Varroc Engineering (VARROC) Q1 24/25 earnings summary

Executive summary

• Q1 FY25 consolidated revenue grew 5.2% year-over-year to INR 18,989 million, driven by 11.3% growth in India, while overseas operations faced negative growth due to cyclical trends and weak demand.

• Profitability declined with EBITDA margin at 9.1% (down from 10.0% YoY) and PBT margin at 2.9% (down from 3.6% YoY), impacted by start-up costs for new Maharashtra plants and commodity price adjustments.

• Net debt reduced by INR 668 million to INR 916 crore (Rs. 9,160 million), with net debt to equity improved to 0.59.

• Lifetime new business wins in Q1 exceeded INR 7,959 million, with 48% from EV players; revenue from EVs was about 8% of total.

• Unaudited standalone and consolidated financial results for the quarter ended June 30, 2024, were approved by the Board on August 7, 2024.

Financial highlights

• Consolidated revenue up 5.2% year-over-year to INR 18,989 million; India business up 11.3%.

• EBITDA margin at 9.1%; PBT margin at 2.9% in Q1 FY25, down from 3.6% last year.

• Net debt reduced by INR 668 million in Q1, now at INR 916 crore; net debt to equity improved to 0.59.

• Return on Capital Employed at 16.3%; net debt to EBITDA at 1.27.

• Standalone net profit was Rs. 176.52 million, compared to a loss of Rs. 135.17 million in the same quarter last year.

Outlook and guidance

• Expect ramp-up in EV volumes and new business wins to drive growth in H2 FY25.

• Overseas market recovery anticipated over the next 1-2 years; cost reduction initiatives to support margin improvement from H2.

• Renewable energy sourcing to yield INR 200 million annual savings from Q2, with further savings from phase two.

• Board approved a draft scheme of amalgamation of Varroc Polymers Limited with the company, subject to regulatory approvals.