Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GHCL Ltd (BOM:500171, Financial) reported a strong operational performance with growing volumes and better cost efficiency.
- The company is developing a greenfield soda ash plant with a 500,000 metric-tonne capacity, expected to enhance future growth.
- GHCL Ltd (BOM:500171) has been allotted 6,449 hectares of lease land for salt production, which will support their salt and bromine expansion projects.
- The company has a robust balance sheet with a net cash surplus of INR676 crores, providing financial stability.
- GHCL Ltd (BOM:500171) is focusing on increasing manufacturing productivity and has several growth initiatives lined up, including sodium bicarbonate capacity expansion and vacuum salt projects.
Negative Points
- Revenue for Q1 FY25 decreased to INR849 crores from INR1,029 crores in the corresponding quarter of the previous year.
- The global demand scenario for soda ash remains mixed, with pricing moderation affecting overall performance.
- The company faces challenges due to the oversupply in the global market and subdued demand, particularly in Europe and the US.
- There is uncertainty regarding the future pricing of soda ash due to dynamic global market conditions.
- GHCL Ltd (BOM:500171) is operating at near full capacity utilization, limiting the potential for significant volume growth in the short term.
Q & A Highlights
Q: Could you please quantify in percentage terms the volume growth that we've seen this quarter?
A: In terms of the volume growth, as compared to the same quarter last year, around 8%. (R.S. Jalan, Managing Director)
Q: What is the imports for this quarter and the previous quarter, please?
A: Imports, if you look at the Q4, is approximately around the GAAP. It's something around 15% -- minus 15%. (Raman Chopra, CFO & Executive Director)
Q: Since you're already operating at our optimum utilization, in terms of incremental volume, could you please guide us for revenue growth for FY25 and '26?
A: In terms of the volume growth, definitely, we will have something around 5% to 6% volume growth in terms of your -- what you call -- in the chemical soda ash. Along with that, we will also have some volume growth into the sodium bicarbonate. Sodium bicarbonate volume growth in terms of the tonnage will be very significant. It will be something around 20%, 25%. (R.S. Jalan, Managing Director)
Q: Given the current oversupply in the global market and over subdued demand, where do we see the prices moving forward?
A: It's a very dynamic situation at this point of time because you see that in the globally -- so much of volatility is happening. On one side, China growth is phenomenal in the soda ash demand side. Whether it's Europe and US, the demand has slowed down. So all depends on how the dynamic situation changes. And therefore, it's very difficult at this point of the time to predict in this current year. (R.S. Jalan, Managing Director)
Q: What is the IRR that we are expecting on our greenfield project? And what is the expected timeline of commissioning for Phase 2?
A: Based on the long-term view which we have taken, the IRR, which is coming something around 16% to 17%, of course, it will depend on the quarter to quarter how the dynamics of the pricing happens. But we have taken a longer-term view and very -- in a way, I would say a little conservative or the realistic number, probably the 16% to 17% through the IRR. Phase 1, as I said, the initial hiccups brought there gradually getting resolved. And we are more or less in a kind of a planning stage at this point of time on the second phase. For first phase, we will be going for the 0.5 million tonnes. And in the second phase, we will be going for another 0.5 million tonnes. Our vision at this point of time is by 2030, we should be having a capacity of around 1.1 million tonnes there. (R.S. Jalan, Managing Director)
Q: Currently, what percentage of our total revenue is coming from sodium bicarb? And is there also pricing pressure as we are seeing in soda ash segment?
A: In terms of the percentage, I don't think it's a very significant percentage at this point of time. It is almost -- I would call it as 6% to 7% kind of right now. And this will gradually increase, like I said just now. 25% increase will happen this year and the next 25% should happen next year. So gradually this -- because this sector is now opening up. And we are also looking at a possibility of how can we expand on this asset. Even in the greenfield project, we have a plan for a significant amount of growth into this segment as well. (R.S. Jalan, Managing Director)
Q: On the sodium bicarb, what could be the capacity utilization at peak levels? And what could be the peak revenue contribution from the same?
A: In terms of -- as I said, my growth into this revenue this year would be something around 25%. But still, we will have a headroom on this. Approximately from here also, we will be looking at something around 20% to 25% further growth going forward into -- probably that should happen in next year. (R.S. Jalan, Managing Director)
Q: What is the current status of the facilities in China that had shut down last quarter?
A: In China, in spite of that, the new investment, which came into the Mongolian location -- Mongolia, because of the demand and because of that, they have been able to just manage the balance between the demand and supply. They are almost like a net importer. They have been net importer in 2023. Even in the first quarter also, they were the net importer of soda ash. (R.S. Jalan, Managing Director)
Q: What is the expected timeline for the bromine and vacuum salt projects?
A: Bromine will come into Q3 of next year. Vacuum salt project will happen in the second quarter of next year. And after that, gradually, that will happen. And we are roughly around -- approximately now INR100 crores kind of -- on the peak level, we will have INR100 crores kind of a top line on that. (R.S. Jalan, Managing Director)
Q: What are the expected margins for the rest of the year?
A: It's very difficult at this point of a time to predict what will be likely to happen because of so much of dynamic changes in the global scale. When this supply chain -- how the situation of supply chain will continue, whether it will continue, not continue, we don't know right now. But I would say that at least we believe that the prices have kind of bottomed out. This is what our belief is. (R.S. Jalan, Managing Director)
Q: What is the current captive percentage for salt?
A: Approximately based on the current number, it should be something around 35%, roughly 35% to around 37%, broadly, which we have a plan to increase to around 40%, 45%, like I said, on the expansion or the productivity improvement that is underway. (R.S. Jalan, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
