Earnings call transcript: Rain Industries sees mixed segment performance in Q2 2025

Rain Industries Limited reported its financial results for the second quarter of 2025, showcasing a mixed performance across its business segments. According to InvestingPro data, the company’s stock is trading near its 52-week high at $6.54, with a market capitalization of $44.53 million. The company experienced growth in its carbon segment, while its advanced materials and cement segments faced declines. Despite these challenges and a concerning financial health score of 1.5 (rated as WEAK by InvestingPro), Rain Industries remains optimistic about future opportunities in the electric vehicle and battery markets.

Key Takeaways

• Carbon segment revenue increased by 10.8%.
• Advanced materials segment revenue fell by 11.9%.
• Cement segment revenue declined by 21.5%.
• Net debt to EBITDA ratio targeted to decrease from 4.5x to 3.0x.
• Strategic expansions in the energy storage and battery sectors.

Company Performance

Rain Industries demonstrated resilience in its carbon segment, which saw significant growth. However, the company faced headwinds in its advanced materials and cement segments. The reintroduction of U.S.-produced CPC in India and strategic expansions in Belgium and Canada are part of the company’s efforts to enhance its competitive position.

Financial Highlights

• Consolidated net revenue: 37.46 billion rupees, up 0.89 billion from Q1 2024.
• Adjusted EBITDA: 4.34 billion rupees.
• Net debt: $854 million.
• Net debt to EBITDA ratio: 4.5x, with a target of 3.0x in the coming quarters.

Outlook & Guidance

Rain Industries is optimistic about the future, particularly in the CPC markets, with anticipated sales volume growth in 2025. The company also expects improved performance in the cement segment and aims to reduce its net debt to EBITDA ratio. Opportunities in the electric vehicle and battery markets are seen as promising growth drivers.

Executive Commentary

Jagander Delelur, Managing Director, expressed confidence in the company’s strategic direction, stating, "2025 has ushered in a positive shift in our CPC markets." He emphasized the company’s readiness to leverage favorable market dynamics and navigate the complexities of the global landscape.

Risks and Challenges

• Volatility in raw material prices could impact margins.
• Competitive pressures in the advanced materials sector.
• Macroeconomic factors affecting global construction demand.
• Regulatory changes in key markets.
• Dependence on the aluminum industry, which accounts for 43% of revenue.

Full transcript - Rainbow Denim BO (RAIN) Q1 2025:

Sarang Pani, General Manager of Corporate Reporting and Investor Relations, Rail Industries Limited: Is Sarang Pani, and I serve as general manager of corporate reporting and investor relations at Rail Industries Limited. Earlier today, we have released our results for the first quarter ended 03/31/2025, and the same is also posted on our website. Shortly, we will guide you through the performance highlights of Rail Industries Limited for the first quarter of twenty twenty five. The speakers for today are mister Jagandar Delelur, managing director of Rain Industries Limited mister Gerard Sriniv, president of Rain Carbon Inc and mister T. Srinivas Rao, chief financial officer of Rain Industries Limited.

Before we proceed, the management would like to note that during this management discussion, forward looking statements may be discussed that include various subjects such as outcomes, trends, targets, and strategic directions. These statements rely on our current projections and are subject to risks and uncertainties that could cause actual results to vary materially from those suggested by these forward looking statements. There are certain risk factors that could lead to results different significantly from our predictions. The discussion today contains certain non GAAP financial measures. The related non GAAP reconciliations are provided in the companion slides.

Please turn to slide three. At this time, where Mr. Jagandendi will offer insights to the key developments at RAIN Group during the first quarter of twenty twenty five. Thank you. And now I hand it over to Mr.

Jagand.

Jagander Delelur, Managing Director, Rain Industries Limited: Thank you, Sarang, and greetings to all. Turning to slide three of our presentation, let us begin with the cornerstone of our operational safety. RAIN closed the first quarter of twenty twenty five with one recordable incident resulting in a total recordable incident rate of 0.06 for the three months ended March for all three business segments put together. This achievement underscores the unwavering commitment of our employees to maintain an industry leading safety standards. However, this milestone also serves as a reminder that safety is a continuous journey, not a destination.

We must remain vigilant, ensuring that every team member returns home safely to their families at the end of each workday. The single recorded incident was an unusual office accident unrelated to our operations. Nevertheless, we took immediate action conducting a comprehensive review across all our global offices to prevent a similar occurrence in the future. This reinforces our belief that safety is not just about procedures, it is shaped by awareness and the environment in which we work. Moving to financial performance, we concluded the first quarter with an adjusted EBITDA of 4,340,000,000.00 rupees.

This represents a slight improvement from our fourth quarter twenty twenty four results and exceeds last year quarterly performance. However, we acknowledge that we have yet to reach our normalized quarterly EBITDA target. Persistent challenges with raw material costs continue to impact on unit margins, limiting our ability to fully regain our expected earnings. Securing high quality raw materials at competitive prices remains a priority, though we recognize the difficulties that have persisted over the last several quarters. Market competition and supply constraints in certain segments have also posed challenges, exerting pressure on both volumes and margins.

Entering the first quarter, our focus was firmly on restoring our normalized operating margins to stabilize overall performance. While we have not fully reached this goal, the direction is promising and results remain aligned with our expectations, fueling optimism as we head into the second quarter and beyond. In our carbon segments calcination business, the first quarter saw a significant surge in China’s green petroleum coke or GPC market due to constrained supply. Consequently, prices for Chinese calcined petroleum coke rose sharply for almost doubling for certain qualities. While there has been some retreat since then, CPC prices in China remain roughly about $50 higher than Western world pricing.

This shift provides some relief for our calcination business as historically low Chinese CPC prices had pushed market rates downward over the past two years. As discussed last year, the CPC market continues to experience raw material pricing pressure driven by the emerging battery and materials sector, which consumes low metal GPC. The current price environment offers timely relief, balancing the headwinds created by BIM demand. We are also pleased to report the arrival of our first cargoes of U. S.

Produced CPC in India, marking the reintroduction of non Indian CPC blend components into our Indian system after a six year gap. This milestone is an indicator of our global blending strategy, which harnesses our global CPC production network along our logistics and blending capabilities. By leveraging these trends, we are pushing to enhance our competitive supplies to regions around India. With these insights in mind, let us now review our first quarter performance across business segments. Across our carbon segment, we experienced a modest 4% quarter over quarter decline in volumes, primarily driven by CPC, while CPCs while sales prices improved, helping to offset raw material costs.

Drilling deeper, CPC sales volumes declined by 7% due to timing of certain shipments, which are spilled over to the next quarter. Looking ahead, anticipate reasonable growth in CPC sales volumes throughout 2025, supported by the ongoing ramp up of production capacity at our vertical shaft cal center plant in India, located within a special economic zone. Additionally, we are reactivating our unique integrated global blend strategy at our SCG unit, which will provide further support. These transformation shifts in our carbon calcination business highlight the importance of securing reliable access to GPC, particularly as demand intensifies due to increasing competition from BA manufacturers. Despite the evolving market landscape, we are strategically positioned to navigate challenges and capitalize on emerging opportunities.

In our carbon distillation business, we continue to manage disruptions in raw material supply stemming from the ongoing war in Europe and the weakened global steel industry. These factors have notably reduced local coal tar availability for our carbon destination facilities. In response, we have rolled out technological innovations that broaden our raw material sourcing while mitigating the reduced European coal tar supply. Additionally, our adaptable logistics infrastructure has been configured to secure higher raw material volumes from greater distances, though at a higher cost. Finished product prices in these segments have risen modestly helping to offset escalating coal tar costs and partially preserve margins.

Our distillation volumes grew by 6% compared to the fourth quarter, in line with the expectations. Looking forward, we anticipate higher volumes in 2025, driven by increasing pitch demand from European aluminum smelters. Elsewhere in our carbon’s distillation segment, the other carbon products volumes decreased by 2% during the first quarter, however, with a 9% rise in prices. Turning to our Advanced Materials segment, profitability remained under pressure during the quarter due to raw material shortages in Europe. While seasonality has historically impacted first quarter results, this year’s performance was further challenged by elevated raw material costs.

Segment volumes declined by 13% along with margins pressure leading to lower profitability compared to Q1 twenty twenty four. Despite these headwinds, our team is actively working with traditional and new suppliers to secure relief on raw material availability for the remainder of 2025. Our goal remains clear to replicate the strong performance our advanced materials segment achieved in 2024. Within the segment’s subcategories, engineered product volumes remained stable quarter over quarter, driven by seasonal impacts, including demand fluctuations for asphalt sealer products. Chemical intermediates volume declined due to seasonal trends affecting end user demand.

Resin and downstream materials maintained flat volumes quarter over quarter. Looking ahead, we are cautiously optimistic. Our HSCR plant in Germany successfully completed routine maintenance in March, allowing us to start the second quarter with increased production levels across multiple product lines. Moreover, efficiency improvements from recent technical innovations have helped lower HSCR operating costs have helped lower HSCR operating costs. In Belgium, we have expanded sales volumes from our phthalic anhydride plant, improving operational efficiency while reducing per unit production cost.

Higher phthalic anhydride output also enables increased energy savings as greater throughput allows our facility to generate more waste to its steam for internal consumption. On a broader scale, energy cost in Europe remained manageable during the winter months, aided by milder than expected temperatures. However, demand recovery remains uncertain with industrial sectors across Europe awaiting clearer signs of resurgence. While market sentiment for 2025 remains cautious, we remain committed to navigating evolving dynamics. The global economic outlook remains turbulent, influenced by tariffs and ongoing conflicts.

As of today, tariffs have had no material impact on our business. Given the unpredictability of political developments, there remains a risk that future escalation could impact our operations. However, with the ever changing nature of global trade policies, providing further guidance at this stage would be speculative. For now, our priority remains clear, ensuring efficiency, competitiveness, and resilience in the market. In regard to our cement segment, following a challenging year 2024, India’s cement industry is paused for strong growth in 2025, driven by increasing construction activity and government infrastructure investments.

The cement demand is projected to rise by approximately 8% supported by improved sales realizations, higher margins and accelerating project development. Non residential construction starts are expected to grow by 3.6% in 2025, marking a return to expansion after a slight decline last year. With market consolidation among national players in India throughout 2024, we anticipate stable net realization and reduced competition among regional producers. Pricing trends show gradual improvement, particularly as construction activity gains momentum in first post monsoon and festival seasons. We could see some of this positive initial indicators starting second quarter twenty twenty five.

However, production costs continue to pose challenges and management remains focused on optimizing operational efficiencies to mitigate impacts. In summary, we believe that the Cement segment is well positioned to perform favorably in the quarters ahead. Now I will hand over the presentation to Jerry Sweeney, who will provide further updates on the industry and our business slide on Slide four. Jerry?

Jerry Sriniv, President, Rain Carbon Inc: Thank you, Jagan. Hello, everyone. It’s a pleasure to speak with you all again. The outlook for the global aluminum industry remains strong despite despite a slight retreat in aluminum prices during the quarter, which have now stabilized around the $2,400 mark on the LME. This price level is supported by relatively low natural gas costs and expectations of increased demand amid persistently low LME inventories.

In 2024, world primary aluminum production reached a new all time high run rate of 73,100,000 tons. However, even with this production increase, LME inventories remained at relatively low levels. Looking ahead, smelting expansions in India and Indonesia are expected to drive the major startup of new capacity in 2025. Furthermore, several additional smelter projects across various regions outside of China are scheduled to come online in 2026, reinforcing industry growth in our target markets. Overall, the aluminum sector appears well positioned for continued expansion, supported by stable pricing, favorable natural gas costs, and a resurgence in demand.

Importantly, with the recent relief on import restrictions in India, our additional CPC production capacity will enable us to meet growing market needs while enhancing our global competitiveness. Moving to slide five, which highlights key commodity price trends and our business performance during the first quarter of twenty twenty five, most prices remained relatively stable with benzene being the notable exception. After a prolonged downturn excuse me, downward trend throughout 2024, benzene prices rebounded, marking an increase this quarter. We anticipate the positive effects of this shift will become more apparent in the coming quarters. Natural gas prices in Europe reached an eighteen month high during the fourth quarter of twenty twenty four, largely driven by seasonal winter demand and supply curtailments throughout the year.

However, as we moved into the first quarter of twenty twenty five, these pressures eased and natural gas prices have begun to decline once again. Turning to Slide six, we focus on revenue distribution by end industry. The aluminum sector accounted for approximately 43% of our total consolidated revenues on an LTM basis as of Q1 twenty twenty five. We expect this figure to return to its normal range of 44%, forty five % by year end. Our revenue streams remain well diversified across various industries, including the construction and carbon black sectors, both of which continue to be critical contributors to our overall business performance.

With that, I’ll now turn the presentation over to Srinivas, who will take you through the consolidated financial performance of RAIM on slide seven. Srinivas, over to you.

T. Srinivas Rao, Chief Financial Officer, Rain Industries Limited: Thank you, Jerry, and hello, everyone. Turning on to slide seven. During the February, RAIN reported a consolidated net revenue of 37,460,000,000.00 rupees, an increase of INR0.89 billion from INR36.57 billion during the same period in 2024. The increase was primarily due to a revenue increase of INR2.65 billion in our carbon segment, which was offset by a reduction in revenue of INR 970,000,000.00 in our advanced materials segment and a reduction of INR 790,000,000.00 in our cement segment. Rain’s consolidated adjusted EBITDA for the first quarter increased by 1,080,000,000 compared to the previous year.

This was attributed to an increase of 1,630,000,000.00 rupees in the carbon segment, which was offset by a decrease of 440,000,000.00 rupees in the advanced material segment and a decrease of 110,000,000 in the cement segment. Moving to slide eight, we can see that for the first quarter ending on 03/31/2025, our carbon segment reported a revenue of 27,340,000,000.00 rupees, an increase from 24,690,000,000.00 rupees during the same period in the previous year. During this quarter, the increase in volume was primarily driven by increased CPC volumes due to higher capacity utilization of our Indian calcium nation plants following the relief from import restrictions. During the February, the average blended realizations decreased by about 5% on account of lower market quotations in the coal tar pits business. There was an appreciation of the euro against the Indian rupee by about 1% and an and an appreciation of the US dollar against the Indian rupee by about 4.4%.

Overall, due to the efforts and reasons, revenue from the carbon segment increased by about 10.8% in the February as compared to the February. The EBITDA for the carbon segment increased by 1,630,000,000.00 rupees compared to the first quarter of the previous year. This was primarily driven by increased volumes and increased margins due to resetting of CPC prices to cover the increase in raw material prices coupled with the appreciation of euro and US Dollar against the Indian rupee by 14.4% respectively. Moving to slide nine, we can see the advanced material segment’s performance. During the quarter ending 03/31/2025, our advanced material segment ended revenues totaling 7,240,000,000.00 rupees, a decrease from 8,210,000,000.00 rupees during the same period in the previous year.

During this quarter, the increase in volume the decrease in volume was primarily driven by lower demand in chemical intermediates and resin subsegments. During the February, average blended increased by 1.3%. Further, revenue increased due to appreciation of the euro against Indian Indian rupee by about 11%. Due to the aforesaid reasons, revenue from advanced material segment decreased by about 11.9% during the February as compared to the February. EBITDA decreased by 432,000,000 rupees compared to the February due to lower volumes in certain sub subsegments, coupled with increase in natural gas prices, offset by the appreciation of the euro against the Indian rupee.

Moving on to slide number 10, we can look at our cement segment, which experienced a 21.5% decline in revenue in the February compared to the same period in 02/2024, attributable to a 13.4% fall in volumes and 9.4% reduction in realizations due to market consolidation by national players in this segment. The EBITDA for our cement segment saw a downturn of hundred and 8,000,000 rupees due to lower selling prices and lower volumes. Moving on to slide 10 on data. The first quarter concluded with a gross debt of 989,000,000 US dollars, which includes working capital debt of $184,000,000 US dollars. Our net debt stood at $854,000,000 US dollars.

And with an LTM EBITDA of hundred and 90,000,000 US dollars, our net debt to EBITDA ratio was one four point five x over the next few quarters. Over the next few quarters, as performance improves, we anticipate that this leverage ratio to gradually approach three point zero x. In terms of liquidity, we closed the quarter with 278,000,000 US dollars comprised of $120,000,000 US dollar cash balance and $158,000,000 US dollars available in undrawn credit facilities. During the quarter, we repaid the US dollar denominated senior secured notes, which are due in April 2025, amounting to 44,000,000 US dollars. The next major long term repayments are scheduled to start in October 2028.

During the quarter, our working capital requirements increased significantly. This was due to several factors. One was thanks to the approval we were granted to import more more raw materials at both of our calcination plants in India versus the past import quantity restrictions. Another factor was the completion of the Indian finance year by when raw material import quotas for our DTA plant in Wishan Weizag must be utilized. The third factor was higher price quotations for raw materials.

For these reasons, we utilized the existing cash balance as at the beginning of the year and also increased working capital borrowings during the quarter. Regarding the maintenance capital, the group spent approximately 14,000,000 US dollars during the February across all locations. I will now pass over the presentation to mister Jagan for his closing remarks.

Jagander Delelur, Managing Director, Rain Industries Limited: Thank you, Shrinivas. As outlined in our earlier comments, 2025 has assured in a positive shift in our CPC markets. With better positioning and strategic planning, we are well equipped to capitalize on this favorable market dynamics and drive sustained progress in the coming quarters. Our distillation business remains a valuable contributor, though it continues to experience pricing pressure for raw materials. To address this challenge, we are actually working on the realignment of raw materials to enhance margins and bolster overall profitability.

While this effort requires adaptability and innovative problem solving, we are confident in our ability to rise to the occasion. The foundation we have built over the past years positions us well to seize market emerging market opportunities and regain traditional earnings levels. A particularly encouraging development has been the relief granted by the Honorable Commission for Air Quality Management in India, lifting import restrictions after six long years. This milestone has reinvigorated our enthusiasm and unlocked new operational efficiencies. With our Indian and US Carbon Calcination facilities now running optimally, we are seamlessly reintegrating our global blend strategy, strengthening our competitiveness.

Our commitment to restoring the company’s earnings remains unwavering, and we are optimistic that this breakthrough will accelerate our path forward. Looking forward 2025, we see promising promise on the horizon. We are especially excited about the potential of our newly announced research and development laboratory and demonstration plant for energy storage materials and battery anode materials in Canada. This investment positions Reign as a key player in the rapidly expanding electrical vehicle and battery markets. Through this demonstration plant, we will further solidify our reputation for excellence in battery technology showcasing the relevance of our products while exploring new applications and supply chain opportunities.

Additionally, we are continually driving efficiencies and volume improvements at our EJCR facility in Germany, which produces cutting edge additives for packing and hygiene products, industries that are growing steadily in response to increasing environmental consciousness. Despite the complexities of an ever evolving global landscape, we remain excited about the future and deeply confident in our strategies. The dedication, ingenuity, and perseverance of our teams are the driving forces behind our continued success. By working together, we will turn challenges into opportunities, ensuring a prosperous trajectory for and all our stakeholders. We sincerely appreciate your ongoing support for Brain Industries Limited and look forward to sharing further updates in our upcoming quarterly presentation.

Thank you very much.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.