Release Date: May 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Finolex Industries Ltd (BOM:500940, Financial) reported a strong Q4 FY24 with over 23% growth in volumes, leading to increased profitability.
- Total income from operations for Q4 FY24 was INR1,235.42 crores, up 8.27% year-on-year.
- The pipes and fittings segment saw a significant volume increase of 22.98% year-on-year.
- The company has a strong balance sheet with a net cash surplus of roughly INR1,820 crores as of March 31, 2024.
- The company has implemented a loyalty program that has received strong feedback and is expected to be launched widely across India within a year.
Negative Points
- EBITDA declined by 3.91% year-on-year to INR208.93 crores in Q4 FY24.
- EBITDA margin decreased to 16.9% in Q4 FY24 from 19.1% in Q4 FY23.
- The PVC resin segment's EBIT decreased significantly to INR66.63 crores in Q4 FY24 from INR117.25 crores in Q4 FY23.
- There was a buildup of inventory on the resin side, which is not considered a normal phenomenon.
- The company faces fierce competition in the market, which has led to pricing actions by competitors in some regions.
Q & A Highlights
Highlights from Finolex Industries Ltd (BOM:500940) Q4 FY24 Earnings Call
Q: Can you highlight the working capital days for inventory and credit, specifically for agri and non-agri, PVC, and CPVC? Is this the new normal?
A: On receivables, as our component of monetary grows, our receivables days will slightly go up. This trend is expected to continue. Inventory days were higher due to a buildup on the resin side, which should normalize. Credit days range from 30 to 60 days.
Q: Can you provide details on the incremental CapEx for FY25 and FY26?
A: The planned CapEx for FY25 is INR150 crores. We are also exploring expansion opportunities, which will be pursued as they become viable.
Q: What were the key variables for the strong volume growth, and where do we stand on them now?
A: We aim to grow the agri segment and accelerate growth in the non-agri segment, especially in urban markets. We are focusing on projects and rationalizing our dealer network to grow the non-agri segment.
Q: Can you provide the PVC, EDC, and VCM spread numbers for the quarter and the current status?
A: For the quarter, PVC was $785, EDC was $358, and VCM was $650. The PVC-EDC delta was $427, and the PVC-VCM delta was $135. Currently, PVC is around $800, EDC is $320, and VCM is $660, with deltas of $480 and $140, respectively.
Q: What is the agri versus non-agri mix for FY24, and any guidance for the future?
A: The agri-non-agri mix for FY24 is approximately 63-64% agri and 36% non-agri. Our aim is to move towards a 50-50 mix in the next three to four years.
Q: What is the growth guidance for the next year?
A: We expect growth between 10% and 15%, in line with industry expectations over the next four to five years.
Q: Are there any plans for capacity expansion in the PVC business?
A: No, most incremental capacity expansion will be in the pipes and fittings segment and for maintenance budgets.
Q: Can you provide details on the Q4 volumes for the PVC business, both external and internal?
A: In Q4, we sold approximately 6,000 tonnes of PVC externally. For the full year, we sold around 14,000 to 15,000 tonnes externally, with the balance consumed in-house.
Q: What is the current status of channel inventory and expectations for PVC prices?
A: As long as PVC prices remain stable, channel inventory is expected to be stable. The situation is being closely monitored, especially considering the volatility in the Middle East.
Q: What is the impact of the anti-dumping duty on PVC, and do we have any exposure?
A: We produce a small quantity of emulsion PVC, around 6,000 to 7,000 tonnes. The anti-dumping duty has been reimposed but does not have a material impact on us due to the small volume.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
