BALKRISIND - Balkrishna Industries Ltd. Share Price

In the Q1 FY26 earnings conference call held on July 28, 2025, management provided an outlook reflecting a challenging yet resilient performance amid external pressures. They reported a sales volume of 80,664 metric tons in Q1, slightly down from the previous year, attributing this to geopolitical tensions, tariff-related disruptions, and overall cautious market sentiments.

Key highlights from the call include:

• The revenue for the quarter stood at INR 2,759 crores, with a profit after tax of INR 287 crores, down 40% year-on-year, primarily due to a mark-to-market (M2M) loss of INR 154 crores.
• The EBITDA margin for the quarter was reported at 23.8%, influenced by changing product mix and a 10% tariff on the U.S. market.
• The company declared a first interim dividend of INR 4 per equity share.
• Management noted that India contributed significantly, accounting for 35% of sales volume and a growth rate of 14.4% year-over-year.

Looking ahead, management remains cautiously optimistic, believing that a stable demand environment could enhance market share and trade conditions, particularly once tariff uncertainties resolve. They expect capital expenditures (capex) related to OTR and Carbon Black expansions to proceed as scheduled, contributing to growth.

Management emphasized that they do not foresee significant challenges with the new tariff structure and remain focused on maintaining EBITDA margins of around 24-25%. They also indicated that all expansion projects are on track and reiterated their commitment to improving operational efficiencies without compromising product quality.

In summary, while challenges persist, the management believes that the underlying resilience and efforts in operational expansion will position the company favorably as market conditions normalize.

Here are the key questions and their detailed answers from the Q&A section of Balkrishna Industries Limited's Q1 FY26 earnings conference call:

1. Question from Raghunandhan: "Can you talk a bit about how you are seeing customer sentiments in the replacement market in Europe? And how do you see the recovery in this market going forward?"

Answer: The current sentiments in Europe are indeed weak, and this is reflected in our performance numbers. The overall economic environment is struggling, which continues to affect our sales in that region.

2. Question from Raghunandhan: "Given all the uncertainties, how do you see the FY '26 outlook, especially with a favorable base for the next two quarters?"

Answer: It's too early to provide concrete numbers or specific guidance for FY '26, given the prevailing uncertainties in the market.

3. Question from Mumuksh Mandlesha: "Has there been any correction in the inventory this quarter, particularly in Europe?"

Answer: There hasn't been any specific adjustment in inventory; the decline is primarily due to overall market sentiment rather than inventory corrections.

4. Question from Mumuksh Mandlesha: "What was the U.S. tariff impact in this quarter?"

Answer: Currently, the U.S. tariff stands at 10%, with 60% of this cost being borne by customers and 40% shared by us. This arrangement continues into Q2.

5. Question from Aditya Jhawar: "How have competitors behaved regarding tariff impacts?"

Answer: All competitors are experiencing similar tariff impacts. Whether or not they are local manufacturers, their supply chains will feel the effects of tariffs on imported materials.

6. Question from Siddhartha Bera: "What percentage of total U.S. revenues was impacted by the tariffs?"

Answer: The tariff was announced on April 9, thereby affecting the entire quarter's performance post that date. We saw a good pickup in volumes despite this.

7. Question from Siddhartha Bera: "Any possible breakup on your projected INR3,500 crores capex over the next three years?"

Answer: We will not provide a detailed breakup of the INR3,500 crores capex; it is planned to be utilized over the next three years as per our strategic requirements.

8. Question from Rishi Vora: "Can you clarify the realized forex losses and your hedging policy?"

Answer: Our hedging policy is conservative, covering 80% of net receivables, which amounts to about 30% to 35% of gross euro revenue. We do not hedge dollar exposures.

9. Question from Abhishek Kumar Jain: "With sanctions imposed on Russia, how is your business impacted in Europe?"

Answer: We do not have direct suppliers from Russia for our raw materials, except for some localized oil derivatives, thus the sanctions do not significantly impact us.

10. Question from Raghunandhan: "What would be the revenue share from the advanced Carbon Black capacity?"

Answer: Revenues from the advanced Carbon Black capacity are still nominal as we are in the trial stage. We anticipate ramping this up toward the end of the calendar year.

This summary captures the essence of the discussions held during the Q&A segment, along with numerical details and future guidance provided.