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HEG Ltd.

BSE: 509631 Sector: Engineering
NSE: HEG ISIN Code: INE545A01016
BSE 00:00 | 19 Jan 1739.95 -43.35
(-2.43%)
OPEN

1783.00

HIGH

1786.50

LOW

1732.50

NSE 00:00 | 19 Jan 1740.60 -44.20
(-2.48%)
OPEN

1770.00

HIGH

1786.95

LOW

1731.25

OPEN 1783.00
PREVIOUS CLOSE 1783.30
VOLUME 19788
52-Week high 2626.15
52-Week low 910.85
P/E 40.29
Mkt Cap.(Rs cr) 6,716
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1783.00
CLOSE 1783.30
VOLUME 19788
52-Week high 2626.15
52-Week low 910.85
P/E 40.29
Mkt Cap.(Rs cr) 6,716
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

HEG Ltd. (HEG) - Chairman Speech

Company chairman speech

I am not overtly concerned about these numbers because there is a positive undercurrentthat gives me optimism for the future. We reported the highest capacity utilisation amongour peer group. It suggests that we have sustained our competitive edge in the globalmarketplace leading to a growing acceptance of our graphite electrodes.

Dear shareholders

I trust you are all well and safe.

As Iink this statement the second wave of the Covid-19 pandemic has ebbed leavingbehind a trail of pain and suffering. My heart goes out to all the families who have beenimpacted by this health emergency.

The year that was

FY21 started on a dismal note as India stepped into a lockdown. But soon India bouncedback with considerable momentum. Steel demand witnessed traction as did steel prices whichshot up in the second half of the year. India ended on a high note which was considerablyheart-warming.

From HEG's perspective the year was challenging. The abruptness in the operatingecosystem caught every player in the industry off-guard.

On the one hand we had to contend with reduced demand owing to a slowdown in economicactivity across the world.

On the other we needed to minimise losses. Graphite electrode prices dropped sharplyeven as most graphite electrode manufacturers remained saddled with high-cost raw materialinventory created in anticipation of healthy demand for graphite electrode.

Our Financials is a replication of this reality… we ended FY21 with a 42% drop inRevenue from Operations and a Net Loss of Rs. 25.30 crore.

I am not overtly concerned about these numbers because there is a positive undercurrentthat gives me optimism for the future. We reported the highest capacity utilisation amongour peer group. It suggests that we have sustained our competitive edge in the globalmarketplace leading to a growing acceptance of our graphite electrodes.

The year that could be

FY22 appears to be positive. My optimism stems from two important realities.

Lag effect: We witnessed a strong uptick in the fortunes of the steel industry(demand and prices upped) towards the close of FY21. It should cascade into increasedgraphite electrode volumes and improved realisation in FY22. This is because the graphiteelectrode industry generally lags demand recovery in the steel industry due to itsposition in the steel producers supply chain. Moreover we have exhausted our high-costneedle coke inventory in FY21. This should improve business profitability.

Growth impact: The steel industry should report healthy growth in CY22 assumingthat the global GDP will grow by about 3% in CY22 (as per IMF estimates). The steel growthbeing closely linked to GDP growth mirrors this number. With the operational graphiteelectrode capacity delicately balanced between demand and supply the additional demandshould improve the prospects of the graphite electrode industry in FY22.

Over the medium-term

A global research house suggests that China aspires to achieve net-zero carbonemissions by 2060. This would require it to reduce/shut operations of high carbon emittingsectors. Steel in all likelihood could feature in this list.

There appears to be substance in this aspiration as Chinese Authorities have recentlyordered cuts at some of its steel-producing hubs. They estimate steel mills there will cutproduction by 20% to 30% in 2021. This could buoy the prospects for the global steelindustry especially the EAF steel sector (a considerably lesser polluting route formanufacturing steel). These developments augur well for the graphite electrode sector andus.

The immediate challenge

The more intense and aggressive second wave of Covid-19 significantly disrupted theprogress of India and the confidence of our fellow Indians. Thankfully the pandemic curvehas been _attened largely owing to all the brave hearts who have fought this battle. We atHEG salute them for their courage passion and perseverance in helping the fellow Indian.

While this health emergency will impact economic progress in the first quarter of FY22a resilient India is sure to rebound with speed. Going forward I believe things will onlyget better.

In closing

HEG appears perfectly positioned to capitalise on emerging opportunities effectively

• Our liquidity strength a deleveraged organisation and a gross cash pool of Rs.1521 crore as on March 31 2021 provide strength to overcome adversities.

• Our people's ‘will do' attitude enables the Company to surge ahead againstall challenges.

• Our additional brown_eld capacity of 20000TPA will be commissioned by early2023. With no other new graphite electrode capacity on the anvil we should be able toservice a larger share of the additional demand.

While we refrain from making any predictions or estimates for the coming years we arepreparing ourselves for every eventuality.

Before I end I would like to thank the entire HEG team who once again have bravedthrough the raging pandemic to meet customer commitments. I also thank the Board for theircontinued guidance in charting the Company's blueprint. My thanks to our otherstakeholders who continue to be our partners in growth. I also place on record my sincereappreciation to all our shareholders for their continued confidence and support.

Warm regards

Ravi Jhunjhunwala

Chairman Managing Director & CEO.

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