Ador Welding

Ador Welding reported a robust Q2 FY26 with sales growing approximately 5% on a quarterly basis. Gross margins improved to 32.7%, and EBITDA reached 12.5%, marking an improvement of about 500 basis points. PBT margins also aligned with target levels at approximately 12.2%. On a half-yearly basis, gross margins stood at 31%, EBITDA margins at 11%, and PBT at INR 58 crores, representing an 11% margin.

The company's improved margins are attributed to pricing discipline and a better product mix, rather than solely steel price fluctuations. Management emphasized that the current pricing structure is stronger and that the focus on higher-margin products is a continuous, month-on-month process aimed at sustaining these improved profitability levels. The product mix is improving, which is helping to maintain margins at a steady-state level.

Ador Welding launched three new welding equipment products, including one for data reading and mapping, an electric battery welder (Rhino E) with a complementary solar product, and the CHAMPTIG AC/DC product. New fluxes for wind applications and drum packaging for MIG were also introduced, alongside new stainless steel products. These launches are part of the strategy to improve product mix and drive efficiency.

The company is actively pursuing opportunities in strategic segments like defense and shipbuilding, where it sees 'interesting order book positions' and is working on approvals. For the project segment (FPED), which incurred a Q2 operating loss of INR 2.5 crores, the strategy has shifted to avoid large exposure projects, focusing instead on smaller projects and aiming for breakeven at INR 15-20 crores revenue. The current project is on track for completion this quarter.

While domestic volumes saw a 4-5% growth in H1, the export market experienced mixed results. The US market was impacted by tariffs, which management hopes will settle soon. Saudi Arabia has been tight, but markets like UAE and Oman showed growth. The company is also exploring expansion into Indonesia, South America, and Russia, with a focus on building traction step-by-step, though exports are expected to be flattish compared to previous years due to market conditions.

The integration of the erstwhile Ador Fontech business is progressing well, with management expressing increased comfort and positive results over the last four to five months. The merger is now showing signs of delivering the intended benefits, particularly in management structures and distribution, contributing to the company's overall performance. This integration is seen as being on the 'right path' and meeting expectations.

Acknowledging the industry-wide shortage of skilled welders, Ador Welding is addressing this through two main approaches: providing training and certification for customers, and focusing on automation and robotic solutions. This dual strategy aims to mitigate the impact of labor shortages, improve efficiency in manufacturing, and support customers' needs for skilled labor.