Earnings call transcript: Rainbow Denim Q2 2025 returns to profitability

Rainbow Denim Ltd. reported a return to profitability in the second quarter of 2025, with a net profit after tax of Rs. 500 million. The company, which had faced challenging quarters previously, showcased improved financial performance, driven by strategic initiatives and market resilience. Currently trading at $3.57, the stock shows mixed signals according to InvestingPro analysis, with the current price aligning closely with its Fair Value. The company’s market capitalization stands at $27.69 million, with the stock trading near its 52-week high of $13.70.

Key Takeaways

• Rainbow Denim posted a net profit of Rs. 500 million for Q2 2025.
• Financial performance improved significantly from the previous quarter.
• The company successfully repaid $44 million in senior secured notes.
• Strategic investments in innovative materials and technologies continue.

Company Performance

Rainbow Denim Ltd. demonstrated a significant turnaround in Q2 2025, reporting a net profit after tax of Rs. 500 million. This marks a return to profitability after several challenging quarters. The company’s efforts in enhancing operational efficiency and strategic debt repayment have contributed to this positive outcome. The aluminum industry’s resilience, with LME prices consistently above $2,600, also played a crucial role in supporting the company’s performance.

Financial Highlights

• Revenue: Rs. 44.01 billion, reflecting an improvement from previous quarters.
• EBITDA: Rs. 6.17 billion, showcasing strong operational performance.
• Earnings per share: Rs. 1.47, marking a return to profitability.
• Capital investments: $28 million, focusing on innovation and growth.
• Strong liquidity position: $339 million, with gross debt at $1.044 billion.

Outlook & Guidance

Rainbow Denim remains focused on sustainable long-term growth, exploring biocarbon and low-carbon solutions. The company is preparing for potential tariff impacts and continues to make strategic investments in emerging technologies. The outlook for the global aluminum industry remains resilient, with promising prospects for future expansion.

Executive Commentary

"We have returned to profitability and posted a net profit after tax of Rs. 500 million," stated Jagandar Dinellor, Managing Director, highlighting the company’s successful turnaround. He further emphasized the strategic advantage of their North American plant locations. Gerard Sriniv, President of Rain Carbon Inc, expressed optimism about the aluminum industry’s outlook, describing it as "resilient and promising."

Risks and Challenges

• Geopolitical tensions could impact raw material sourcing and market stability.
• Fluctuations in global market volatility pose potential risks to pricing strategies.
• The company faces challenges in maintaining cost efficiency amidst rising operational costs.

Rainbow Denim’s strategic positioning in the aluminum and carbon markets, coupled with its focus on innovative materials and technologies, positions it well for future growth. However, the company remains vigilant about potential risks and challenges in the global market landscape.

Full transcript - Rainbow Denim BO (RAIN) Q2 2025:

Saran Pani, General Manager of Corporate Reporting and Investor Relations, RAIN Industries Limited: Greetings to everyone. We welcome you all to today’s management presentation hosted by RAIN Industries Limited. My name is Saran Pani and I serve as General Manager of Corporate Reporting and Investor Relations here at RAIN Industries Limited. Earlier today, we released our financial results for the second quarter and half year ended 06/30/2025. These results are now available on our website for your reference.

In just a moment, we will walk you through the key performance highlights in RAIN Industries Limited for the 2025. We will be providing you insights on our operational progress, market dynamics and strategic initiatives that are shaping our path forward. The speakers for today are Mr. Jagandar Dinellor, Managing Director of Rain Industries Limited Mr. Gerard Sriniv, President of Rain Carbon Inc Mr.

T. Srinivasrao, Chief Financial Officer of Rain Industries Limited. Before we proceed, 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 differing significantly from our predictions.

The discussion today contains non GAAP financial measures that relate non GAAP reconciliations that are provided in accompanying slides. Please turn to Slide three at this time, where Mr. Jagandarini will offer insights to the key development in RAIN Group during the 2025. Thank you. And I now hand it over to Mr.

Jagandar. Thank you, Sarin, and greetings to all. Let me begin by highlighting our safety performance, a cornerstone of our operational excellence. As of the end of the 2025, we achieved an exceptional total recordable incident rate or TRIR of just 0.03 across all three segments, three of our business segments. This remarkable result is a testament to the unwavering commitment and diligence of our entire operations team, whose dedication to safety continues to set industry benchmarks.

We operate in highly complex industrial environments where safety is not just a priority, it is a fundamental part of our culture. We consistently reinforce the importance of embedding safety into every aspect of our work, making it an integral part of our DNA. During the second quarter, we recorded a single incident involving a contract employee at one of our facilities in Germany. The contractor did not adhere to the reins prescribed safety procedures for the task at hand and was sprayed with hot water resulting in a minor burn. While we regret any incident, we treat each one as an opportunity to gain experience and further strengthen our safety protocols and adherence to them by everyone.

What stands out, however, is the continued safety progress we have made over the years. This slide, our safety performance has steadily improved, reflecting our proactive approach, rigorous training and the collective vigilance of our teams. We are proud of this trajectory and remain committed to driving even higher standards of safety across all our operations. Moving on to this quarter’s financial highlights on Slide four. We concluded the 2025 with encouraging financial results, reporting revenue of Rs.

44,010,000,000.00 and EBITDA of Rs. 6,170,000,000.00. This marks a notable improvement over first quarter’s performance and surpasses the results achieved the same period last year. After several challenging quarters, I am pleased to share that we have returned to profitability and posted a net profit after tax of Rs. 500,000,000.0 and earnings per share or EPS of Rs.

1.47. This turnaround is a testament to the resilience, strategic discipline and unwavering commitment of our teams across all functions. Over the past two years, we have navigated a rapidly evolving business landscape, implemented key operational efficiencies, and remain focused on delivering consistent value to our customers and stakeholders. In the 2025, we made targeted capital investments totaling US28 million dollars which included essential maintenance CapEx. These investments reflect our continued commitment to strengthening our operational backbone and laying the groundwork for sustainable long term growth.

We closed the quarter with a strong liquidity position of $339,000,000 and no term debt maturities until October 2028. A key milestone during this period was a repayment of $44,000,000 senior secured notes due in April 2025, which we successfully repaid in March, which underscores our disciplined approach to financial management and our focus on maintaining healthy balance sheet. We remain vigilant about the cost of capital. Our focus continues to be on identifying the right opportunity to refinance our high cost debt. We will act decisively when market conditions are favorable, ensuring that any refinancing aligns with our broader objective of optimizing capital efficiency and enhancing shareholder value.

As we enter 2025, our primary focus was and remains on restoring normalized operating margins to stabilize our overall performance. The second quarter represents a meaningful step in that direction. While we have not yet fully achieved our main targets, our trajectory is promising. The first half results are aligned with our budget expectations, which gives us confidence as we move into the second half of this year and beyond. However, we remain vigilant.

The global markets are volatile and businesses across sector are operating conservatively in response to ongoing geopolitical conflicts, trade barriers, inflationary pressures, and macroeconomic headwinds. These fluid factors continue to exert pressure on volumes and margins. We are closely monitoring these dynamics and remain agile in our approach to mitigating risks and protect margins. Turning to Slide five on segment wise performance compared to 2025. Across our carbon segment, we recorded a volume increase of approximately 67,000 metric tons or an increase of 11%.

This growth was primarily driven by our stronger performance in our CPC business, partially offset by reduced volumes in the distillation business. Revenue rose revenues rose by 17%, largely attributable to the volume increase, though pricing also contributed supported by a surge in Chinese CPC prices during the first quarter. This price surge in China created a favorable window for us to increase volumes for our calcination plants in India. The timing was ideal as both facilities were operating at elevated capacity levels throughout the quarter. Notably, we also delivered the first cargo of U.

S. Produced CBC to India since lifting of the import ban. These developments collectively helped normalize EBITDA earnings within this part of our carbon segment for the quarter. While we are encouraged by this performance, we remain focused on ensuring its sustainability. Our goal is not just to achieve strong quarterly results, but to build a foundation for consistent long term earnings.

However, we must acknowledge that the Chinese CPC prices surge price surge earlier in the second quarter, which helped to boost our earnings began the contract at the end of the second quarter. This volatility underscores the importance of securing high quality raw materials at competitive prices, a challenge we continue to navigate, especially as we ramp up CPC production in India, considering the growing demand for green petroleum coke from the battery anode material industry. On the distillation side of the carbon segment, we experienced softer volumes during this quarter. This was largely due to uncertainty surrounding which prompted customers to reassess their supply chains and delay orders. Additionally, volatility in oil prices closely tied to the pricing of commodity products like carbon black oil added further pressure.

Chinese coal tar prices, pitch prices remained subdued, powering in the fine 50 to 600 US dollars per metric ton range throughout the quarter. Combined with a weaker U. S. Dollar, this created additional pricing headwind for our other products in carbon segment. Looking ahead, several variables across our operations still need to stabilize before can confidently project our project sustained earnings.

We are monitoring this closely and adjusting our strategies accordingly. While these challenges are real, we view them as temporary disruptions rather than long term structural issues. Our teams are actively engaged with customers, monitoring market signals and exploring ways to enhance our value proportion in both the calcination and distillation segments. Moving to our Advanced Materials segment. Volume growth during the quarter was primarily driven by seasonal products, which traditionally see stronger demand in the second and third quarters of the year.

This seasonal uplift contributed meaningfully to both revenue and EBITDA performance. Beyond volume gains, we also placed strategic emphasis on a specialty product with higher margins. Our targeted sales efforts in these products helped enhance profitability and reflect our ongoing commitment to value driven growth rather than volume operational level, energy costs in Europe remained relatively stable throughout the winter months, supported by milder than expected weather conditions. This provided some relief to our cost base and helped maintain operational efficiency. However, the broader record demand recovery across industrial sectors in Europe remains uncertain.

Many industries are still waiting for clearer signals of resurgence. The market sentiment and geopolitical situation in 2025 continues to be cautious. While we acknowledge these uncertainties, we remain focused on navigating the evolving landscape with agility and discipline. We are actively monitoring market developments and maintaining close engagement with our customers to ensure we are well positioned to respond to shifts on demand. Our strategy remains centered on balancing short term performance with long term resilience, and we are confident that steps we are taking today will support sustainable growth in the quarters ahead.

Coming to the cement segment in South India, where our cement plants are located, cement volumes remained steady compared to the previous quarter. While we did not see a meaningful rise in volumes, we were able to increase the selling prices by about 13% by realigning the volumes across different markets, which contributed positively to the margin improvements for the quarter. This pricing movement was largely driven by demand dynamics in the region, highlighting the strength of the market’s pricing environment. As we look ahead into the second year second half the year, our focus will be on enhancing cost efficiency across the board. Key initiatives include reducing power and fuel costs by leveraging our strategic relationship with global refineries and logistical expertise to source pet coke and other cement fuels more competitively.

Additionally, we are working to lower outward freight costs by continuing to concentrate on our distribution efforts in key cement markets located close to our production facilities. These steps are part of a broader strategy to strengthen Grain’s operational resilience and improve profitability even in a relatively flat volume environment. On a macro level, the outlook for the cement industry in India remains encouraging. Continued government emphasis on infrastructure development and housing projects is expected to drive sector wide growth. While we remain cautiously optimistic, we are confident that our proactive approach to cost management and market alignment will push us well to capture emerging opportunities.

Turning to Slide six, I would like to take a moment to highlight some of the strategic initiatives we are investing in today at RAIN. While these efforts are not materially reflected in our bottom line, they are laying the groundwork for our medium to long term growth, particularly in the emerging battery material space in North America and Europe. Our research and development team continues to make meaningful strides in developing advanced materials tailored to several types of next generation energy solutions. These innovations are essential to ensuring we remain aligned with the global shift towards cleaner and more sustainable technologies. Our team’s work is now being accelerated by the commissioning of our new R and D demonstration plant in Canada, which is operational and scheduled for official launch by the 2025.

This facility represents a key milestone supported in part by government funding and working in collaboration with leading graphite and battery anode producers. Thanks to these efforts, our specialty coating product is currently the only non Asian product produced specialty coating material being purchased by Asian markets. While volumes remain modest for now, we are gaining critical market insights, forging customer relationships, and building technical credibility that we believe will cushion us strongly as global demand increases. Another promising area of research currently underway is our exploration to the use of biocarbon materials in our traditional calcium petroleum coke or CPC and coal tarp which are CTP product applications. This is a rapidly growing field driven by industrial carbon users, increasing interest in reducing carbon dioxide emissions.

Biocarbon production is accelerating worldwide, and we are actively assessing how these renewable alternatives can be seamlessly integrated into our product portfolio. Our aim is not only to meet evolving environmental standard, but also to lead the way in offering innovative carbon, low carbon solutions to our customers. Importantly, our existing plant locations in North America provide a strategic advantage in this endeavor. The proximity to key raw materials required for biocarbon production enables us evaluate these options efficiently and cost effectively. This geographic benefit strengthens our ability to pilot and potentially scale up the use of biocarbon in our operations aligning with our broader sustainability goals.

We recognize that these initiatives may not yet move the middle in our current financials. However, they reflect the disciplined forward looking steps we are taking to diversify our portfolio, expand our technological capabilities, and secure future growth in markets that align with our core strengths. Turning to our core business, we continue to take deliberate actions to reinforce its foundation and expanded speech. We are entering this new region and broadening our customer base for our pitch products by installing a pitch melting and blending unit in India. This facility will target the graphite battery and aluminum markets in India and surrounding region, enabling us to better serve existing customers and markets and attract new ones.

Additionally, the recent restart of our CPC blending operations in India will allow us to deliver a superior product that meets the evolving specifications of our customers. Now I’ll hand over the presentation to Jerry Sweeney, who will provide further updates on industry and our business on slide seven. Jerry?

Gerard Sriniv, President, Rain Carbon Inc: Thank you, Jagan. Hello, everyone. It’s a pleasure to speak with you once again. The outlook for a global aluminum industry remains resilient and promising even in the face of headwinds such as the recent imposition of U. S.

Tariffs. Despite the tariff rate doubling to 50%, the LME or London Metal Exchange price has held firm consistently trading above US dollar 2,600 level. The price stability reflects a combination of favorable global factors including sustained expectations of rising demand. Moreover, LME inventories remain persistently low further supporting strong pricing dynamics. Industry analysts and publications are forecasting continued momentum with aluminum prices projected to increase further during 2026.

This reinforces our confidence in the long term fundamentals of the sector and the strategic importance of our positioning within it. Looking ahead, in smelting expansions in Indonesia and India, which are well located relative to RAIN’s operations, are driving the startup of new capacity in 2025. Further, several additional smelter projects across various regions outside China are scheduled to come online in 2026, including capacity restarts in The United States, reinforcing industry growth potential. 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 and global blend strategy will enable us to continue to meet growing carbon markets needs while enhancing our global competitiveness.

Looking ahead, the global economic outlook appears to be gradually improving. However, persistent concerns surrounding tariffs and ongoing geopolitical tensions continue to temper overall optimism. We are navigating an increasingly unpredictable world, yet the prevailing sentiment is cautiously optimistic, a welcome shift from the uncertainty that has characterized the past few years. As of today, tariffs have not had a material impact on our business. Encouragingly, global trade conflicts seem to be showing signs of resolution rather than escalation at this point.

This trend, while still fragile, offers a measure of reassurance. In this environment, our strategic focus remains firmly on enhancing efficiency, strengthening competitiveness, and building resilience across all markets we operate in. We are also closely monitoring the recent tariff measures imposed by The United States on Indian exports effective which go into effect on August 6. While the full implications are yet to unfold, we are proactively assessing potential impacts on our business and preparing appropriate responses to safeguard our interests. Moving on to slide eight, which highlights key commodity price trends and our business performance during the 2025, most prices remained relatively stable with benzene being the notable exception.

After a prolonged downward trend throughout 2024, benzene prices rebounded in the 2025, but then retreated in the second quarter. Natural gas prices in Eurus Europe reached an eighteen month high during the 2024, largely driven by seasonal winter demand and supply curtailments throughout the year. However, as we moved into the 2025, these pressures eased and natural gas prices then continued to decline throughout the second quarter. With that, I will now turn the presentation over to Shrinivas, who will take you through the consolidated financial performance of RAIN on slide nine. Shrinivas, over to you.

T. Srinivasrao, Chief Financial Officer, Rain Industries Limited: Thank you, Jerry, and and hello hello, everyone. Turning to slide nine. Consolidated net revenue was 43,350,000,000.00 rupees during the second quarter, an increase of INR2.79 billion compared to the 2024. The increase was primarily due to an increase of INR3.96 billion in carbon segment and an increase of 50,000,000 in the cement segment, which was offset by INR 1,220,000,000.00 decrease in the advanced materials segment. Consolidated adjusted EBITDA for the second quarter was INR 6,170,000,000.00, reflecting an increase of INR 1,270,000,000.00 compared to the 2024.

This increase was driven by 1,340,000,000.00 rupees increase in the carbon segment and a 210,000,000.00 rupees increase in the cement segment, partially offset by a 280,000.00 rupees decrease in the advanced materials segment. Moving to slide 10. Carbon segment reported revenues of 31,910,000,000.00 rupees during the current quarter, an increase of 3,960,000,000.00 rupees or 14.2% compared to the 2024. During this quarter, the increase in volume volumes was primarily driven by CPC attributed to higher capacity utilization of Indian calcination plants following the relief from import restrictions, which was partially offset with the reduction in CTP and other carbon products. As mentioned earlier, the increase in CPC price was an account of sudden Chinese CPC prices.

Further, revenue increased due to an appreciation of euro and US dollar against Indian rupee by 8.12.6%, respectively. The adjusted EBITDA for the carbon segment increased by 1,340,000,000.00 rupees or 35.2% compared to the second quarter of the previous year. This was primarily driven by increased volumes and margins due to resetting of CPC prices, coupled with appreciation of euro and US dollar against the Indian rupee by 8.12.6%, respectively. Moving to slide 11. Advanced material segment revenue was 8,180,000,000.00 rupees, a decrease of INR 1,220,000,000.00 or 13% compared to the 2024.

During the current quarter, the decrease in volume was primarily driven by lower demand for our seasonal products resulting from unfavorable weather conditions in North America. The decrease in revenue was partially offset due to appreciation of the euro against Indian rupee by about 8.1%. Adjusted EBITDA decreased by 280,000,000.00 rupees compared to the 2024 due to lower volumes and coupled with the increase in natural gas prices offset by the appreciation of euro against the Indian rupee. Moving to moving on to slide 12, we can look at our cement segment, which experienced a 1.6% increase in revenue in the 2025 compared to the same period in 02/2024. The same is attributable to an increase in realizations.

The adjusted EBITDA for our cement segment increased to $249,000,000 rupees during the 2025 compared to 37,000,000 rupees for the same period in 2024 due to improved realizations and lower operational costs. Moving to the next slide on debt, slide 13. The second quarter concluded with a gross debt of $1,044,000,000 US dollars, which includes working capital debt of $225,000,000 US dollars. Our net debt was at $853,000,000 US dollars. And with an LTM EBITDA of 203,000,000 US dollars, our net debt to EBITDA ratio is was 4.2 x.

Coming to the cash flows, as discussed during the last quarter, our working capital requirements increased significantly due to higher raw material imports needed to meet, both CPC plant requirements in India and timing of the completion of Indian finance year by when import quotas for one of our CPC plant in India must be utilized, and lastly, due to increased prices of raw material. We are seeing the partial release of the same during this quarter and expect to normalize by end of the year. Invest investing activities outflow of 559,000,000 rupees represents 2,450,000,000 spent on maintenance capital expenditure offset by 1,860,000.00 rupees net maturities of term deposits and interest received on such deposits. Financing activities inflow of 462,000,000 rupees represents additional borrowings made during the 2025, net of long term debt repayments and interest expenses. I will now pass over the presentation to mister Jagan for his closing remarks.

Saran Pani, General Manager of Corporate Reporting and Investor Relations, RAIN Industries Limited: Thank you, Srinivas. After a prolonged period of underperformance driven by global market headwinds, we are beginning to see signs of recovery. We have made meaningful progress in improving our performance, and the second quarter marks a step forward in terms of earnings. While we recognize that market conditions remain volatile and not yet stable enough to sustain this level of performance in the near term, we are encouraged by the momentum we have built. We have consistently communicated over the past year.

Our focus remains on driving sustained earnings improvement throughout 2025. Our current efforts are centered on achieving normalized earnings supported by disciplined execution and strategic investments. We are still in the midst of transformational changes within our carbon calcination business as outlined in our first quarter update. A key priority continues to be securing reliable sources of raw materials like GPC, especially as demand in spies due to growing competition from battery anode manufacturers. This remains a critical area for us, and we are actively working to strengthen our supply chain and ensure long term access to quality raw materials.

Elsewhere in the carbon segment, our distillation operations have remained focused on operational cost savings to offset reduced volumes. I am pleased to report that these efforts are going in the right direction so far, and we anticipate continued efficiency gains until the market dynamic shift. Despite the evolving and sometimes unpredictable market landscape, we believe we are strategically positioned to navigate challenges and capitalize on emerging opportunities. Our cautious optimism for the near term is balanced by a strong conviction in the long term fundamentals of our business and strategic direction we are pursuing. We sincerely appreciate your continued support today in Industries Limited.

We look forward to sharing further updates and progress in our upcoming quarterly presentation. Thank you very much.

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