Vardhman Special Steels (VSSL) Q4 18/19 earnings summary

Executive summary

• FY19 opened with strong auto demand and high utilization, but a sharp second-half slowdown and failed price increases pushed results below expectations. Revenue rose 22% YoY; EBITDA grew 2.5% and net profit declined 11%.

• Operations produced 188,499 tonnes of billets and 159,583 tonnes of rolled products; the planned furnace shutdown was deferred to H1 FY20, with inventory built to protect customer supply.

• Aichi Steel agreed to invest ₹50 crore for an approximately 11.4% stake and provide technical and operational assistance, subject to shareholder approval.

Financial highlights

• Revenue from operations was ₹1,120.76 crore versus ₹877.89 crore in FY18; exports rose 17.83% to ₹58.23 crore.

• EBITDA was ₹69.72 crore, up 2.5%; net profit was ₹22.21 crore, down 11%, and PBT was ₹22.14 crore versus ₹25.10 crore.

• Basic EPS was ₹6.22 versus ₹7.91; diluted EPS was ₹6.19 versus ₹7.88.

• Operating cash flow was negative ₹18.85 crore, versus positive ₹11.21 crore in FY18, amid billet inventory buildup; operating profit before working-capital changes was ₹71.71 crore.

Outlook and guidance

• FY20 was expected to be challenging; management said matching FY19 numbers would be a good outcome if automotive headwinds persisted.

• A 60-day steel-melting-shop shutdown in H1 FY20 was planned to replace the electric arc furnace, improve yield and efficiency, reduce utility consumption, and upgrade product quality.

• Management expected lower raw-material and electrode prices to support performance in coming months, while auto demand recovery remained uncertain.

• Maruti’s Green-category vendor certification was expected to create development-partner access and potentially add volumes over 18–24 months; significant FY20 returns were not expected.