Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Operating revenue grew by almost 23% year-on-year to INR528 crores.
- EBITDA for the quarter increased by around 91% year-on-year to INR41 crores.
- Profit after tax rose by 77% year-on-year to INR24 crores.
- Demand for tyre cord fabric is experiencing an uptick, driven by increased demand in the two-wheeler segments and growth in tyre exports.
- Efforts focused on cost optimization have led to improved margins.
Negative Points
- Margins are expected to remain under pressure due to lower prices in the Chinese market.
- Increased raw material costs arising from supply chain issues were passed on to customers.
- Power and fuel costs, although reduced, still pose a challenge due to seasonality impacts.
- Geopolitical risks and international freight costs remain uncontrollable factors that could affect future performance.
- The company does not provide forward-looking statements, making it difficult to predict future performance.
Q & A Highlights
Q: Our volume has increased to 20,000 tonnes in this quarter. Is this increase in volume sustainable?
A: Yes, the volumes have gone up in the current quarter compared to both the corresponding quarter and the immediately preceding quarter. This is mainly driven by better demand for both verticals, particularly in the two-wheeler segments in India and tyre exports. We are hopeful that the demand conditions should remain positive due to GDP growth and a good monsoon.
Q: Power and fuel costs have come down substantially compared to last year. Should we expect this trend to continue?
A: Yes, the reduction in power costs is mainly due to the hybrid power commissioned in July '23. We expect these numbers to continue based on the continuous availability of hybrid power, despite some seasonality impacts. Additionally, lower fuel costs for steam generation due to reduced coal rates have also contributed to the savings.
Q: What percentage of power do we source from the grid and what percentage from renewable sources?
A: At the Bharuch plant, between 25% to 33% of power, depending on the season, comes from hybrid renewable power, with the balance sourced from the grid. This ratio is expected to remain in the same range.
Q: Can you provide details on the average prices for caprolactam and the outlook?
A: In the last quarter, caprolactam prices were $1,664 per metric tonne, compared to $1,644 in the previous year. Prices have been stable over the past year, and we expect them to remain range-bound if crude prices do not move significantly.
Q: What is the revenue potential for polyester tyre cord fabric (PTCF), and who will be the major customers?
A: Major customers for PTCF will include tyre companies like JK, MRF, and CEAT, primarily for passenger tyres. We are targeting about a 10% capacity for the domestic demand, with commercial production expected to start in the first quarter of FY26 after approvals.
Q: What kind of CapEx are we looking at for this year?
A: We are focusing on sustenance and cost-saving CapEx, which will not be large. We have completed all major expansions and CapEx in the last quarter of FY24. Routine CapEx, including modernization and energy-saving projects, will be between INR35 crores to INR50 crores.
Q: How are supply chain disturbances impacting exports, and are there opportunities from developments in Bangladesh?
A: Supply chain issues, particularly container freight increases, have slightly come down but are still higher than Q4 levels. Normalization is expected as tariffs in the US have kicked in. Regarding Bangladesh, any shift in garment demand to India could lead to better yarn demand, but it is too early to predict.
Q: Can the strong volume growth in the first quarter be sustained throughout the year?
A: While we do not provide forward-looking statements, we are optimistic that better volumes should continue in the remaining quarters compared to the previous year, given the current demand and our operational capacities.
Q: How has the demand been in July, considering the better monsoon?
A: We cannot provide monthly numbers, but the demand has been steady. We are hopeful that the second quarter will also show good volumes.
Q: Can you quantify the capacity and realizations for PTCF?
A: We are targeting about a 10% capacity for the domestic demand. The process will start with trials and approvals from tyre companies, with commercial production expected to begin in the first quarter of FY26.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
