Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ganesh Benzoplast Ltd (BOM:500153, Financial) reported a 14% year-over-year increase in stand-alone profit after tax for Q1 FY '25.
- The company maintained a steady EBITDA margin of around 50% for its rental income segment.
- Ganesh Benzoplast Ltd (BOM:500153) has secured critical approvals for its new LPG terminal project, expected to complete by October 2026.
- The Chemical division is expected to achieve a 10% growth rate and improve EBITDA margins from 5-6% to 8-9%.
- The company is exploring new product lines and certifications to expand its market reach, including FDA and REACH certifications.
Negative Points
- The Liquid Storage Terminal (LST) division's margins are lower compared to competitors like Aegis Logistics.
- There was a decline in revenue from the EPC and wharfage business due to a jetty being under repair for three months.
- Growth in the LST division is expected to be limited to 5-8% due to maxed-out capacities.
- The Chemical division has been underperforming with current EBITDA margins at 5-6%, though efforts are being made to improve this.
- The demerger of the Chemical and Tank divisions is delayed due to ongoing legal issues.
Q & A Highlights
Q: Sir, I wanted to understand why our margins are lower than Aegis Logistics in the Liquid Storage Terminal division. And we have guided that we'll have a 5% to 7% kind of realization growth in this segment, but there seems to be a degrowth. So why is that?
A: The margins depend on the product mix and capacities. Compared to our competitors, we are on par if you exclude LPG. The decline in realization is due to a drop in EPC and wharfage business, but our profitability remains steady from rental income. (Rishi Pilani, Executive Chairman and Managing Director; Amar Kabra, GM Finance and Taxation)
Q: For FY '25, what kind of expectations do we have for both our divisions—LST and Chemical?
A: For the LST division, we expect growth between 5% to 8%, and for the Chemical division, closer to 8% to 10%. (Rishi Pilani, Executive Chairman and Managing Director)
Q: What are the reasons behind the underperformance of the Chemical segment? And what strategies are you implementing to address and overcome the losses incurred by the segment?
A: We are not incurring losses in the Chemical division. The capacity utilization has steadily increased without fresh working capital. We have implemented management changes, introduced new products, and modified raw material purchasing to improve margins from 5%-6% to closer to 10%. (Rishi Pilani, Executive Chairman and Managing Director)
Q: What is your outlook for the fiscal year, and could you highlight the key growth drivers and potential risks that may impact the company's performance?
A: For the infra division, key drivers include strategic location and sustained market growth. For the Chemical division, the niche product mix and new certifications like FDA and REACH will help maximize sales domestically and internationally. (Rishi Pilani, Executive Chairman and Managing Director)
Q: What is the current progress on the new tanks that we are proposing with BW?
A: We are in the process of getting approvals for the revised 64,000-tonne terminal. The firefighting installations are completed, and we have received the critical approval from the Chief Controller of Explosives. We aim to start work in October. (Rishi Pilani, Executive Chairman and Managing Director)
Q: When can we expect the demerger of our Chemical divisions and the Tank division?
A: We are waiting for a court judgment on this matter. Meanwhile, we are working to increase the profitability of the Chemical division to contribute positively on a consolidated basis. (Rishi Pilani, Executive Chairman and Managing Director)
Q: What is the current estimated CapEx for the large LPG project?
A: The estimated CapEx for building the 64,000-tonne LPG capacity is around INR700 crores to INR750 crores. (Amar Kabra, GM Finance and Taxation)
Q: Could you elaborate on the specific cost-saving measures implemented and their impact on the overall financial health of the business?
A: The reduction in total expenditure and improved EBITDA margins are due to a combination of factors, including the steady performance of the Chemical division and the strategic transfer of the EPC business. (Amar Kabra, GM Finance and Taxation)
Q: With the new capacities coming in, do you take orders once they are ready, or have you started the process to ensure capacity utilization from day one?
A: We already have a certain capacity tied up with BW LPG and CPIL. Orders for LPG tanks generally start rolling in closer to completion, but we believe there is a demand for such capacity at JNPT. (Rishi Pilani, Executive Chairman and Managing Director)
Q: What is your CapEx plan going forward?
A: Our CapEx plan includes maintenance CapEx, building new tanks, and the LPG CapEx. We are looking at opportunities for building new tanks and have secured the equity contribution required for the LPG project. No fresh CapEx is envisaged in the form of debt or equity. (Rishi Pilani, Executive Chairman and Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
