Finolex Cables Limited , a leading manufacturer of electrical and telecommunication cables, reported a 13% year-over-year increase in revenue, reaching INR 1,400.00 crore for the first quarter. The company's profit after tax also grew by 13% compared to the same period last year.

Strong Performance in Electrical Segment

The electrical segment drove the company's performance, with a notable 16% volume growth. This growth was primarily attributed to increased sales in power cables rather than wires. However, the company faced challenges in various areas:

• Agricultural Wire Demand: Unseasonal rains starting in mid-May negatively impacted the demand for agricultural wires.
• Communication Cable Volumes: The communication cable segment experienced depressed volumes and values due to delayed contract closures with customers.
• FMEG Revenues: The lighting segment faced price erosion, affecting revenues from Fast-Moving Electrical Goods (FMEG).

Margin Pressures and Product Mix Shift

Despite the revenue growth, Finolex Cables experienced margin pressures due to a shift in product mix. The company's Deputy CEO and CFO, Mr. Mahesh Viswanathan, explained:

"There is more of sales towards project and those are at discounted prices. The discounts are fairly deep. You get volumes, you get cost efficiency in the plant, but then at the end of the day, the margins are definitely lower, and they are lower by about 4-5 percentage points."

The company aims to achieve segment margins of around 12% but acknowledged that it might take a couple of quarters to reach this target.

Capex Plans and Future Outlook

Finolex Cables announced a capital expenditure plan of INR 300.00 crore for the current fiscal year. Key highlights include:

• E-beam Facility: The company has completed its E-beam facility for electrical cables, with products available since March.
• Optical Fiber Business: A significant portion of the capex (INR 325.00-350.00 crore) is allocated to the fiber business, including a preform facility that is awaiting final trials.
• Electrical Cable Segment: The company plans to invest INR 60.00-80.00 crore in replacement and productivity improvements for the electrical cable segment.

Market Challenges and Opportunities

Finolex Cables faces several market challenges, including:

• Price Erosion in Lighting: The lighting sector has experienced significant price erosion, affecting the FMEG segment's top line.
• Government Project Delays: The communication cable segment continues to face challenges due to slow execution of government programs like the National Optical Fibre Network.
• Competition in Wires Segment: The company acknowledged underperformance compared to industry peers, particularly in the wires segment, over the past 4-5 years.

Looking ahead, Finolex Cables expects growth to pick up, particularly in the real estate sector, which could drive demand for wires and cables. Mr. Viswanathan stated, "I think that should be the time that we should also see growth picking up, maybe by third quarter this year, and it should continue at least for a few quarters, 4 to 6 quarters for sure."

The company remains focused on improving its product mix, expanding its retail footprint, and introducing new product offerings to drive growth in the FMEG segment. Additionally, Finolex Cables is exploring opportunities in the growing data center market, which could potentially boost demand for both power and data cables in the future.

As Finolex Cables navigates these challenges and opportunities, investors and industry observers will be closely watching the company's ability to improve margins and capitalize on emerging market trends in the coming quarters.

Finolex Cables Limited , a leading manufacturer of electrical and telecommunication cables, has reported a robust 13% year-over-year increase in revenue for the first quarter. The company's performance, however, shows mixed results across different segments and metrics.

Financial Highlights

• Revenue: Rs. 1,396.00 crores, up 13% year-over-year from Rs. 1,230.00 crores
• EBITDA: Rs. 185.00 crores, an 11% increase year-over-year
• Profit After Tax (PAT): Rs. 139.00 crores, up 13% compared to the same quarter last year

Despite the overall growth, Finolex Cables experienced a sequential decline in performance compared to the previous quarter:

Segment Performance

Electrical Cables

The electrical cables segment emerged as the primary growth driver for Finolex:

• Revenue: Rs. 1,206.00 crores, a 17% year-over-year increase
• Wire volumes grew by 16%
• Power cable volumes doubled

Communication Cables

The communication cables segment faced challenges:

• Revenue: Rs. 109.00 crores, a 9% year-over-year decline
• The decrease was attributed to delays in optical fiber cable agreements with customers

Other Segments

Other segments, including appliances, also experienced a decline:

• Revenue: Rs. 62.00 crores, an 8% year-over-year decrease
• Performance was impacted by unseasonal rains affecting sales in agricultural applications

Market Factors

Finolex Cables' performance was influenced by several factors:

1. Seasonal Challenges: Unseasonal rains impacted sales across segments, particularly affecting agricultural applications and appliances.
2. Segment-Specific Issues: The communication cables segment faced headwinds due to delays in finalizing optical fiber cable agreements.
3. Strong Electrical Segment: The robust performance of the electrical cables segment, especially in wires and power cables, helped offset challenges in other areas.

Investor Communication

Finolex Cables held a conference call with analysts and investors to discuss the quarterly results. The company also released an investor presentation detailing its performance and key highlights for the quarter ended June 30.

As Finolex Cables navigates through market challenges and capitalizes on growth opportunities, investors and industry observers will be keenly watching how the company addresses the segment-specific issues and leverages its strengths in the electrical cables market for sustained growth in the coming quarters.