AIAENG — earnings call

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Prepared remarks

Moderator · Conference Operator

Ladies and gentlemen, good day, and welcome to the Q4 FY '25 AIA Engineering Limited

Questions and answers

Moderator · Conference Operator

The first question is from the line of Bhoomika from DAM Capital.

Bhoomika Nair

Sir, my first question is on the U.S. antidumping duty, which has been levied.

So the total duty is 9.16%.

Is there anything apart from that in terms of base duties or anything else?

AIA Engineering Limited May 23, 2025

Kunal Shah

Yes, yes.

So there is an overall duty that Trump has applied, right?

There's a baseline duty, there's a section, there are several things going on.

There's a duty on aluminum and steel, which is a different chapter.

So there is a base duty that is there under the...

Sanjay Majmudar

Which is universally applicable.

Kunal Shah

Yes.

Bhoomika Nair

Absolutely, yes, yes.

Sanjay Majmudar

And this is apart from that.

Bhoomika Nair

Okay.

And so post this tariff -- post this duty, which came up and the tariffs which came up, one is, can you outline or call out what was the FY '25 sales to the U.S. geography in million tons?

And how are we seeing -- I know you said that there hasn't been any drop in the volume so far.

But if you can just get the FY '25 volume numbers for U.S. geography?

Kunal Shah

Bhoomika, there is -- like I said, there's a lot more curiosity besides the investment fraternity about this information.

U.S. is an important market, but it is not -- it is less than, I would say, 8%, 10% of the total volume, broadly, I'm saying, okay?

So the materiality is there or not there, right, either whichever way you look at it.

And for now, the nature of the product is such that there is capability, there is extent, there's capacity, there are several things linked to it, right?

So I mean, except for one or two other countries where we have seen a different buying behavior, U.S. is a little different from that standpoint.

Like I said, today, the business continues.

If it's continued today, we look -- we have visibility for a quarter or 2 ahead because everyone in the U.S., forget a buyer of high chrome grinding media or liners or other products, even someone importing grains has confusion of what's going to happen.

So that's what I said that rather than nitpicking and unpacking what's happening, just -- let's just ride out next 2 quarters, and we'll get exact clarity on what it is.

It will be a little bit more imaginative and speculative on left or right and trying to unpack it into smaller numbers.

As long as business continues, we should be okay for now, right?

Sanjay Majmudar

And I will just add, our endeavor is to ensure our teams, everyone, we ensure that, I mean, there is nothing materially lost in U.S. We still continue with more or less the same volumes.

Bhoomika?

Moderator?

Moderator · Conference Operator

Bhoomika line got dropped.

We'll move to the next.

The next question is from the line of Chirag from Centrum Broking.

AIA Engineering Limited May 23, 2025

Chirag

Sir, some updates.

So last quarter, you had mentioned that we are working on some couple of large mines and possibly if they can convert, there could be 30,000, 40,000 metric ton addition.

So any update on that front, sir?

Sanjay Majmudar

We are working on several mines and our endeavor continues.

Chirag

Okay.

So in last quarter, we had mentioned that on the revised base of FY '25, we could again start looking at 25,000 to 30,000 metric ton addition per annum.

And now in the opening remarks, you mentioned that you would not like to give any volume outlook for FY '26.

So is it just U.S. uncertainty?

Or do you still see the momentum of conversion from forged to grinding media not recovering that fast?

Sanjay Majmudar

I would not want to pinpoint any particular reason.

But one, let me assure you one thing that we are not going back on that target.

That is point number one.

But what we thought that as we speak as compared to last quarter, again, so many things have happened in this world and things continue to happen.

You agree with me?

Correct?

Chirag

Yes, correct, yes.

Sanjay Majmudar

So while we are working on several fronts and our endeavor is to ensure that our medium- to long-term growth strategies remain intact and we become a predominant player in this industry, we felt that let us wait for a quarter or 2 and see how few things are unfolding without -- before giving a specific growth target.

But I'm very clear.

I'm not going back on what I said last quarter.

There should not be any other inference.

Chirag

Okay.

And sir, last question on our mill liner business, sir.

So just wanted to know how in FY '25 that business fared and the outlook for the next 1 to 2 years?

And any change in strategy in terms of ramping up of that business?

Sanjay Majmudar

No, I think it has been doing very well.

A lot of focus, a lot of investment is going in that business, and we remain very bullish on that.

As you are aware, we have already made some further expansions in that particular business and investment in that facilities.

So we are working very hard on approaching this business on multiple fronts.

As we speak, we have also increased our stake in that Australian company to 59%.

Chirag

Correct.

So sir, has that business started contributing in double digits to our total annual volumes?

Is it possible to share any volume broad ballpark outlook for this business?

Sanjay Majmudar

We don't share specific volumes, but of course, it is double digit, of course.

Chirag

And that business is currently outgrowing the grinding media business in terms of volume growth?

Sanjay Majmudar

No, no, no. So listen, grinding media still becomes a predominant volume driver.

It can't outgrow the grinding media but it is growing.

It is growing.

Definitely, it is growing.

AIA Engineering Limited May 23, 2025

Moderator · Conference Operator

The next question is from the line of Bhavin Vithlani from SBI Mutual Fund.

Bhavin Vithlani

So could you outline the thought process of investments in China and Ghana because this is pivoting from a strategy of being in India in a single location?

Kunal Shah

So idea was that we have seen last 3 years, we've made -- we have furthered our solutions in terms of the ability of our consequences.

We've been hamstrung by a few things.

One of the things has been freight, right?

There's a large implication on the transit time.

For example, when you're going to South America, it's almost a 80-day, 90-day transit time.

On top of that, with the whole Red Sea thing that's been on for the last 2 years, in between the China, U.S. container thing, there is a little bit of freight anxiety that sometimes customers express saying the freight is going on from 1x to 3x, containers are unavailable at times or the shipping time that it takes, what if there is a global event and where supply does not come in.

So these are just conversations.

These are not showstopper, but these were regularly coming up to us.

So there are -- we have taken -- we are trying to do things to see how can we fasten or fasten our acceptance with the customer, right?

So we are making small bets.

We are not going with a whole monolithic plant.

We are going to do it in a modular fashion.

We're going to do with a small capacity, see how that goes.

So it is our attempt to see.

So for our plant in China, for example, our transit times are half to everywhere in the world than what it is from India. okay?

And these are -- and most of our customers are mining customers where China already has a shipping corridor set up, right?

So these are efficient shipping corridors to sail from at a cost that is generally half than what we see from India and half the shipping time.

So that was one of the considerations to say what else can we do so that our fortunes are not linked to this one variable that has been -- which we thought after COVID.

So 2 years of freight issues post COVID, then we saw about a year that things normalize, again when what happened with the Red Sea issues, the freight volatility came in.

So this is one of our attempts to say making a small bet to see whether it changes the whole approach and the game to say now I've got the capacity which can deliver and offer a better supply chain visibility, predictability, cost from a shipping standpoint, et cetera.

I think it is only from that standpoint.

India continues to be the location.

So this is for our ability to break into a customer, give them the comfort.

We'll see what happens from there, correct?

The idea is that I've got a super normal solution, which can bring all these benefits to the customer.

And it's taking a little more time.

Could this be weighing on the customer's mind?

Would this help facilitate a faster, quicker conversion?

This is our attempt to in that direction, and we are not betting the house for it.

So that is the context.

Bhavin Vithlani

I'm sorry to harp here.

I mean where -- when I look through this investment decision, it is in a country which has little or probably no respect to...

AIA Engineering Limited May 23, 2025

Kunal Shah

What I'll say is I don't think there is a debate on this beyond this.

This is our strategy.

This is what we are moving forward with, making a small bet.

I think it will be not good use of everyone's time to now discuss a personal view.

There is -- and I would love to take this offline, and I'm very happy to share and we can go through this one-on-one after that.

Bhavin Vithlani

Fine.

And the second thing is, if you could just help us understand how are the realization different for grinding media and mill liners?

If you could give us a little ballpark in terms of indication, that would be helpful for us.

Kunal Shah

So realization for -- so the way we look at it is we've got grinding media as one category of products and non-grinding media is another category, right?

So mill liners are part of the non- grinding media category.

We've got vertical mill parts, we do quarry parts.

We do castings for cement mills, right?

So there is about 12, 13 suite of products that we do under the non-grinding media.

And that overall is about 30% of the volume, broadly, I'm saying.

25% by volume comes over there.

The cost of making these parts is also very different.

So if I -- if you ask me about the margin, my both categories are comparable.

But if you ask me about my realization, my non-grinding media could be from INR130, INR140, it can go right up to INR230, INR250, okay?

So now the weighted average now keeps changing depending on what I have done more, what has required machining, what is a 25% chrome versus 11%, 12% chrome.

There's -- all those variables come in, where do I need much heavier patterns versus smaller, easier patterns, right?

There's a whole cost investment that goes into the costing and the pricing part of it.

Some parts take up to 4 months from the receipt of the order.

Our design itself takes a month, our pattern making takes another 1.5 month, 2 months, then there is production, sample casting.

Post production, there is a month-long machining exercise, almost a 5, 6 months start to finish.

So -- and then the pricing then is commensurate with that.

All that cost that gets applied, accrued for that product and hence, from a margin standpoint, largely may not be very different.

But from a cost and hence, the selling price, there is a little bit -- there is a level of where it's not comparable.

These products are strictly not comparable.

But I would say between INR140, INR150, they go right up to INR250.

I'm saying realization per kilo.

Bhavin Vithlani

Great.

And just last question.

About a year back or so, we had green shoots from getting into the South America territory, especially Chile.

That's an area considering the production of copper that country has and our sales, we were significantly under-indexed.

So if you could give us some color on where we are because that is a geography which can give us significant volume delta going forward.

Kunal Shah

Yes, yes.

That could be a material game changer for us.

And it will be -- it will sound repetitive to say that, but we are very hopeful that we get a breakthrough soon, but we'll just AIA Engineering Limited May 23, 2025 have to wait for it, right?

It's been a long chase and effort.

We've gone through quite a bit of macro events in between.

We hope that we are building on that momentum, and I'm hoping in the next 2 quarters, there is some breakthrough that we would get to share.

But we've been in that a quarter away and not cross the line at least 3 times in the last maybe 1.5 years.

So with that caveat, I'm hoping that we have something good to share soon.

Bhavin Vithlani

Sure.

Just one more question I had because I remember we speaking about there are certain customers which had to do inventory correction due to internal challenges.

Could you just give us an update on -- I mean, what kind -- what percentage of volume would have been lost because of that?

And where are we in that?

Kunal Shah

We lost about 8,000 to 10,000 with 2 customers, 2 or 3 customers last year over 12 months.

So rolling basis, that volume should come back.

I think the one which was a larger customer, I think in another max 1 quarter gets back to original consumption pattern.

I think that's 1 quarter away.

The other 2, I mean, either are in the process.

I think, let's say, in a quarter's time, at least that volume on a rolling 12-month basis, we are hopeful will reset about 8,000 to 10,000 tons.

Bhavin Vithlani

Okay.

So is it fair to say that the drop in the volume that we have seen is none of the cases where we have lost a customer?

It's mainly to do with the idiosyncrasies of the customers and their inventory issues, et cetera.

Kunal Shah

So that was one part of it.

We did lose volume.

I think we did lose volume to the competition, I think for one large customer that went back, that went to the competition.

But I think other than that, nothing has changed in that -- and that was a rare event over the last 20 years that we've been competing, maybe 5 handful events where customer is -- that's where it is.

And some part of that may be linked to the duty structure and the uncertainty and all of that.

So we are hopeful that we can correct that.

Hopefully, we can correct that event also.

And I will -- we can speak offline for the whole -- once more on the logic about the China, Ghana.

Yes.

Moderator · Conference Operator

Thank you, a remainder to all participants, you may press star and one to ask question.

Kunal Shah

Operator, I think if this is done, we can wind this up.

Moderator · Conference Operator

Okay.

As there are no further questions from the participants, I now hand the conference over to the management for closing comments.

Over to you, sir.

Kunal Shah

Thank you.

Thanks, everyone, for staying on the call and hearing us.

And as usual, Sanjay bhai and I continue to remain available for any questions offline.

Thank you.

Sanjay Majmudar

Thank you very much.

Have a good evening.

AIA Engineering Limited May 23, 2025

Moderator · Conference Operator

Thank you.

On behalf of AIA Engineering Limited, that concludes this conference.

Thank you for joining us, and you may now disconnect your lines.

Thank you.