Century Enka Limited (NSE: CENTENKA) Q3 2025 Earnings Call dated Feb. 12, 2025
Corporate Participants:
Suresh Sodani — Managing Director
Analysts:
Vikram Suryavanshi — Analyst
Mohit Upadhyay — Individual Investor
Abhishek Jain — Analyst
Priyankar Sarkar — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3 FY ’25 Earnings Conference Call of Century Anca hosted by PhillipCapital India Private Limited. 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. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Vikram Suryavanshi from PhillipCapital India Private Limited. Thank you, and over to you, sir.
Vikram Suryavanshi — Analyst
Thank you. Good afternoon, and very warm welcome to everyone. Thank you for being on the call of Centurynca Limited. We are happy to have the management with us here today for question-and-answer session with the investment community. Management is represented by Mr Suresh Sodani, Managing Director. Before we start with the question-and-answer session, we’ll have opening comments from the management. I will hand over this call to Mr Suresh for opening comments. Over to you, sir.
Suresh Sodani — Managing Director
Good afternoon, everyone, and welcome to our Q3 FY ’25 earnings conference call. I would like to thank our host, PhillipCapital for hosting this call. Now let me first brief you on the operational highlights for the 3rd-quarter of FY ’25. In the Tire fabric segment, NTCF demand was subdued due to poor truck and bus segment demand, but was partly offset by sustained demand from two and three-wheeler segment, while demand from the farm tire segments improved towards the end-of-the quarter due to extended monsoon. Increased imports by tire companies following the normalization of supply-chain issues reduced demand for NTCF from domestic suppliers. Our margins remained under pressure due to volatile raw-material prices and imports from China. We remain cautiously optimistic about NTCF demand growth in Q4 and FY ’26. Approvals for fabric are in-progress and we expect commercial production to start in FY ’26. In the filament yarn segment, demand improved due to marriage and festive season leading to better capacity utilization, while a higher share of value-added products helped in sustaining margins. We will continue to focus on additional investments in value-added and niche products with better margins. Caprolactum prices continued to decline, resulting in-stock losses and margin pressure, but we mitigated the impact to higher share of renewable energy usage and other cost-reduction measures. Let me now brief you on the financial results for the 3rd-quarter and year-to-date of the financial year ’25. For the Q3 operating results, our operating revenues stood at INR493 crores, which grew by almost 9.5% year-on-year. EBITDA for the quarter stood at INR27 crores, which grew by 48% year-on-year. EBITDA margins were reported at 5.51%, profit-after-tax at around INR14 — INR14 crores represented an increase of almost 198% year-on-year. PAT margin stood at 2.84% for the quarter. Total volume for Q3 grew at 11% year-on-year to INR19 368 metric tons. Fabric revenue for Q3 FY ’25 decreased by around 5% year-on-year to about INR214 crores, while yarn revenue for the same-period increased by about 23% year-on-year to almost INR255 crores. Now coming to year-to-date results for the financial year ’25, operational revenue stood at INR1,558 crores, representing a growth of 22% year-on-year. EBITDA stood at INR106 crores, which increased by 116% year-on-year. EBITDA margins for the period was 6.81%, net profit was INR60 crores, which grew by 165% year-on-year and PAT margin stood at 3.83%. Total volume for nine months FY ’21 ’25 grew by 21% year-on-year to 60,275 metric tons. Fabric sales for nine months FY ’25 increased by 22% to INR952 crores, while filament yarn sales increased by 20% to INR735 crores. With this, we can open the floor for question-and-answers.
Questions and Answers:
Operator
Thank you, sir. Ladies and gentlemen, we will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2. Participants are requested to use handsets while asking a question. We will wait for a moment while the question queue assembles the first question comes from the line of Mohit Upadhyay, an individual investor. Please go-ahead.
Mohit Upadhyay
So one question only from my side. Actually, margins have been under pressure for a while now. What is your outlook on revival for this and what is company doing to counter this threshold? Any cost-cutting measures that we can also — what is the updated on the anti-dumping on NYF or NFY, sorry. Do you believe this will help improve our margin in coming quarters? Lastly, what is the outlook on the demand environment? We have added a lot of new capacity, but growth is still muted. So when we can expect better growth, sir? That’s it sir, ma’am.
Suresh Sodani
Okay. So I guess actually there are three questions, but in case I miss out on terms of replying to any one of them, you can come back later and ask that. One was on with respect to the margins pressure, which is right, because the margin pressures continue and being in very volatile external environment, these are also quite varying. And we have been taking continuous measures to — on the cost side for margin improvement, one which we have already shared and which we continue to do is increasing our share of renewable power, which is cheaper from the grid power. So we are already drawing renewal power at in the current year and we intend to expand that by middle of next financial year. So that would help in reducing the cost. Secondly, we continue to invest on reducing our power consumptions, particularly on the old equipments and which have given good results in terms of reducing the overall power and fuel cost and we’ll continue to work on that. We are also looking at improving the productivity through various in-house measures and which are also — will take more time, but these will over a period of time start giving more results. So as far as ADD is concerned, the association has filed an application for anti-dumping duty on NFY and the process has been initiated. As we have been mentioning in every quarter that China continues to dump a lot of material, particularly at the — on the commodity side at very low prices and that creates a lot of margin pressure on those products and the purpose of ADV is to address imports mainly from China. As far as the capacity addition is concerned, the capacity that we added in NTCF at was mainly for some part of it was to expand the capacity and part of it was to compensate for the deteriorating or the aged machines of Pune. So we continue to use the full capacity at Pune at, the new capacity and only the — in terms of the demand requirement, the balanced quantities are producing from the old equipment. So we do get better-quality products, which have a better sale with the customer as well as they are more cost-effective. We — the full utilization will come when the market conditions are better and which has a lot of relations with GDP and infrastructure growth and movement, I mean the overall impact on the economic activity. But this will happen and it can happen in certain months, it may not happen for the year as a whole. I guess I’ve answered all the three parts of your question. If anything is left, I would request you to please raise your question again in the following — in the process that the value capital and they advise you to do that.
Mohit Upadhyay
No. Actually my questions were answered, mostly or three questions were answered. And thank you for giving me the opportunity and I wish you best of luck for ahead. Thank you.
Suresh Sodani
Thank you.
Operator
Thank you. Participants, please press star and one to ask a question the next question comes from the line of Abhishek Jain from Investwell Agents Private Limited. Please go-ahead.
Abhishek Jain
Hello.
Suresh Sodani
Yeah.
Abhishek Jain
Yeah. Good evening, sir. I’ve got a couple of questions regarding the capex. Sir, how much are we investing for the PTCF capacity and how the funding will be done through internal accruals and the borrowings? And what sort of capacity will be added and the projected revenue from therein. Can you please clarify on these things?
Suresh Sodani
Is there any other question or should I — you said you are.
Abhishek Jain
Yeah, the capex in general, what sort of modernization we are looking at because NTCF is not going product. So definitely we may will be diversifying into PTCF or any other product going-forward. So what sort of modernization or diversification capex or the maintenance capex that you look for in the coming year and the next year onwards, that will be good. The roadmaps out of will be very good, if you can follow.
Suresh Sodani
So in PTCF, we have already completed the capex and we spent about INR103 crores on this project. I mean the tenure capacity — mix makes a difference on the — on the total production that comes out of this capacity, but it could range between 4,000 tonne to 5,000 tonnes per annum depending on the mix, as I said. Second, we expect to continue to spend on the upgradation of the equipments, which continue to be used for our NTCF operations to mainly to reduce the power consumption on per unit per kg or per ton basis and that will be a continuous exercise. But on an average, we are being spending between INR20 crores to INR30 crores, which are going to primarily focused on improving productivity and energy efficiency and getting more grade 1 products from our existing equipment. So these will continue year-on-year. As far as other large capex are concerned, we are still not ready to — I mean, in terms of these are still under discussion stage. So as and when we are ready and we get on Board approval, then through a due process, it will be announced to all the regulatories as well as to the investment community.
Abhishek Jain
This is the thing is that we are quite a profitable company with very less borrowing or to say we are a net cash-positive company. Even after that, we are not getting into other things like the Board is not having some roadmap for the new product development and all that is what the question was all about. No, because NTCF is at the end, sir, NTCF is not a product that will be growing. It’s a shrinking market along with the — you know the capacity, the old equipment and everything that we have got and the channel jumping and all. So it is not going to be very profitable going-forward. So that was the concern actually.
Suresh Sodani
So no, your concern is valid. What I would like to understate is that in last four, three to four years, we already invested close to INR400 crores in capacity addition in PTCF, in a new dipping line at Pune and in expansion and replacement of NTCF capacities at Bharuch. So these are equipment — these are investments which have already been done and we will continue to look for growth in, I mean particularly in PTCF and other technical textiles. But as I said, these are still at a discussion stage and we do not have any net borrowings. In fact, we are sufficient
Abhishek Jain
I think gain INR50 crores in cash, including investment and all
Suresh Sodani
We have sufficient treasury and I mean, cash on-balance sheet to make future investments, but this investment should give a minimum hurdle rate returns so that these can be approved by the Board. And in the current scenario, we have to be careful on where we are investing. So looking at all these scenarios, these plans are made and we have made investments in capacity in NFI, we had added value-added capacities in NFI, which have given good results. So we’ll continue to look for these kind of investments. If any large new investments would come, then obviously, it has to go through our process of internal approvals and then the Board approval and then once it is approved, we’ll be shared with the in the due course.
Abhishek Jain
Okay, sir. Can you tell me about the technology tire we have for the PTCF or in-house?
Suresh Sodani
These are — these are standard technologies and these are mostly by the equipment suppliers itself. So there is no — I mean, technology per se, what we need to do is we have to get the product through our own internal technical know-how to meet the requirements of the tire companies. So it is a marriage of equipment given by standard and good international companies and then our own know-how in tire reinforcement markets to make the product as required by or as I mean similar to what other important material is coming or where the — what the specifications of the tire companies are.
Abhishek Jain
Thank you very much, sir. That’s all from my side.
Suresh Sodani
Thank you.
Operator
Thank you so much. Participants, please press star and one to ask a question. The next question comes from the line of Priyankar Sarkar from Square 64 Capital Advisors LLP. Please go-ahead.
Priyankar Sarkar
Yeah. Hi, good afternoon, sir. So I’m a bit new to the company, so asking a basic question. Typically, when we do capex, what is the typical asset turn that we can achieve in our company.
Suresh Sodani
More than the asset turn, actually we look at IRR hurdle rate which has to be crossed. So asset turn is a more a outcome of what investments are required and what is the — so that I think is more important is what kind of IRR we are able to generate out of this investment and what is the strategic fit-in of that product or that investment in our long-term goals. So that is normally the process. The asset turn is more an outcome of once we do all the analysis and what comes out.
Priyankar Sarkar
So just to get a sense, whatever the capex we have done over the last couple of years, I mean, let’s say if we put INR100 crores into this thing at a peak utilization, I’m not saying in year-one. I’m saying what is the potential whenever there is a demand, whenever we get to a peak potential of utilization, what is the typical we can get if we invest, let’s say INR100 crores in a project,
Suresh Sodani
I would say it is very typical to a product and what investments we are making. But if we were to take just a ballpark number at least 1 to 1.3, 1.4 asset tons should be there. I mean, top-line should be there on an investment of a reasonable size magnitude. It could be INR100 crores, could even deliver 1.5 times turnover on that. But it is — and second is the top-line is also a function of the raw-material pricing because the raw-material pricing also fluctuates. So if the — if the crude and all the derivatives are at, say, $100, it will make — the top-line would be different, it’s a crude and all it’s derivated onwards our benchmark through a $70 crude price, it will be different. So it’s — it can change. It cannot be a static number. But as I said, our internal process are more towards seeing that what kind of returns it generates and does it fit-in strategically in our — in our thought process.
Priyankar Sarkar
Got it. So do you look at a payback period? I mean, what would be the typical payback period would you consider while putting up a capex?
Suresh Sodani
So are — we look at IRR minimum hurdle rate of 12% or above.
Abhishek Jain
Okay. Okay. Fair enough, sir. Thank you very much and wish you all the best.
Suresh Sodani
Yeah.
Operator
Thank you. A reminder to all participants, you may press star and one to ask a question. The next question comes from the line of Abhishek Jain from Investwell Agents Private Limited. Please go-ahead.
Abhishek Jain
Sir, just want one more question. Sorry for that. Can you provide me the revenue breakup between NTCF and PTCF?
Suresh Sodani
Sorry, what breakup?
Abhishek Jain
Revenue breakup, segmental revenue breakup of how much are we generating from NTCF and PTCF?
Suresh Sodani
We have not started PTCF as yet. These are still, as I said, as mentioned, we have started giving them for trials. So we have not started manufacturing PTCF in the full volume and because it goes through a process which is long-drawn and the tire companies go through a very stringent approval process so that the product is meets all the specs and there is no chances of failure of the tires because of the reinforcement. So the currently what we see as a reinforcement of turnover is all NTCF turnover already.
Abhishek Jain
All right, sir. And when do we expect this to come from?
Suresh Sodani
And trials have started and we expect, I mean at various stages. So in FY ’26, some processes should start in Q1 and Q2. I mean, this all depends on how the tire companies go through this process. Being a new product to us, there is a slightly longer process compared to NTCA, which we have been doing for many decades. So difficult to give a straight timeline, but yes, between first and second-quarter, we are hopeful of getting approvals for at least some of the customers.
Abhishek Jain
And sir, how much are we expecting revenue and the margin sort of?
Suresh Sodani
So revenue at peak capacity should be — I mean, as I said, it’s a function also of the raw-material, but at a standard what we assume as a price should be about between INR10 crores to INR120 crores and margins at least in excess of 10% EBITDA margins.
Abhishek Jain
Okay, thanks very much.
Operator
Thank you. Thank you. Participants, please press star and one to ask a question. Thank you. The next question comes from the line of Vikram Suryavanshi from PhillipCapital India. Please go-ahead.
Vikram Suryavanshi
Yeah. Good evening, sir. So what was the average caprolactam price for this quarter?
Suresh Sodani
Yes. So the caprolactam price at the end of Q2 was 16 23 CIF and end of Q3 is about 1483. It has been varying. So instead of giving an average, I’ve given you the end quarter numbers because in certain months, the fall was more steep. So between Q2 end to Q3 and the fall is about $140 per tonne.
Vikram Suryavanshi
Understood. So that fall has impacted our raw-material because that inventory loss would be accounted into raw-material cost.
Suresh Sodani
Yes, yes. So I mean our model as long as the prices are varying at a at a decent pace. I mean that volatility is less, that is more suitable to us because otherwise it can have an impact on our effective margins that we are able to report.
Vikram Suryavanshi
Understood, understood. And see other textile companies, particularly in polyester also has some advantage because when we import from China, a BI certification and all that what government has made it compulsory. So is there a way we can have some kind of relief from that kind of a BI certification in our business or it’s not much impacting
Suresh Sodani
So we have already initiated the BIS, the QCO — BIS process through the association and the has already come out and the stakeholder meetings are on. And we are hopeful that — and government is positive. I mean the authorities are positive that this has to come as a part of getting the right products and there is no misdeclaration of products or malpractices in the — during the imports of any inferior product. So we are hopeful that in the next year, maybe in-quarter one itself, the BIS could get notified and then implemented in due course.
Vikram Suryavanshi
Understood. And our this PTCF, 4,000 to 4,000 annual production what we have capacity. Once we get customer approval, how fast we can ramp-up to this capacity or can we give some in terms of utilization possibility for full-year once it is operational.
Suresh Sodani
So normally, what we have seen in past in NTC is that once we get an approval and the product becomes standardized and are accepted by the customers, then we can ramp-up very fast. So because then that — and what we are dealing with is the same customers that are buying NTC from us. So the customers are not different, the people that we are dealing with are not different. It’s only that it is going for a different application and it has to go through a process of approval, which is a new — I mean more stringent and more detailed compared to a product which we were already making. So once we start and we get a commercial-scale approval, I think the ramp-up will be quite fast.
Vikram Suryavanshi
Understood. Okay. And just on the current capacity, which have almost I think 98,000 to 2,000 tonnes per annum. So this year probably we’ll go to almost like around 80,000 plus in terms of capacity — production, so which is quite good utilization. So is there any headroom for further production now from the same rated capacity or how we are basically to what extent peak utilization can go up the rated capacity for the PTC — sorry, NTCF and nylon basically
Suresh Sodani
Yeah. So one is, I mean, the demand conditions will drive whether we can utilize the full capacity because it’s a volatile situation. But what will add to the capacity utilization is a commercial approval for our PTCF, which will definitely help in getting more capacity on an overall basis as a percentage of the installed capacity.
Vikram Suryavanshi
But for anticip and nylon, basically we can go-around 80,000, 82,000 tons this year-on full-year basis.
Suresh Sodani
So I mean we — as we said, we have been reporting only on a — we have synthetic yarns in single. So what we are giving is an overall capacity and we expect a good — healthy capacity utilization to continue. The market conditions determine that we can cater — whether we can touch 90 plus in certain quarters or even higher, but it all depends on how — I mean the PTCF approval comes and how the market conditions are.
Vikram Suryavanshi
Okay, understood. Thank you very much.
Suresh Sodani
Yeah. Thank you. Thank
Operator
You. Participants, you may press star and one to ask a question thank you. As there are no further questions, I would now like to hand the conference over to the management for the closing comments.
Suresh Sodani
Thank you everyone for joining our earnings call. I hope you were able to give you answers to your queries and hope these were to your satisfaction. If you have any further questions or would like to know more about the company, please reach-out to our Investor Relation managers at Valorem Advisors. Thank you.
Operator
Thank you, sir. Ladies and gentlemen, on behalf of PhillipCapital India Private Limited, that concludes this conference. You may now disconnect your lines.