Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Chemical division sales volume increased by 40% quarter-on-quarter and 17.8% year-on-year.
- Fertilizer division sales volume grew by 22.1% quarter-on-quarter and 23.5% year-on-year.
- Total revenue from operations increased by 1.8% quarter-on-quarter and 10.7% year-on-year, reaching INR194.2 crores.
- Gross profit rose to INR66.8 crores, marking a 5.7% quarter-on-quarter increase and 11.5% year-on-year increase.
- Profit after tax was INR12.8 crores, representing a 62% increase year-on-year.
Negative Points
- Political instability in Bangladesh poses a short-term risk to business operations.
- Realization for the chemical segment dropped by 39% quarter-on-quarter.
- The company is facing challenges in maintaining historical EBITDA margins of 15-17%, currently targeting 12-13% for FY25.
- There is a potential impact on margins due to high-cost inventory.
- The CapEx projects are ongoing and may face delays, although the company is confident in their completion.
Q & A Highlights
Q: Can you provide insights on the impact of the political situation in Bangladesh and Turkey on your business?
A: Bangladesh and Turkey are significant markets for us. We conduct business in Bangladesh against confirmed LCs, ensuring minimal risk. Despite current political instability in Bangladesh, we expect the situation to stabilize within a month. Turkey, on the other hand, is stable with no major issues. We remain cautious but optimistic about both markets. - Punit Makharia, Executive Chairman and Managing Director
Q: Are there any benefits or cost reductions from the new solar plant visible in this quarter?
A: The 3.8 MW solar plant is established but awaiting connectivity approval, expected by the end of this month. We anticipate significant cost savings, around INR6.5 to INR7 per unit, which will improve our margins. - Punit Makharia, Executive Chairman and Managing Director
Q: Can you explain the drop in realization for the chemical segment this quarter?
A: The drop in realization is due to a decrease in prices from Q4 to Q1, despite an increase in volumes. The raw material prices have stabilized, affecting the overall realization. - Punit Makharia, Executive Chairman and Managing Director
Q: What is the expected benefit from the ongoing CapEx of INR215 crores?
A: The CapEx is spread across various verticals, including chemicals, fertilizers, and solar. We expect a payback period of three to four years, with significant improvements in operational performance post-completion by Q1 FY26. - Punit Makharia, Executive Chairman and Managing Director
Q: What is your guidance for the full year in terms of growth and EBITDA margins?
A: We maintain our guidance of at least 15% growth in top line and expect to achieve 12% to 13% EBITDA margins this fiscal year. We anticipate returning to our earlier margins of 15% to 17% by FY26. - Punit Makharia, Executive Chairman and Managing Director
Q: How is the demand for dyes and dyes intermediates trending?
A: Demand is stabilizing with a decent amount of orders in hand. We have a 35 to 40 days order book, indicating strong demand and improved market conditions. - Punit Makharia, Executive Chairman and Managing Director
Q: What is the current utilization rate for both the fertilizer and chemical segments?
A: The utilization rate is around 70% to 75% for both segments on a consolidated basis. - Punit Makharia, Executive Chairman and Managing Director
Q: Can you highlight the growth in the fertilizer segment and its future outlook?
A: The fertilizer segment has shown significant growth, and we expect a 20% to 25% increase this year due to favorable market conditions and supply chain dynamics. - Punit Makharia, Executive Chairman and Managing Director
Q: How much of your dyes revenue is contributed by Bangladesh and Turkey?
A: Approximately 35% of our dyes revenue is contributed by Bangladesh and Turkey. - Punit Makharia, Executive Chairman and Managing Director
Q: What are the reasons for the drop in margins from historical levels?
A: The drop in margins is due to industry-wide depression over the last 2 to 2.5 years. We expect to achieve 12% to 13% EBITDA margins this year and return to historical levels of 15% to 17% by FY26. - Punit Makharia, Executive Chairman and Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
