Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IG Petrochemicals Ltd (BOM:500199, Financial) reported a year-on-year revenue growth of 5.7%, reaching INR595 crore.
- EBITDA for the quarter grew by 7.3%, standing at INR71 crore, with an EBITDA margin of 12%, up from 11.8% in the previous quarter.
- The company enjoys a net debt zero status, which provides financial stability and flexibility.
- The addition of the PA5 unit has increased the company's production capacity to 275,000 tonnes per annum.
- The demand for phthalic anhydride in India is expected to grow between 5% to 6%, providing a positive outlook for future sales.
Negative Points
- Two plants were under statutory maintenance shutdowns, impacting overall production capacity.
- The company faced challenges due to heightened shipping charges, affecting export and import activities.
- The PA5 plant operated at only 50% to 60% capacity in the first quarter, indicating underutilization.
- The company anticipates further shutdowns for catalyst changes, which could impact production volumes.
- Despite the revenue growth, the profit after tax for the quarter was INR35 crore, which may not fully reflect the company's profitability due to depreciation and interest costs for all five plants.
Q & A Highlights
Highlights of IG Petrochemicals Ltd (BOM:500199) Q1 FY25 Earnings Call
Q: You mentioned that two plants were under statutory shutdown. Can you elaborate on the cost benefits and yield improvements with the new plant?
A: The new plant offers a cost benefit of $20 to $25 cheaper compared to earlier plants due to shared infrastructure and manpower. Yield benefits are consistent across all plants, ranging between 7% to 8%. The new plant is expected to reach optimal capacity soon, enhancing overall production efficiency. - Pramod Bhandari, CFO
Q: What was the utilization rate of the PA5 plant in the first quarter, and when do you expect the two plants under inspection to resume production?
A: The PA5 plant operated at around 50% to 60% utilization in the first quarter. The two plants under inspection are expected to resume production by the first week of August, gradually ramping up to 80% to 85% utilization. - Pramod Bhandari, CFO
Q: Can you provide insights into the realization of PA and MA in the domestic market for Q1 FY25?
A: The margins for phthalic anhydride in the domestic market ranged between $150 to $200. IGPL's operational efficiency and byproducts like maleic anhydride and benzoic acid contribute an additional $80 to $120 in margins. - Pramod Bhandari, CFO
Q: What is the status and future plan for the compressed biogas (CBG) plant?
A: The CBG plant is a 5-tonne per day trial project with an investment of INR30 crore to INR32 crore. The plant will use flexible raw materials, primarily Napier grass. Once successful, the model can be replicated across different locations. - Pramod Bhandari, CFO
Q: How do you see the demand for phthalic anhydride evolving, and which segments are driving growth?
A: The demand for phthalic anhydride is growing at 5% to 6%. Key segments include paint, plasticizers, and CPC, with specialty chemicals and UPR showing significant growth. The paint and infrastructure segments are also expected to perform well due to new capacity additions. - Pramod Bhandari, CFO
Q: What is the expected volume loss due to the plant shutdowns, and what are the projected volumes for the full year?
A: The shutdowns resulted in an annualized loss of 80,000 to 85,000 tonnes. For the full year, the expected volume is between 210,000 to 215,000 tonnes, up from 204,000 to 205,000 tonnes last year. - Pramod Bhandari, CFO
Q: How sustainable are the current quarter's numbers for the full fiscal year?
A: While it's challenging to predict exact numbers, this year is expected to be better than the last year. The company aims to maintain or improve current performance levels. - Pramod Bhandari, CFO
Q: What is the impact of the recent freight cost increases on your operations?
A: Freight costs have increased by 10% to 20% due to global factors, including the US-China trade tensions. However, since 80% to 85% of our sales are domestic, the impact is minimal. Export sales, which account for 5% to 7% of total sales, are adjusted for freight cost changes. - Pramod Bhandari, CFO
Q: What are the CapEx plans for FY25 and FY26, and how will they be funded?
A: The total CapEx for FY25 and FY26 is around INR200 crore, with INR150 crore to INR160 crore for the plasticizer project and INR40 crore for other projects. This will be funded through a mix of debt and equity, with INR100 crore in debt already tied up. - Pramod Bhandari, CFO
Q: How do you see the future of the UPR segment, and what is its current market acceptance?
A: The UPR segment is growing at 15% to 20% annually and has significant potential. It currently accounts for less than 5% of the Indian market but is expected to grow due to its advantages in large infrastructure projects. - Pramod Bhandari, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
