Good evening, ladies and gentlemen. In just a moment, we will take you through the performance of Rain Industries Limited during the third quarter of 2022. Presenters today are Mr. Jagan Reddy Nellore, Vice Chairman of Rain Industries Limited, Mr. Gerard Sweeney, President of Rain Carbon Inc., and Mr. T. Srinivas Rao, Chief Financial Officer of Rain Industries Limited.
Before we begin, management would like to mention that some of the statements made in today's discussion may be forward-looking in nature, and they could be affected by certain risks and uncertainties. The company's actual results could differ materially from such forward-looking statements. Now, if you could turn to slide three, Mr. Jagan Reddy will provide an update on the key developments within Rain Industries. Thank you, and over to you, Jagan.
Thank you, Alan. Good evening, everyone. As may be noted from slide three of the presentation, we finished the third quarter with an EBITDA of INR 9.78 billion, down approximately 22% from our second quarter EBITDA of INR 12.52 billion, and moving us closer to what typically is our normal performance.
As we noted on our previous call, we anticipated that our third quarter numbers would be more in line with the first quarter, and they were. That was partly because the pent-up post-pandemic demand has subsided, and customers' stocks were full. The bigger issues, however, were a continuation of high energy prices in Europe and the fact raw material costs have been catching up with the price of finished goods. As a result, the opportunistic margins that we benefited from in the first half of the year, while still present, have diminished.
That, of course, was inevitable. As we cautioned during our two previous calls, the opportunity margins were a temporary phenomenon, and the resulting high EBITDA was not the new normal. Q2 appears to have been the peak of the cycle, and our earnings have been working their way back to the normal operating range, which we have guided to in the past.
Looking ahead, we expect to see additional softening in demand due to the factors I just mentioned, as well as the usual seasonality as sales of some of our products wind down heading into winter.
Moreover, a growing number of customers around the world appear to be reacting to inflation, expectations of continued high energy prices, rising interest rates, and predictions of a looming recession by postponing purchases of non-essential items, which too has resulted in reduced demand from some of our customers. We anticipate that this will continue through the fourth quarter and into 2023.
Moving on to slide four. Aluminum prices are in state of gloominess. After peaking at around $4,000 a ton early in the year, they are back down below $2,300 a metric ton. In fact, LME prices have been above $2,300 for only seven days since 1st September. As we have said in the past, the industry generally requires pricing above $2,300 for continued production and possible expansion.
Coupled with the decline in LME prices with the escalation of energy costs for those aluminum smelters for not running on low-cost hydropower, it can be understood why many producers, especially in Europe, have either curtailed or reduced production. For us, we are also seeing a challenging dynamic where smelters and anode producers are pushing for lower prices for carbon to compensate for falling LME prices.
While converters like Rain are dealing with the declining raw material availability as a result of a slowdown in the construction and manufacturing, which has increased the cost of our raw materials. In a recent earnings call, an aluminum industry leader pointed out that its carbon-related cost of production has risen from 15% in the third quarter of 2021 to 22% in the third quarter of this year. We certainly do understand our customers' position as their selling prices are falling.
Unfortunately, the cost of raw materials that we need to produce the essential inputs for anodes is going in the opposite direction. Despite this situation, demand for our carbon, coal tar pitch, and calcined petroleum coke remains reasonably good, and we expect that it may continue into the fourth quarter.
That said, we are watching the markets very closely for any signs of demand destruction with LME prices at their present declining levels. Regarding the cement business, the demand continues to be reasonably strong in South India.
However, the cost of fuel continues to be a major cause of concern, thereby impacting the near-term supply. With this business update, I will now turn over the presentation to Gerry to take you through the industry and other business updates on slide five. Thank you. Gerry?
Thank you, Jagan. Good evening, everyone. It's a pleasure to discuss the industry trends during third quarter of 2022 with you. Let's turn to slide five. In our carbon segment, continued demand for coal tar pitch and calcined petroleum coke by the aluminum industry was largely fueled by LME prices that remained above 2,300 during July and August.
In addition, demand for calcined petroleum coke by the titanium dioxide industry continues to be favorable. I am pleased to report that mother nature allowed us to get through the third quarter without any of the hurricane-related damage and costs that we have experienced in the United States in the past few years. This obviously provides uninterrupted production and lower overall costs.
As anticipated, we did experience a reduction in our margins towards normalized levels during the quarter, which was driven by a sluggish Chinese economy, curtailments of some aluminum industry capacity in response to higher energy costs in Europe. As a result, much of our carbon segment's profitability in the third quarter was driven by inventory purchases that were made earlier in the year. We also benefited from revenues of higher-priced energy from our facilities that are equipped with waste heat and steam recovery systems.
During the quarter, we continued to make progress in our quest to commercialize our proprietary anhydrous carbon pellets or ACP. We recently had our most extensive production run yet. With some additional modifications, we believe there is an opportunity to significantly increase our output and thereby reduce our production costs.
That said, as we've cautioned in recent calls, we are still progressing along the learning curve associated with this new material and production process, and we need to perfect it before we can speak confidently about ACP's commercial potential. Nonetheless, we are pleased with the current product quality and density, and we recently provided another major global customer with calcined ACP for testing.
Turning to India, we continue to operate one of our two kilns at our Vizag calcination facility as we await the government's fiscal year supplemental import reallocation to calciners of green petroleum coke volumes that should determine how to best operate our Vizag kilns during the rest of the current financial year 2022-2023.
In terms of our Indian vertical shaft calciner, the plant is operating smoothly, albeit at lower capacity due to raw material constraints. We are receiving additional orders for higher density CPC, as well as increased interest from several other potential customers around the world.
Elsewhere in India, we are awaiting the finalization of the Ministry of Environment, Forest and Climate Change's long-awaited emissions regulations for the calcining industry, as ordered by the Honorable Supreme Court of India in 2019.
Once the regulation is implemented, we expect to be one of the few calciners in India in compliance with emissions levels called for in the draft regulation, recognizing our ongoing commitment to investments in sustainability.
Looking ahead at our carbon segment's calcination business, we anticipate a more challenging environment as a result of inflation, a possible recession and falling LME prices. In addition, a continued slowdown of Chinese manufacturing could reduce demand for both CPC and GPC, which could lead to price volatility.
That said, we are in a favorable position having operations and flexible logistical connectivity in the United States and India, which gives us the ability to react and pivot to compensate for possible shifts in regional demand and transportation costs.
Moving on to the distillation side of our Carbon segment, coal tar pitch volumes were up marginally due in part to some spot volumes that we picked up during the quarter. In our other carbon products category, sales of crude naphthalene and carbon black oil were in line with second quarter, while creosote volumes began their expected seasonal decline.
Looking ahead, we expect that sales of our carbon distillation products should remain reasonably good as we are seeing continued strong demand for pitch and carbon black oil. In addition, despite the seasonal nature of creosote sales, we are seeing signs that the U.S. railroad industry plans to invest in more extensive track maintenance during the winter, which would be favorable for creosote sales.
Conversely, we anticipate lower demand for crude naphthalene due to a slowdown in construction activities. We're also simultaneously seeing the coal tar availability is tightening and prices are rising as steel producers are cutting output due to slower construction and lower overall demand.
Turning to our Advanced Materials segment, while we experienced negative EBITDA in the quarter, it was primarily related to the revaluation of inventories due to the fall in commodity prices. We began to see reduced demand for the majority of our products.
However, the fact that we are still working off lower cost raw materials purchased during prior periods helped the margins. In terms of engineered products, demand for our PETRORES specialty coating began to rebound as China's zero COVID restrictions eased, allowing an uptick in lithium-ion battery production and enabling us to finally transfer some of the PETRORES trapped inventory in our Chinese warehouses, there.
Conversely, we saw a decline in sales of CARBORES due to 30% reduction in Chinese and European steel manufacturing, as CARBORES is used as a binding product in refractory materials used by steel plants. Finally, sales of our seasonal LP Sealer Base fell from their summer peak as expected.
Looking at chemical intermediates, our VTX modifiers refined naphthalene volumes were all in line with second quarter demand, and sales of phthalic anhydride slowed significantly during the quarter due to demand issues.
Moving on to resins, higher energy costs created significant issues in our cost of production and resulting margins. We also saw lower demand for our standard hydrocarbon resins during the quarter, and aromatic chemicals volumes also declined due to our decision to discontinue production of our 3,5-DMP product.
Looking ahead, demand for our advanced materials, which are used for things like automobile components and furniture glue, is softening as customers adjust their inventories, in anticipation of consumers being more prudent in their near term spending habits. With rising prices, the threat of a recession, and declining consumer confidence, we expect purchases of things like cars and home furniture will decline in coming months to compensate for increased costs related to winter heating and other essential goods.
Finally, because of the severe energy situation in Europe, we have conducted a thorough analysis of the energy intensity of each production unit at our European plants, and are carefully evaluating whether it makes sense to temporarily reduce or shut down additional production lines in the event of the situation worsening or rationing.
We are also closely monitoring our suppliers and customers, as some of them are taking similar actions that could indirectly or directly impact our operations or sales as well. Any measures that we would take are expected to be temporary, and we are committed to returning to full operation when the situation improves. With that, I will now turn the presentation to Srinivas, who will take you through the consolidated performance of Rain on slide six. Srinivas, over to you.
Thank you, Gerry. Good evening. Good evening, everyone. It is a pleasure to present our financial performance during the September 2022 quarter. In the third quarter of 2022, Rain achieved consolidated net revenues of INR 55.59 billion, compared to INR 37.91 billion in the third quarter of 2021, an increase of INR 17.68 billion.
This resulted from an increase in revenue of INR 16.63 billion from our Carbon segment, an increase of INR 0.83 billion from our Advanced Materials segment, and an increase of INR 0.22 billion from our cement business segment. Rain's consolidated Adjusted EBITDA increased by INR 3,236 million compared to the prior year.
This resulted from an increase in the Carbon segment by INR 4,769 million, offset by a decrease in the Advanced Materials segment by INR 695 million, and a decrease in the Cement segment by INR 558 million.
Now turning to the next slide on Carbon segment performance. Revenue from our Carbon segment was INR 41.58 billion for the quarter ended September 30th, 2022, as compared to INR 24.95 billion for the same period last year. During the quarter, sales volume decreased by 3.8% compared to comparable Q3 2021, driven by lower throughput due to raw material availability.
Further, the average blended realization increased by 73.1% driven by market quotations and increased raw material prices across all the regions. There was a depreciation of euro against Indian rupee by 8% and appreciation of U.S. dollar against Indian rupee by 7.7%. Overall, due to the aforesaid reasons, revenue from Carbon segment increased by about 67% during Q3 of 2022 as compared to Q3 of 2021.
Adjusted EBITDA of the Carbon segment increased by INR 4,769 million as compared to Q2 of CY 2021 due to improved realizations, offset by depreciation of euro against Indian rupee, lower sales volumes and an increase in raw material and energy costs. Turning to next slide on performance of Advanced Materials.
Revenue from our Advanced Materials segment was INR 10.37 billion rupees for the quarter ended September 30th, 2022, as compared to INR 9.54 billion in the same quarter last year. During the current quarter, there was a decrease in volume by 29.8%, primarily driven by lower demand from Asian markets.
During Q3 2022, the average blended realization increased by 55%, primarily due to changes in energy prices, oil related quotations, raw material quotations, along with a change in the product mix and customer mix, offset by depreciation of euro against Indian rupee by about 8%. Due to the aforesaid reasons, revenue from Advanced Materials segment increased by 8.7%, during September 2022 as compared to September 2021.
Adjusted EBITDA for the Advanced Materials segment decreased by INR 975 million due to decrease in volumes, depreciation of euro against Indian rupees and increase in energy costs offset by improved realizations.
Moving on the next slide on our cement business. During the third quarter of 2022, cement revenue increased by 6.4% compared to third quarter of 2021. The increase was primarily driven due to increase in volumes by 8.2%, offset by decrease in realizations by 1.7%. Cement EBITDA decreased by INR 558 million due to higher energy costs offset by increased sales volumes. Moving on the next slide on debt.
We ended the quarter with total debt of $1,075 million, including working capital debt of $88 million. Net debt was $851 million and based on LTM EBITDA of $468 million, we ended the quarter with a net debt to EBITDA ratio of 1.8x. We are comfortable at this level as our average blend, average borrowing cost stood at around 6%. Though the six months Euribor, which is the interest rate for our Term Loan B in our European operations, has moved from negative to positive during the quarter after a long time.
It will not have a material impact on the average borrowing cost of the company as majority of our debt is designated in fixed interest rate of 7.25%. You would have noted that the decrease in Senior Secured Notes, which is due to repurchases of bonds during the nine months period.
We incurred about $70 million towards capital expenditure, including plant turnarounds during the last nine months. Our requirement for expansion capital will be minimal going forward. With that, I will now turn the presentation to Mr. Jagan for closing remarks.
Thank you, Srinivas. After multiple quarters of unusually high demand, revenues and EBITDA, our performance during the third quarter moved closer to the historical norms. With energy prices still high in Europe and the potential for a recession in the coming months, we expect the near term environment will become more challenging, especially for our distillation and advanced materials.
When you couple that with the falling LME prices that could significantly impact aluminum production and the emergence of yet another COVID variant that could result in new shutdowns in China and elsewhere, we are doing all we can to reduce our costs wherever possible and proactively prepare for what could be difficult times in the months ahead. The good news is that the employees of Rain are resilient, and we have successfully weathered many challenges over the years.
In the process, we have learned from those experiences and as a result, are well-positioned to manage whatever comes our way during the coming months. Thank you for your continued interest in Rain Industries Limited, and we look forward to next quarter's presentation. Thanks.