Earnings Call: Q3 2025

Nov 6, 2025

My name is U. S. Saranga 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 third quarter and 9 months ended September 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 third quarter of 2025. We will provide insights into our operational progress, market dynamics, and strategic initiatives that are shaping our path forward. The speakers for today are Mr. Jagan Mohan Reddy Nellore, Managing Director of Rain Industries Limited, Mr. Gerard Sweeney, President of Rain Carbon Inc., Mr. T. Srinivasa Rao, CFO of Rain Industries Limited. Before we begin today's discussion, the management would like to highlight that certain statements made during this presentation may be forward-looking in nature. These statements may include, but are not limited to, expectations regarding future performance, strategic initiatives, market trends, financial targets, and anticipated outcomes. Such forward-looking statements are based on our current assumptions, projections, and available information. They are inherently subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied. Factors that may impact our performance include changes in market conditions, regulatory developments, competitive dynamics, and other risks. Additionally, today's production presentation may include reference to non-GAAP financial measures. These metrics are intended to provide additional insight into our operational performance and should not be considered as substitute for GAAP measures. Reconciliation of these non-GAAP measures to the most directly comparable GAAP figures are available in the accompanying slide deck. Now please turn to slide 3 of the presentation. Mr. Jagan Mohan Reddy Nellore will walk us through the key developments and strategic highlights from the third quarter of 2025 for Rain Group. With that, I'll hand it over to Mr. Jagan. Thank you, U. S. Saranga Pani, and greetings to all. As is our tradition, we begin by emphasizing our safety performance, an essential pillar of our operational excellence and corporate culture. By the end of nine months period September 30, 2025, Rain achieved a Total Recordable Incident Rate, or TRIR, of 0.09, marking a notable improvement over the same period last year. This achievement reflects the deep-rooted commitment of our workforce to maintaining a safe and secure working environment across all our operations. It's a testament to the vigilance, discipline, and care demonstrated daily by our teams, and it continues to set benchmarks within our industry. We operate in highly complex industrial environments where the potential for such safety incidents is a constant concern. This is why safety is not just a priority, it is a core value embedded into every aspect of our operations. From leadership to frontline teams, we reinforce safety protocols consistently and make it an integral part of our every employee's routine. During the third quarter, we recorded two incidents at our European facilities. While any incident is one too many, we approach each with transparency and a commitment to learning and improvement. Importantly, our overall safety performance has shown steady progress over the past several years. This positive trajectory is a result of our proactive safety culture, which includes a drive for employees to report any unsafe acts or conditions before they can cause an incident, rigorous training programs, and the collective vigilance of our global teams. We are proud of the strides we have made and remain fully committed to raising the bar even further, ensuring that safety continues to be a defining strength of Rain. Moving on to this quarter's financial highlights on slide four, we concluded the third quarter of 2025 broadly in line with our internal expectations. Reported revenue for the quarter end stood at INR 44.76 billion, reflecting a 2% sequential increase, primarily driven by improved volumes across select product lines. Adjusted EBITDA came in at INR 6.48 billion, up 5% from the previous quarter, consistent with our forecasted range. While these results represent a step forward, we acknowledge that we are still in the process of our previously guided stepwise progress towards our normalized quarterly earnings level. Our focus remains on steadily restoring performance to those levels that is reflective of consistent progress and sustained business performance. Compared to the same period last year, these results are more stable and encouraging. Over the past 2 years, we have navigated a dynamic and often challenging business environment. Throughout that period, we have rigorously implemented operational efficiencies and remain focused on delivering consistent value to our customers and shareholders. During the first 9 months of 2025, we have targeted capital investments aggregating to $41 million covering essential maintenance and plant turnaround activities. These investments were deliberately measured, reflecting our commitment to operational resilience and long-term sustainability while remaining below typical levels given the current environment. We are also excited to have received permissions to construct and begin investing in a brownfield Cement segment plant expansion, including our proven state-of-the-art environmental and green electricity systems at our Cement segment's existing location in Telangana State, which will increase our capacity to produce additional cement at a key time of increasing market demand in South India. We ended the quarter with a strong liquidity of $388 million and have no major term debt maturities until October 2028, providing us with financial flexibility and stability. As we entered 2025, our primary objective was to restore normalized operating margins and stabilize overall performance, as mentioned in our previous calls. This third quarter of 2025 reflects our progress towards that goal. However, you may also remember from past calls that our fourth quarter typically presents seasonal challenges, including lower sales volumes due to customer de-stocking and reduced activity in our seasonal product lines, such as pavement sealers, Creosote, and some construction-related materials. Despite this, our year-to-date performance shows a healthier and more reliable earnings profile compared to the past two years, giving us confidence as we prepare for the final quarter and begin planning for 2026. While some macroeconomic pressures appear to be easing, we remain cautious. Geopolitical tensions, trade barriers, inflationary trends, and broader economic uncertainties continue to influence demand and margin dynamics. These factors impacted our performance earlier in the year, and we are hopeful that any improvement in the external environment will help in normalizing our performance. We remain agile and vigilant, committed to mitigating risks and protecting margins as we move forward. Turning to slide 5 on segment-wise performance compared to second quarter of 2025. Starting with the Carbon segment, we recorded a volume increase of approximately 9,000 metric tons, representing a 1.4% growth compared to the second quarter. This was primarily driven by higher volumes in distillation business, while volumes in the calcination business were slightly lower. The Carbon segment revenue increased by 2.4%, largely due to a favorable product mix and favorable foreign exchange rates. The slight decline in the calcination volumes was mainly due to the timing of shipments and some reduction in the average prices. As noted previously, CPC prices from China surged early in the second quarter, which allowed us to adjust our pricing temporarily before those prices later normalized. Our global blending strategy in the calcination business continues to gain traction, particularly with the resumption of U.S.-produced CPC exports to India. As highlighted in prior quarters, raw material sourcing at competitive prices remains critical to sustaining margins in our Carbon segment. In the calcination business, the ongoing competition for feedstock from battery anode material or BAM producers continues to be a significant challenge for the entire global calcination industry. The emergence of the BAM industry as a new and consistent buyer of low to medium sulfur and metals GPC grades introduced a structural change in demand dynamics. Unlike the calcination industry, BAM industry exhibits less sensitivity to price fluctuation, which has contributed to upward pressure on GPC prices across the board. This has led to supply constraints and forced the calcination industry to pay premiums for materials that were previously more competitively priced. In our distillation business, we saw a volume increase of 9% and a revenue increase of 13% quarter-over-quarter. This rebound was anticipated following a weaker second quarter. The improvement was led by stronger demand for core products such as Coal Tar Pitch or CTP and Carbon Black Oil or CBO. The distillation business continues to face headwinds from commodity price volatility, elevated energy costs, and the impact of stronger euro against U.S. dollar on our North American operations. Volume recovery was the key driver this quarter, supported by renewed customer demand. Geopolitical uncertainties and the gradual shift towards Electric Arc Furnace steel production over traditional blast furnaces continue to influence coal tar or raw material availability and market dynamics. Global challenges persist, we view them as evolving conditions rather than barriers. Our position as a leading global supplier of carbon products provides us with strategic flexibility. Our Carbon segment's team remains engaged with customers and markets, actively working to strengthen the value proportion of both its calcination and distillation businesses. The Advanced Materials segment reported a 7% increase in volumes, largely driven by seasonal products that typically perform well in the second and third quarters. This seasonal uplift contributed to a 9% increase in revenue and a 16% increase in EBITDA compared to the second quarter. Despite the volume and margin improvements, elevated energy costs in Europe during the summer months added pressure to our cost base. Additionally, the segment continues to face pricing and volume challenges in its commodity chemical portfolio, particularly resins. As you have all likely been following in the news, this is a broader issue affecting European chemical producers, exacerbated by U.S. tariffs, which have redirected more Asian products into European markets. The region's regulatory burden, high energy costs, and labor costs are already impacting on the competitiveness of many European players. We are monitoring these developments closely and will take necessary steps to safeguard the long-term viability of this segment. In regard to our Cement segment, the operations in South India were impacted by extended monsoon conditions, leading to lower volumes compared to the second quarter. Realizations were also slightly lower, resulting in a modest decline in revenue for the quarter. With the monsoon season tapering off since October, we anticipate a recovery in volumes during the fourth quarter. The reduction in GST rates from 28% to 18%, which became effective on September 22nd, 2025, is expected to stimulate demand, particularly in the housing and infrastructure sectors. Moving on to slide six. As mentioned earlier, we are pleased to share a few more details about our board's recent approval for a brownfield expansion at our Cement segment's Unit 1 plant in Ramapuram, Telangana. Regulatory approvals for this expansion have been secured. The expansion is designed to align with our low cost, low emission benchmarks and includes plans for a 7 megawatt waste heat recovery plant, similar to the systems which we use at our existing cement plants, as well as some of our carbon and Advanced Materials plants. With ongoing infrastructure development in Andhra Pradesh and Telangana and supportive government welfare schemes, we expect demand for cement to strengthen in the coming quarters. Industry forecasts suggest demand could grow by 20% over the next 2 to 3 years, supported by initiatives like Pradhan Mantri Awas Yojana and declining interest rates which are expected to boost housing constructions. To manage financial risk, we plan to fund the INR 7.57 billion project primarily through internal accruals with minimal reliance on external debt. We are targeting commercial operations to commence in the second half of calendar year 2027. With initiatives of both captive green power generation currently generating over 40% of our Cement segment's total electricity requirement and optimization of outward freight by concentrating on neighboring markets, we target to achieve improved operating margins. Turning to slide 7, as many of you may have seen in our recent press release, we are excited to announce a joint development agreement with Northern Graphite of Canada, aimed at pioneering the use of alternate fuels for the energy storage market. This collaboration is focused on transforming natural graphite process byproducts into high-performance battery-grade materials by integrating upstream feedstock control with advanced downstream processing and electrochemical testing. Our goal is to maximize yield from graphite mining operations while minimizing waste and carbon footprint, aligning with global sustainability imperatives. We are targeting to bring these next generation materials to market within 2 years, leveraging Rain's proprietary LiONCOAT carbon coating technology developed at our Canadian Technology Innovation Center in Hamilton, Ontario. The total estimated development cost of 3.1 million CAD will be partially funded by a 0.9 million CAD grant under the Canada-Germany Collaborative Industrial Research and Development Program, underscoring the strategic importance and international recognition of this initiative. In parallel, we made a formal entry into the North American mesocarbon microbead or MCMB sector during the third quarter. This material is a critical component in rechargeable batteries, widely used in defense applications, power tools, and electric mobility solutions. We launched a targeted marketing campaign and enhanced our presence at key battery trade shows in collaboration with China Steel Group of Taiwan. Demonstrating our intent to be a serious player in this space. Our R&D efforts are expanding into this market area as well, with active engagement from our partners. We see this as a strategic growth area aligned with the accelerating global demand for energy storage solutions in the face of raw material limitations. Beyond these initiatives, we continue to advance our broader innovation agenda, including product development, geographic expansion, and core business reinforcement, as we have discussed with you in our previous investor calls. These efforts are designed not only to diversify our portfolio, but also to position Rain at the forefront of the energy transition and Advanced Materials landscape. We believe these developments reflect our long-term vision and technical capabilities and our commitment to sustainable growth. We are confident that our strategic investments today will translate into meaningful value creation for our stakeholders in the years ahead. Now I will hand over the presentation to Gerard Sweeney, who will provide further updates on the industry and our business on slide eight. Gerard. Thank you, Jagan. Hello, everyone. It's a pleasure to speak with you all again today. Again, on slide 8, the outlook for a global aluminum industry remains resilient and promising, even in the face of the recent imposition of U.S. tariffs. Despite the U.S. tariff rate doubling to 50% of late, the LME, the London Metal Exchange price, has surged to about $2,900 U.S. dollars per metric ton. This price improvement reflects a combination of favorable global factors, including sustained expectations of rising demand for this key metal. 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 position within it. Looking ahead, smelting expansion in India and Indonesia, which are well located relative to Rain's operations, are driving the startup of new capacity in 2025 and 2026. Further, several additional smelter projects across various regions outside of China are scheduled to commence operations in 2026, including capacity restarts in the U.S., reinforcing industry growth potential. Overall, the aluminum sector appears well-positioned for continued expansion, supported by stable pricing and a resurgence in demand. Importantly, the relief on petroleum coke import restrictions in India, combined with our additional CPC production capacity and global blending strategy, will enable us to continue to meet growing Carbon market needs while enhancing our global competitiveness. Looking ahead, the global economic outlook continues to improve. Excuse me, the removal of persistent concerns surrounding tariffs and ongoing geopolitical tensions are unleashing more optimism globally. While the world continues to be unpredictable, the prevailing business sentiment is cautiously optimistic, a welcome shift from the uncertainty that has characterized recent quarters and even years, for that matter. Tariffs continue to have no material impact on our business. Encouragingly, global trade conflicts seem to be showing signs of resolution. 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. Referring to slide 9, which highlights key commodity price trends and our business performance during the third quarter of 2025, most prices have retreated due to low global oil prices. Natural gas prices in Europe fell from the last winter's highs during the last few quarters but remain relatively high versus pre-conflict levels. With that, I'll now turn the presentation over to Srinivas, who will take you through the consolidated financial performance of Rain on slide 10. Srinivas, over to you. Thank you, Jerry, and hello, everyone. Turning to slide 10, consolidated net revenue was INR 44.35 billion during the third quarter, an increase of INR 5.29 billion compared to the third quarter of 2024. The increase was primarily due to an increase of INR 4.87 billion in the Carbon segment and an increase of INR 0.46 billion in the Advanced Materials segment, which was offset by a INR 0.04 billion decrease in the Cement segment. Consolidated Adjusted EBITDA for the third quarter was INR 6.48 billion, reflecting an increase of INR 3.56 billion compared to the third quarter of 2024. This increase was driven by INR 3.02 billion increase in the Carbon segment, a INR 0.33 billion increase in the Advanced Materials segment, and a INR 0.21 billion increase in the Cement segment. Moving to slide 11, our Carbon segment reported revenues of INR 32.68 billion during the current quarter, an increase of INR 4.87 billion, or 17.5%, primarily driven by the higher volumes in the distillation business. These were mainly Coal Tar Pitch and Carbon Black Oil due to improved demand, coupled with higher realizations in the segment's calcination business compared to the third quarter of last year. Further, revenue in this segment was increased due to an appreciation of euro and US dollar against the Indian rupee by 10.9% and 4.2% respectively. The Adjusted EBITDA for the Carbon segment increased by INR 3.02 billion, or 127.6% compared to the third quarter of the previous year. This was primarily driven by increased volumes in the distillation business and the margins in the calcination business due to resetting of CPC prices. These were coupled with the appreciation of EUR and USD against the Indian rupee by about 10.9% and 4.2% respectively. Moving to slide number 12, our Advanced Materials segment revenue was INR 8.91 billion, an increase of INR 0.46 billion, or 5.4% compared to the third quarter of 2024. During the current quarter, the increase in volume was primarily driven by the segment's engineered products and its naphthalene derivatives. This is coupled with the appreciation of EUR against the Indian rupee by about 10.9%. Adjusted EBITDA increased by INR 0.33 billion compared to the third quarter of 2024 due to higher volumes and increase in margins, coupled with appreciation of the euro against the Indian rupee. On slide number 13, we can look at our Cement segment, which experienced a 1.3% decrease in revenue in the third quarter of 2025 compared to the same period in 2024, attributable to lower demand due to extended monsoon. The Adjusted EBITDA for our Cement segment increased to INR 195 million during the third quarter of 2025 compared to negative INR 7 million for the same period in 2024 due to lower operational cost in the current quarter compared to the last year. On slide number 14 on debt. Third quarter concluded with a gross debt of $996 million, which included working capital debt of $164 million. Our net debt stood at $801 million, and with an LTM EBITDA of $243 million, our net debt to EBITDA ratio was 3.29x. This improvement is primarily driven by the improved performance of the company over the last two quarters. Coming to the cash flows. As discussed during the first quarter of 2025, our working capital requirements increased significantly due to increased raw material import requirements on both our carbon calcination plants in India and due to the increased market prices of those raw materials. We are seeing a moderate release in terms of pricing during the last two quarters of 2025. We expect that quantity levels will continue to meet the additional requirements pertaining to the SEZ facility which is operating at full capacity. We expect further release in terms of pricing by end of the year. Investing activities outflow of INR 1.06 billion represents INR 3.52 billion spent on the maintenance capital expenditure, offset by INR 2.46 million net maturities of term deposits and interest received on such deposits. Financing activities outflow of INR 10.79 billion represents repayment of long-term debt and interest expenses and other borrowing payments, offset by increased working capital borrowings made during the nine months of 2025. I will now pass over the presentation to Mr Jagan for his closing remarks. Thank you, Srinivas. Following a prolonged period of underperformance, largely influenced by global market headwinds, we are beginning to observe early signs of recovery. The third quarter of 2025 represent another incremental step forward in our earnings trajectory. While we are encouraged by this progress, we remain mindful that market conditions continue to be volatile, and it may take some time before we see sustained stability across our operating environment. As we have consistently communicated over the past year, our strategy is centered on a stepwise recovery with a focus on disciplined execution, cost control, and targeted investments. Our objective remains to return to normalized earnings levels, and we are cautiously optimistic about the moment we have built so far. Within our Carbon segment, we are still undergoing transformational changes, particularly in our global calcination business. A key priority continues to be secure and cost-effective sourcing of raw materials, especially Green Petroleum Coke. The growing demand from battery anode manufacturers for our raw material has intensified competition for these inputs, and we are actively working to strengthen our supply chain and ensure long-term access to quality feedstock. In our Carbon segment's distillation business, the focus has remained on operational cost efficiencies to help offset volume pressures. I am pleased to note that these efforts are progressing in the right direction, and we expect further gains in efficiency as we continue to optimize our processes. However, we remain cautious given the broader market uncertainties. We continue to monitor the cost of capital closely. Our approach is to refinance high-cost debt and remain cautious and strategic. We will act when market conditions are favorable, ensuring any refinancing aligns with our broader goal of optimizing capital structure and efficiencies. Despite the evolving and sometimes unpredictable landscape, we believe that Rain is strategically positioned to navigate these challenges. Our approach remains measured, and we are committed to making decisions that support long-term value creation rather than short-term gains. We appreciate the continued support of our shareholders and stakeholders. We look forward to sharing further updates on our progress and strategic initiatives in the next quarterly presentation. Thank you very much.