SP Refractories Ltd Management Discussions

<dhhead>Management Discussion and Analysis Report Industrial Structure and Developments: </dhhead>

SP Refractories Limited, a National Stock Exchange EMERGE platform Registered Company is engaged in manufacturing and supplying of high-quality refractory material made using premium grade cement aggregates and other raw material wherein the final product is used by iron, steel and construction industries. The Company has almost 18 (Eighteen) years of experience in the refractory sector.

The Indian refractories industry plays a crucial role in supporting the core manufacturing sectors, particularly steel, cement, glass, and non-ferrous metals. The industry has shown resilience and adaptability in the post-pandemic phase, driven by strong demand from infrastructure and manufacturing sectors.

The refractory materials industry is integral to various high-temperature industrial processes, such as manufacturing of Refractory materials, characterized by their ability to withstand extreme temperatures, are essential for the efficient and safe operation of furnaces, kilns, and reactors. The global refractory market has shown steady growth, driven by the expansion of end-use industries and the rising demand for advanced materials that offer better performance and longevity.

BUSINESS OVERVIEW

SP Refractories Limited is engaged in the manufacturing and supply of high-quality refractory materials, primarily Magnesia Carbon Bricks, Castables, and Monolithics used in furnaces, kilns, and incinerators. The company caters to key players in the steel, cement, and foundry sectors.

The Company’s manufacturing unit located at Nagpur is equipped with modern machinery and follows stringent quality control processes. The Company has sustained its market presence through product customization, timely deliveries, and robust client relationships.

Financial Performance

During the financial year 2024-2025, the company recorded a steady increase in revenue, reflecting a growing demand for our products. The strategic expansion into new markets, coupled with our focus on innovation and quality, has positively impacted our financial performance. The company’s profit margins have improved slightly compared to the previous year, driven by an increase in sales and better operational efficiencies.

Operational Performance

The company has continued to enhance its operational capabilities by investing in state-of-the-art manufacturing facilities and adopting advanced production technologies. These initiatives have enabled us to improve product quality, reduce production costs, and increase output. Our supply chain management has also been strengthened, ensuring timely delivery of products to our customers while minimizing disruptions.

Sales and Marketing Initiatives

To support our growth strategy, we have implemented aggressive sales and marketing initiatives aimed at expanding our market share. These efforts include:

Market Expansion: We have successfully entered new geographic markets, leveraging our strong brand reputation and superior product offerings.

Product Development: Continuous investment in research and development has led to the introduction of new and improved refractory products, catering to the evolving needs of our customers.

Customer Engagement: We have enhanced our customer engagement efforts through targeted marketing campaigns, improved customer support services, and tailored solutions for key clients.

Opportunities and Threats:

Major Opportunities for the Company are as follows:

Rise in new geographical markets of different cities of the India.

Increase in emerging technologies.

Demand for high-performance, energy-efficient refractory products.

Long experience of the promoters in the industry;

We follow the Quality standards which are followed by leading companies working in the same segment.

Rising domestic steel production and infrastructure growth.

Track record of successful execution of projects.

Experience across various Industry Vertical.

Major Threats/ Challenges to the Company are as follows:

Technology dependency

Integration with various technology

Manpower retention

Environmental regulations and compliance costs.

Foreign exchange fluctuations affecting imports of raw materials.

Volatility in raw material prices, especially magnesite and graphite.

Outlook:

Looking ahead, the company is optimistic about its growth prospects in the financial year 2025-2026. With a strong product pipeline, strategic market expansions, and a focus on operational excellence, we are well-positioned to capitalize on industry opportunities and enhance shareholder value. We anticipate continued demand for high-quality refractory materials, driven by the growth of key end-use industries such as steel and cement.

Risk and Concerns:

The refractory industry faces several challenges, including fluctuations in raw material prices, stringent environmental regulations, and competition from low-cost producers. To mitigate these risks, the company is focusing on:

Supply Chain Optimization: Securing long-term supply contracts with key suppliers to stabilize raw material costs.

Sustainability Initiatives: Investing in eco-friendly production processes and products to comply with environmental regulations and meet the growing demand for sustainable solutions.

Innovation: Continuously innovating to differentiate our products from those of competitors, ensuring we remain a preferred supplier in the industry.

Internal Control System and their adequacy:

The company has robust internal control systems in place to ensure compliance with applicable regulations, safeguard assets, and ensure the accuracy of financial reporting. Regular audits and reviews are conducted to ensure these systems remain effective and are continuously improved to address emerging risks.

Human Resources:

Our employees are the backbone of our success. The company is committed to creating a supportive work environment that fosters innovation, collaboration, and professional growth. Continuous training and development programs are in place to ensure our workforce is equipped with the skills and knowledge required to excel in a competitive industry.

Segment wise or product-wise performance:

The Company is presently engaged in single segment of manufacturing and supplying of high-quality refractory material and the performance of Company for the financial year 2024-25 is summarized below:

Particulars	31/03/2025	31/03/2024
Revenue From Operations	3025.41	2881.08
Other Income	0.60	2.62
Total Income (Revenue)	3026.01	2883.70
Net Profit/Loss before Interest, Depreciation and Tax	353.73	292.10
Less: Finance Cost	34.40	42.54
Less: Depreciation and amortization for the year	40.00	32.73
Net Profit/Loss before exceptional and extraordinary items and tax	279.33	216.83
Less: Exceptional Items	00.00	00.00
Profit before extraordinary items and tax	279.33	216.83
Less: Extraordinary Items	00.00	00.00
Profit before tax	279.33	216.83
Less: Tax Expenses
i. Current tax expense	66.02	54.37
ii. Deferred tax Liability/(Assets)	4.25	6.60
iii. Tax for Earlier years	0.00	0.00
Profit/Loss for the period from continuing operations	209.06	155.86
Profit/Loss from discontinuing operations	0.00	0.00
Tax expense of discontinuing operations	0.00	0.00
Profit/Loss from discontinuing operations (after tax)	0.00	0.00
Profit/Loss transferred/adjusted to General	0.00
		0.00
Reserve
Basic earnings per equity share	11.68	8.71
Diluted earnings per equity share	11.68	8.71

Key Observations:

1. Revenue Growth: Revenue from operations and other income increased from 2,883.70 Lakhs to 3026.01 Lakhs showing a positive growth trend.

Discussion on financial performance with respect to operational performance:

1. Revenue Analysis:

Revenue from Operations and Other Income:

	31st March, 2025: 3026.01 Lakhs
	31st March, 2024: 2883.70 Lakhs

Analysis: The revenue increased by 142.31 Lakhs, or 4.93%, from 2883.70 Lakhs in 2024 to 3026.01 Lakhs in 2025. This growth reflects the companys ability to enhance its operational performance and achieve higher sales.

2. Operational Profitability:

Profit/Loss before Interest, Depreciation, and Tax:

	31st March, 2025: 353.73 Lakhs
	31st March, 2024: 292.10 Lakhs

Analysis: The profit before interest, depreciation, and tax (PBDIT) increased by 61.63, Lakhs representing a 21.09% growth compared to the previous period. This substantial increase reflects improved operational efficiency and effective cost management, contributing positively to the companys overall profitability.

3. Depreciation and Amortization:

Depreciation and Amortization for the Year:

31^st March, 2025: 40.00 Lakhs

31^st March, 2024: 32.73 Lakhs

Analysis: Depreciation and amortization expenses increased by 7.27 Lakhs or 22.21%. This increase in non-cash expenses could suggest higher capital expenditure or changes in asset utilization. While the rise in these expenses typically reduces net profit, it may also indicate investment in assets that could enhance future operational efficiency.

4. Profitability after Depreciation:

Net Profit/Loss before Exceptional and Extraordinary Items and Tax:

	31st March, 2025: 279.33 Lakhs
	31st March, 2024: 216.83 Lakhs

Analysis: The Company recorded a year-on-year increase of Rs. 62.50 Lakhs (28.82%) in its net profit before exceptional and extraordinary items and tax. This notable growth reflects improved operational efficiency and effective cost control measures implemented during the year, even before considering any one-time or extraordinary adjustments.

5. Tax Impact:

Current Tax Expense:

	31st March, 2023: 66.02 Lakhs
	31st March, 2024: 54.37 Lakhs

Analysis: The current tax expense increased by Rs. 11.65 Lakhs, representing a growth of 21.42% over the previous year. This rise may be attributed to higher taxable income during the year or changes in tax computations arising from adjustments or more efficient tax planning.

6. Final Profitability:

Profit/Loss for the Period from Continuing Operations:

	31st March, 2025: 209.06 Lakhs
	31st March, 2024: 155.86 Lakhs

Analysis: The profit from continuing operations increased by 53.20 (Lakhs), or 34.13%. This significant improvement reflects a stronger operational performance and effective management of expenses and taxes.

7. Earnings per Share:

Basic and Diluted Earnings per Equity Share:

	31st March, 2025: 11.68 per share
	31st March, 2024: 8.71 per share

Analysis: The basic and diluted earnings per share increased by 2.97, or approximately 34.10%. This growth reflects improved profitability and operational performance, contributing positively to shareholder value.

SUMMARY AND CONCLUSIONS

1. Revenue Growth: The Company achieved modest revenue growth of 4.93%, suggesting steady performance in its core operations.

2. Operational Efficiency: Improvements in profit before interest, depreciation, and tax, as well as net profit before depreciation and tax, highlight enhanced operational efficiency and cost control.

3. Depreciation Management: The increase in depreciation and amortization expenses suggests higher capital expenditures or changes in asset utilization. While this typically reduces profitability by increasing non-cash expenses, it may also indicate investments in assets that could enhance future operational efficiency.

4. Tax Management: Decreased current tax expenses and a deferred tax credit contributed favourably to net profit, reflecting effective tax planning and adjustments.

5. Final Profitability: The substantial increase in profit from continuing operations (22.5%) underscores strong operational performance and effective management strategies.

6. Earnings per Share: The rise in earnings per share signals improved profitability and value for shareholders.

Overall, the financial performance for the year ending 31^st March 2025 reflects strong operational performance, effective cost management, and enhanced profitability compared to the previous year. The company has demonstrated resilience and growth in its core operations, benefiting from strategic management of expenses and taxes.

MATERIAL DEVELOPMENT IN HUMAN AND OTHER RESOURCES / INDUSTRIAL RELATIONS FRONT:

During the reporting period, significant strides were made in the management and development of human resources, as well as in maintaining robust industrial relations. Key developments include:

Talent Acquisition and Development: The Company continued to attract and retain top talent through targeted recruitment drives and by enhancing employee training programs. These initiatives have strengthened our workforces skillset, ensuring alignment with the company’s strategic goals.

Employee Engagement and Retention: Employee engagement initiatives were further enhanced, leading to improved morale and reduced attrition rates. Regular feedback mechanisms and employee wellness programs contributed to a positive work environment.

Industrial Relations: The Company maintained harmonious industrial relations throughout the period. Proactive engagement with labour unions and regular communication with employees helped in preventing disputes and fostering a collaborative work culture.

Health and Safety: Continued emphasis was placed on occupational health and safety. The introduction of new safety protocols and regular safety audits ensured a safe working environment, reducing the number of workplace incidents.

Details of significant changes (i.e. change of 25% or more as compared to the immediately previous financial year) in key financial ratios, along with detailed explanations therefore:

Ratio	FY 2024-25	FY 2023-24	Change %	Reason for change
Current Ratio	2.42	2.22	9.01%	--
Debt-Equity Ratio	0.35	0.45	(22.22%)	--
Debt Service
Coverage Ratio (DSCR)	3.86	3.43	12.48%	--
Return On Equity Ratio	0.17	0.15	11.86%	--
Inventory T/O Ratio	4.64	6.22	(25.40%)	COGS reduces during the year as compared to our avg. inventory, resulting in decreasing inventory turnover ratio.
Trade Receivables T/O Ratio	4.75	4.61	2.99%	--
Trade Payables T/O Ratio	22.24	16.94	31.26%	Trade payable t/o ratio increases as a result of decreasing trade payable as compared to previous year.
Net Capital T/O Ratio	4.44	5.53	(16.23%)	--
Net Profit Ratio	6.91	5.41	27.73%	The company has increasing net profit ratio as a result of decrease in cost of consumption as compared to previous year.
Return On Capital Employed	22.80	20.61	10.63%	--
Return On Investment	8.37	6.91	(21.13%)	--

Disclosure of Accounting Treatment:

The financial statements have been prepared on accrual basis under the historical cost convention, in accordance with the accounting principles generally accepted in India and comply with the Accounting Standards specified under section 133 of The Companies Act, 2013 and the relevant provisions of the Companies Act, 2013 and with the relevant provisions of the Companies Act, 2013, to the extent applicable.

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets, liabilities, revenue, expenses and disclosure of contingent liabilities on the date of financial statements. The recognition, measurement, classification or disclosures of an item or information in the financial statements are made relying on these estimates. Any revision to accounting estimates is recognized prospectively.