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Graphite electrode maker HEG sees more gain on China skies

Steel News - Published on Tue, 04 Dec 2018

Image Source: Livemint
Live Mint reported HEG Ltd expects revenue to more than double and the pretax margin to rise to as much 75% as demand remains strong because of environmental curbs in China. Chief Executive Officer Ravi Jhunjhunwala said in a phone interview last week that “Things are looking good as of now. I think we are on track to reach about 68 billion rupees (USD 975 million) in revenues. Our Ebitda margin continues to widen and I think it will be fair to say that we see them in the 70-75% range for the next few quarters and some time to come.”

That’s after its earnings before interest, taxes, depreciation, and amortization margin rose to a record 64.6 percent in the year ended March 31, making it the most profitable graphite electrode producer on the planet, data compiled by Bloomberg shows.

HEG’s shares have surged about 28 times since the beginning of 2017 on rising demand for graphite electrodes, an essential component of electric arc furnaces that turn scrap into steel. Electrode prices are estimated at as much as USD 15,000 a tonne, more than double the historical average of USD 4,500 a tonne and are expected to keep rising into 2019, following China’s efforts to reduce overcapacity and pollution in its steel industry. China’s blue-sky protection plan is widening anti-pollution controls that are shuttering plants that make graphite electrodes and traditional blast-furnace steel mills, while lifting output of less-polluting steel from electric arc furnaces. It’s also pushing more global steel production to Europe

HEG plans to increase its annual capacity by a quarter to 100,000 tons in about three years to meet higher demand. While it will spend as much as 12 billion rupees to expand capacity, which it plans to finance it through its own cash, any new graphite electrode supply will be constrained by the limited availability of key raw material needle coke.

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Posted By : Ratan Singh on Tue, 04 Dec 2018
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