Rain Industries subsidiary bears the brunt of Europe’s energy crisis

By CNBCTV18.COM STI (Update)

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A subsidiary of Rain Industries has decided to temporarily close a unit in Europe as the continent suffers its biggest energy crisis in decades. What impact does this have on operations in general? Read to find out more.

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Rain Carbon Inc., a 100% subsidiary of Rain Industries, announced the temporary closure of an operating unit in Europe. He cited potential gas shortages, price spikes in the upcoming winter season and current geopolitical situations as factors behind the decision.

Due to the circumstances, the subsidiary will also develop additional energy-related contingency plans for its other production units across continents.

Shares of Rain Industries were trading down 4.3% at Rs 192.50 as of 10:10 am on BSE.

Rain Carbon is the world’s largest producer of coal tar pitch (CTP) and the second largest producer of calcined petroleum coke (CPC), with operations in Europe, India and North America. It has five coal tar distillation plants with a combined capacity of 1.3 MTPA in North America and Europe.

In its recent annual report, Rain Industries mentioned that Russia contributed 8% of its consolidated revenue, so any impact from the war in Ukraine will have a limited impact on the business. The subsequent escalation of energy prices in Europe had a significant impact on Rain Carbon’s performance in the second half of FY22.

“We have proactive measures in place to minimize risks to our production facilities in Western Europe should the Russian-Ukrainian conflict disrupt natural gas flows,” management wrote in its annual report.

Responding to rising energy prices, the company hedged part of its natural gas contracts through the second quarter and is pursuing measures to reduce energy intensity at its plants.

This is also important for Rain Industries since 40% of the company’s global turnover comes from Europe.

Rain Carbon also mentioned in the exchange file that it carried out an in-depth analysis of the energy intensity of each production unit in its European factories. The company continues to assess whether it makes economic sense to temporarily reduce or shut down additional production lines if the situation worsens.

“Any measures taken are expected to be temporary, and Rain Carbon is fully committed to resuming full operations when the situation improves,” the company said.

The continent is currently going through its biggest energy crisis in decades, with Russia’s natural gas supply coming to a complete halt. Russia cited punitive economic sanctions imposed by the West behind blocking gas supplies to Europe.

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