Detailed Narrative
Q3 FY25 Financial Performance Overview
Century Enka reported a robust Q3 FY25 with operating revenues growing by 9.5% year-on-year to INR 493 crores. EBITDA saw a significant increase of 48% year-on-year, reaching INR 27 crores, with EBITDA margins at 5.51%. Profit after tax surged by almost 198% year-on-year to INR 14 crores, translating to a PAT margin of 2.84%. Total volume for the quarter also grew by 11% year-on-year to 19,368 metric tons.
Segmental Performance and Challenges
The Tyre Cord Fabric (NTCF) segment experienced a 5% year-on-year revenue decrease to INR 214 crores in Q3 FY25, primarily due to subdued demand from the truck and bus segments and increased imports by tyre companies. Conversely, the Filament Yarn segment demonstrated strong growth, with revenue increasing by 23% year-on-year to INR 255 crores, driven by improved demand from marriage and festive seasons. For the nine months of FY25, NTCF sales grew by 22% to INR 752 crores, and filament yarn sales increased by 20% to INR 735 crores.
Strategic Investments and Capacity Expansion
The company has completed CAPEX of approximately INR 103 crores for its Polyester Tyre Cord Fabric (PTCF) project, with commercial production expected to commence in FY26. Over the last 3-4 years, Century Enka has invested close to INR 400 crores in PTCF capacity addition and replacement of NTCF capacities at Bharuch. Additionally, INR 20-30 crores are annually allocated for upgradation of NTCF operations to reduce power consumption and improve productivity.
Margin Management and Cost Reduction Initiatives
To counter margin pressure from volatile raw material prices and imports, Century Enka is focusing on increasing its share of renewable power, with plans to expand this by the middle of next financial year. The company is already drawing renewable power at Bharuch. The company is also investing in reducing power consumption in older equipment and improving overall productivity through in-house measures, which are expected to yield more results over time.
Raw Material Volatility and Import Challenges
Caprolactam prices continued to decline during the quarter, leading to stock losses and margin pressure. The company noted a $140 per ton fall between Q2 and Q3 FY25. Management highlighted that China's dumping of material, especially in the commodity segment at low prices, significantly impacts margins. To address this, an application for anti-dumping duty on NFY has been filed, with hopes for notification and implementation in the next year, possibly Q1 FY26.
Outlook and Future Targets
Century Enka is cautiously optimistic about NTCF demand growth in Q4 FY25 and FY26. For the new PTCF segment, the company anticipates peak capacity revenue between INR 110 to 120 crores with EBITDA margins exceeding 10%. Customer approvals for PTCF are expected between Q1 and Q2 FY26. The company maintains a minimum IRR hurdle rate of 12% or above for new investments and expects asset turns of 1 to 1.4 for new projects. Overall capacity utilization for NTCF and Nylon is projected to be around 80,000-82,000 tons for the full year.