India’s leading recyclers Gravita expects sales volumes to be lower in Q1, Q2 due to disruptions in supply chain and logistics. Gravita’s has ruled out any significant impact of the pandemic on its financial performance over the- long-term and expects volumes to improve gradually in the domestic market. 

 

Outlook

The company’s performance, in terms of volumes, is impacted due to the disruption in the supply chain and its effect on operations. With the opening of markets in India, Gravita expects business to improve gradually. In FY21, the company plans to focus on strengthening its scrap procurement network globally to source higher volumes at competitive prices. Gravita is also focused on improving product and market mix to increase margins. In the upcoming quarters, the company expects good growth in aluminium segment.

 

Gravita imports a major share of its raw material requirements and lockdowns imposed across the world have disrupted the company’s supply chain due to logistic challenges. Raw material supplies have begun to improve.

 

The demand-supply scenario is subdued in many countries as they struggle to return back to normalcy. This is expected to marginally affect the company’s revenue and profitability. Globally, 70pc lead consumption is for lead acid batteries followed by use in power cables, radiation protection, constructions, pigment and chemicals sectors. The market dynamics is expected to impact the demand for these products over the next few quarters.

 

Operational performance

In Q4FY2020 (March quarter), Gravita’s lead sales volume rose by 48pc to 22,397mt from the prior year quarter and aluminium sales increased by 34pc to 2,534mt. Plastic sales volume were at 3,104mt in Q4.

 

During the year (FY2019-2020), the sales volume of lead increased by 19pc to 77,470mt from the prior year quarter, supported by a 18pc rise in lead production. Sales volume of lead alloy increased by 71pc and while sales of value-added products rose by 77pc. In FY2020, sales volume of aluminium was 8,046mt and plastic was 11,793mt.
 

In April 2019, Gravita’s subsidiary started commercial production at its lead recycling facility in Tanzania, East Africa. The plant has an annual lead production capacity of 3,000mt and an aluminium capacity of 6,000mt. Gravita’s subsidiary in Ghana, West Africa started lead production in June 2019, the plant has an installed capacity to produce 12,000mt lead. 

 

COVID-19 impact

Gravita has resumed operations at all its manufacturing units in India from May 4. In line with government of India’s pandemic guidelines, the company has shut operations from March 24 onwards. Some units resumed partial operations on April 21. Overseas plants of Gravita remained operational during the pandemic. 

 

The company’s management is of the view that business will be on low volumes in the upcoming quarters due to logistic problems and the disruption in supply chain. The pandemic and the lockdown had no significant impact on the operational and financial performance of the company in Q4 or FY2020 and will have no significant impact on the company’s financial performance on a long-term basis. 

 

The company has adequate capital and financial resources to meet its business needs. Gravita has availed an additional one-time demand loan at concessional rate of Rs19.64 crore ($2.6mn) from banks, of which Rs12.60 crore is yet to be accessed by the company. 

 

Financial results

In Q4FY2020, Gravita’s consolidated operational revenue improved by 11.9pc to Rs379.26 crore from Q4 FY2019 and consolidated net profit was Rs. 12.61 crore. For the full year, consolidated operational revenue rose by 9pc to Rs1,347.80 crore and consolidated net profit was Rs33.18 crore, up 114pc from the prior year. Operational efficiency, product and market mix along with optimal capacity boosted Gravita’s profit margins. 

 

($1=Rs75.53)

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