we believe that their own mining and production cycles are also becoming normal. So that destocking doesn’t go overnight. It takes one or two quarters. We believe that by end of this year or maybe from the first quarter of next year, then things should. So I don’t think we have lost any major customers. That is your first answer from our side.
Second, more importantly, we also have. Therefore, as a matter of strategy, Decided that we need to rethink from a medium to long term perspective. And that is exactly the reason why you have seen our announcements. We are very, very bullish on the prospects, medium to long term prospects. We also have to change our gears and evaluate the situation as it unfolds. And that is what proactiveness is very critical for long term growth of the company. And that’s what exactly we are doing. As you see, our margins are good. We do expect the business potential to remain the same. I also made an announcement that very soon you can look at some significantly large incremental orders from new mines which are under development. So everything is more or less as it is except for this, I would say temporary disruption and nothing really structural about it.
Anupam Gupta
Sure. Understand. And next question would be. Sir, generally we talk about Megator in, in terms of competition but we’ve also seen the, the large guy in the, in the Forge segment entering that high chrome segment as well. Have you started to see competition from them for your existing customers or new customers?
Kunal Shah
Which, which large guy you are talking about? Malikov?
Anupam Gupta
Yeah.
Kunal Shah
No, I don’t think so. I’m sorry, I can’t go beyond that. But that really is not, I would say a threat or a competition for us.
Anupam Gupta
Sure. Okay. And just one last question, one last question on the liner business. So you had put up that 50kt capacity which came up then you are also ventured into the rubber lining rubber liners so far. How has been the traction on liners been? Are we on track for that four year full utilization which you had initially said or what’s the trajectory there?
Kunal Shah
The trajectory. Hi, this is Kunal. The trajectory is a little slower than how we had expected. In fact there were quite a bit of learnings in terms of, you know, what customers looking at their perception. What is our approach and strategy to go break some of those customers? I think we are delayed with full utilization.
I think it will take longer. And given another learning was we were sharing too much information, you know, trying to explain everyone about liners that you know it also you know got custom our competitors updates on exactly what we’re trying to do. So now as a policy, you know we are rolling up our volume. We are not sharing separate line item on volume and etc. With the, with the mining liner. So. But it is slower.
I mean that does not take away from the fact that mill liners have been slower for mining. But from a strategy standpoint they remain one of the most important opportunities for us to discuss with customers and bring in all of these These suite of solutions and benefits for the customer. So as we look to add more grinding media mill liners are important tool to break into the customer and
Unidentified Speaker
Just to add these rubber and composites have been added very very strategically to complete our product offering solution offering capability. Again we believe there is no direct competition to what we are actually offering.
Anupam Gupta
Okay. And this rubber composite had started in terms of deliveries or no?
Kunal Shah
Yeah, we just started small quantities. They’ll ramp up, you know over next one year.
Anupam Gupta
Oh, okay. Understand. That’s all for my sister. Thank you.
Kunal Shah
Thank you.
Operator
Thank you. The next question is on the line of Suraj Sonulkar from Asian Market Securities. Please, please go ahead.
Suraj Sonulkar
Hello. Thank you for the opportunity. Some clarification that now we are. We will not be expanding grinding media expansion of 36000 ton in India. Right?
Kunal Shah
Yes. Right.
Suraj Sonulkar
And rubber and composite liner capacity of 28000 ton that we have we commissioned in Jan that included in our total 4 lakh 60,000 ton capacity. Right?
Kunal Shah
That’s right.
Suraj Sonulkar
Okay. Or. And what will your capex guidance for FY26 and 27?
Kunal Shah
So this year, the next coming year will do about up to 50 crores in renewable power. And I think we’ll be done with most of the strategy as far as optimizing power cost is concerned. Up to 50 crores in maintenance capex per year. So. So once you remove that not more than you know, 35 to 50 crores of maintenance CapEx plus our investment in the two plants that we’ve announced. I think our capex will not be more than that in your future.
Suraj Sonulkar
Okay. Okay. So we have planned $50 million for this China and Ghana.
Kunal Shah
That’s right. Exactly.
Suraj Sonulkar
Thank you. Thank you. Thank you.
Operator
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star in one. I think there are no more questions. We can wrap up. Sure. Thank you sir. As there are no more questions I would now like to hand the conference over to AI Engineering management team for the closing comments.
Kunal Shah
Thank you so much. And as always Sanjay B and I remain available to take any offline questions. Have a great evening and we’ll connect at the end of the fourth quarter. Thank you.
Operator
Thank you. Ladies and gentlemen, this concludes your conference for today. We thank you for your participation and for using Chorus Call conferencing services. You may please disconnect your lines now. Thank you and have a great evening.