Grindwell Norton - Annual Report Summary 2023
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About the company
Grindwell Norton Limited (GNL) is one of the subsidiaries of Compagnie de Saint-Gobain (Saint-Gobain), a transnational group with its headquarters in Paris and with sales of Euro 51.20 billion in 2022.
Saint-Gobain has organised its businesses into two broad areas:
Construction or Building related businesses focused on serving the regional market,
High Performance Solutions (“HPS”) catering to the global market.
GNL’s businesses are part of the HPS Sector.
Within GNL, the businesses are divided into two major segments;
Abrasives: GNL makes over 15,000 different products in a year.
Ceramics & Plastics Network
GNL offers the widest range of cutting-edge abrasive products to the Indian market. While the vast majority of these products are made by GNL in India, some are sourced from other plants of Saint-Gobain or from third parties.
PERFORMANCE PLASTICS (“PPL”)
The Performance Plastics business produces and markets more than 800 standard and custom-made polymer products through three business segments: Engineered Components (“ENC”), Life Sciences (“LS”) and Composites (“CMP”).
The major product lines in PPL are Bearings, Seals, Tubing & Hoses, Films, Fabrics and Foams.
The major markets addressed are Life Science, Automotive, Oil & Gas, Construction, Energy and General Industrial.
GNL has a plant for ENC and LS products situated in Bengaluru.
PERFORMANCE CERAMICS AND REFRACTORIES (“PCR”)
GNL’s PCR Business Unit makes Ceramic and Refractory products for a wide range of industrial applications. The products manufactured mainly include Silicon Carbide based “shaped” refractory and ceramic products.
PCR Refractory products find use in applications across industry segments like Primary Iron & Steel, Primary Non-Ferrous Metals (Aluminium, Copper, Zinc, etc.), Secondary Steel, Secondary Iron, Secondary Non-Ferrous (Aluminium, Copper), Petrochemicals, Waste to Energy Systems, etc.
PCR Ceramic products are used in applications in industry segments like Sanitaryware, Tableware, Ballistic Armour Protection, Wear Resistance Systems, etc.
SILICON CARBIDE (SC)
Silicon Carbide grains are used primarily as raw material in the manufacture of Abrasives, Refractories and Iron Foundries and are also used for stone polishing. SC is manufactured at the plant located at Tirupati in Andhra Pradesh.
SC is also manufactured by the Company’s subsidiary, Saint- Gobain Ceramic Materials Bhutan Private Limited, at its plant near Phuentsholing in Bhutan.
In the domestic market, there are three main players (including GNL) in the SC business. This market is also catered by imports, mainly from China, Vietnam and Russia.
2022-23 Highlights of different sectors of the business
During the year, the Paper maker unit was commissioned successfully.
Ceramics and Plastics
The Performance Ceramics and Refractories (“PCR”) business witnessed a 41% increase in sales over 2021-22 mainly due to increased demand from the end-user industry like foundry, steel and non-ferrous segments.
The growth in Performance Plastics business was mainly due to improved demand in the automotive and life science segments. While there has been an increase in the input cost, a better product mix helped to maintain the margins.
The Silicon Carbide business witnessed good growth in terms of sales due to relatively higher domestic demand from the refractory industry; however, the steep increase in input cost and also a reduction in selling price resulted in lower margins.
Digital Services & Others:
The Captive IT Development Centre (“INDEC”) had a stable year.
Subsidiaries:
The Company has a subsidiary in Bhutan, Saint-Gobain Ceramic Materials Bhutan Private Limited (“SGCMBPL”) and during the year, the Company acquired 100% shareholding in PRS Permacel Private Limited, (“PRS”) an unlisted company that produces aesthetic decals and other adhesive tapes, etc. in India.
Associate Company
The Company had invested in Cleanwin Energy Three LLP in the last financial year for the purchase of wind power for its Mora unit and during the year, the supply of power commenced which will result in cost optimization and will promote sustainability.
Abrasives business:
Demand was stable but somewhat subdued. The auto industry has witnessed stable growth. Export-dependent industries saw a big decline in order books. Rural demand was weak. FMCG companies had a soft volume growth.
Performance Plastics:
The Bearings segment of Engineered Components was the biggest contributor to an outstanding performance due to significant revivals seen in automotive volumes.
The Life Sciences domestic market witnessed good demand from local manufacturers of vaccines and drugs and also due to the conversion of new customers and applications.
As global markets witnessed a demand slump, export orders for tubings from our affiliates saw a significant decrease.
Revival of Construction activity and industrial activity helped the Composites segment to do much better.
Moreover, strong customer conversions and demand pick up in Electric Vehicle (“EV”) automotive customers have led to strong growth for the Composites business.
Seals business too showed good growth volumes over the last year with new customer additions in the Energy sector in spite of a sluggish Energy market environment.
Performance Ceramics and Refractories
The new JV SGSR is still in the stabilization phase & expected to achieve break-even in 2023-24.
Silicon Carbide
SC business witnessed the worst inflation on the cost front. The petcoke which is one of the primary raw materials touched historically high levels for GNL as well as your Company’s subsidiary in Bhutan. This increase in the Petcoke and RPC prices impacted adversely overall input costs.
During the last quarter, while there was some softening on the input costs, the Selling prices dropped far higher than the input cost drop resulting in a decrease in overall margins.
Opportunities
Indian Government is rapidly investing in developing infrastructure in several areas including roads, airports, railways etc.
Indian Steel Industry which is already the 2nd largest in the world will continue to grow much faster with new capacities for value-added steels. With the Western world relooking at its excessive supply chain dependence on China, several new opportunities will emerge for India.
These will mean faster and sustained growth of the abrasives industry in the near future.
Performance Plastics: The Life Sciences business continues to have a strong demand outlook on the domestic front and with local production of Bags there is a huge new business opportunity available for conversion.
Electric Vehicle Battery packs promise to be a significant growth driver for the Composites business in 2023-24.
Silicon Carbide: Looking ahead, the focus in 2023-24 will be on maximizing supply from both manufacturing locations and continuing to focus on price and cost management.
Threats
Abrasives:
Over the years, imports from China have significantly increased in the lower tiers of the market. As the quality and performance levels of these products are acceptable, they offer a competitive value proposition to the customers.
The evolution of Electric Vehicles is expected to result in a somewhat lower potential for abrasives.
Competition
The Abrasives Market in India has two major players and many other small, mid-size players.
In the last few years, many paint, adhesives and similar companies have entered the abrasives market. With their deep distribution and aggressive prices, they have been able to penetrate the market in a short period of time.
Imports from China have grown over the period of time.
Organized players in the power tools segment and local traders importing from China in their own brands.
High-end European and Japanese players continue to work in specific niches.
Performance Plastics:
Demand disruption in key markets like Automotive, Life Sciences, Industrial and Oil & Gas is a major risk due to the macro environment uncertainty in the short term.
Performance Ceramics And Refractories
The business has a very high level of exposure to global supply chains – both for inputs and sales. There are many geo-political factors at play that can disrupt these supply chains.
Silicon Carbide
Given the ongoing global Energy crisis, the Input cost pressure continues to affect the company.
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