Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Significant rebound in financial performance with PBT increasing from INR 23 crores to INR 118 crores and PAT from INR 21 crores to INR 93 crores.
- Achieved the second highest sales in the last 15 years for the first quarter, amounting to INR 2,144 crore.
- Fertilizer sales increased by 7% in value terms on a year-over-year basis, with a 30% growth in sales volume.
- Favorable rainfall has facilitated the acceleration of Kharif cultivation, maintaining robust demand for fertilizers.
- The company remains debt-free with a strong balance sheet and healthy liquidity, supported by prompt government subsidy releases.
Negative Points
- Margins for fertilizers, particularly DAP, are under pressure, with some products experiencing negative contributions.
- Government reduced the subsidy outlay for fertilizers by approximately 13% in the current year budget.
- Domestic prices for industrial products remain subdued due to the dumping of cheap Chinese imports, impacting profitability.
- Caprolactam and nylon 6 production faced challenges due to annual shutdowns and increased raw material costs.
- Projects such as the HX Crystal Project and Urea Revamping Project are delayed, with full impact on turnover and margins expected only in the next financial year.
Q & A Highlights
Q: In the last interaction, you mentioned offering discounts on ammonium sulfate due to the lean season. Have these discounts been withdrawn, and has the increase in subsidy helped improve performance?
A: The increase in subsidies for ammonium sulfate is minimal. Discounts were offered last quarter but have been adjusted. The market for ammonium sulfate remains competitive, and the lean season required discounts to push sales. The performance improvement is also due to the optimization of production and raw material economics.
Q: Has the cost of production for ammonia fallen this quarter, and what was the average cost of natural gas for Q1 compared to Q4?
A: Natural gas prices increased by 6% year-over-year. The cost of ammonia impacts NPK fertilizers more than urea. The average cost of natural gas for Q1 was INR 45 per MMBtu.
Q: What are the current per tonne margins for ammonium sulfate, NPK, DAP, and urea?
A: Average margins for fertilizers are around INR 2,000 to INR 2,500 per metric ton. DAP currently has no margin and even negative contribution. Urea margins are lower due to higher energy consumption and associated penalties.
Q: When will the phosphoric acid and sulfuric acid plants be commissioned, and how will this affect margins and volumes for DAP and NPK?
A: The phosphoric acid and sulfuric acid plants will take 2 to 3 years to commission. Once operational, they will reduce dependency on imports, potentially improving margins and increasing production volumes for DAP and NPK.
Q: How will the anticipated increase in NBS subsidy affect margins for DAP, and what is the current impact of negative margins on the bottom line?
A: An increase in NBS subsidy is expected to make DAP breakeven rather than negative. The current negative impact on the bottom line due to DAP is around INR 42 crores.
Q: Can you quantify the impact of energy inefficiencies and penalties on the urea unit?
A: The exact amount is difficult to quantify as it depends on government decisions. However, the company is investing INR 450 crores in revamping the Urea II plant to improve energy efficiency and reduce penalties.
Q: What is the outlook for the industrial chemicals segment, given the current market conditions and Chinese imports?
A: The industrial chemicals segment is currently sluggish due to international market conditions and cheap Chinese imports. The company is taking steps to improve the situation, such as the HX crystal plant project, which is expected to enhance profitability.
Q: What is the expected CapEx for the HX crystal project, and what revenue and margin improvements are anticipated?
A: The HX crystal project will have a CapEx of INR 100 crores and is expected to generate INR 100 crores in revenue with good margins, improving the industrial products segment.
Q: What improvements in profitability are expected from the energy conservation measures for the urea plant?
A: The energy conservation measures will reduce energy consumption to meet government targets, increasing production capacity from 800 to 1,123 metric tons per day. This will result in additional margins and profits.
Q: At what capro-benzene spread levels does the company break even, and what are the fixed costs for caprolactam and melamine plants?
A: The breakeven capro-benzene spread is around $725 per metric ton. Fixed costs are higher than $100 per metric ton, and the company is currently generating losses in the caprolactam segment but positive contributions from melamine.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
