Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales volume grew by 10.7% year-over-year to 165 kt for FY24, and by 25% compared to the preceding quarter.
- Awarded a contract to Mott MacDonald Private Limited to increase ABS production capacity to 210 kt by FY28.
- Maintained EBITDA margins despite dynamic market conditions, demonstrating operational efficiency.
- Revenue for Q4 FY24 increased to INR599 crores from INR485 crores in Q3 FY24.
- Introduction of two new brands, STYROLOY and ASALAC, aimed at enhancing market presence and revenue streams.
Negative Points
- Revenue for FY24 decreased to INR2,222 crores from INR2,372 crores in FY23.
- PBITDA for FY24 remained steady at INR273 crores, down from INR290 crores in FY23.
- Q-o-Q drop in spread due to product mix changes and operational disruptions.
- Higher product prices and margins seen during COVID-19 have normalized, impacting overall revenue and margins.
- Significant CapEx required for capacity expansion, with detailed cost estimations still pending.
Q & A Highlights
Q: What explains the quarter-on-quarter drop in spread despite flat styrene monomer prices and ABS and PS prices? Was there an adverse product mix effect?
A: Rahul Agrawal, Managing Director: The overall margins have not changed significantly. There could have been a product mix change, and some short-term disruptions in operations required adjustments in the product mix. However, this has been corrected and should not be a significant change.
Q: How should we look at the spreads for ABS and PS in the long term, considering the mix of products?
A: Rahul Agrawal, Managing Director: It is better to look at annualized performance due to seasonality in the business. We are in a normalized situation now, and as we increase capacities and introduce new products, the product mix will improve, potentially enhancing spreads.
Q: What is the addressable market size for the new blends like PS, ABS, ASA, and PA ABS?
A: Rahul Agrawal, Managing Director: The addressable market for all the blends we have developed is around 40,000 to 50,000 tonnes in India. This is a high-growth business, targeting sectors that are rapidly expanding in the country.
Q: Which segments are seeing accelerated demand growth due to the Make in India initiative?
A: Rahul Agrawal, Managing Director: High growth is observed across automotive, household appliances, and medical devices. Significant investments are being made in these sectors, and some capacities will also cater to export markets.
Q: What is the timeline for seeing the effects of improved volumes from debottlenecking?
A: Rahul Agrawal, Managing Director: The debottlenecking process is ongoing, with significant volume increases expected by the middle of the financial year. We are also developing new grades of polystyrene to improve margins.
Q: What are the expected volume growth rates for the next two to three years?
A: Rahul Agrawal, Managing Director: We are targeting a volume growth of around 15% to 20% annually, in line with our capacity augmentation plans.
Q: How will the cost optimization measures impact the company's financials?
A: Rahul Agrawal, Managing Director: We have implemented several measures, including steam cost savings and potential power cost reductions. These initiatives, along with debottlenecking and logistics projects, will lead to significant cost savings.
Q: What is the outlook on EBITDA margins for FY25 and FY26?
A: Rahul Agrawal, Managing Director: While we do not provide specific forward guidance, we are working towards higher EBITDA margins through product mix improvements, capacity increases, and cost rationalization measures. The current annualized EBITDA margins are sustainable and expected to improve.
Q: How will the competitive landscape change with new capacity additions in the ABS market?
A: Rahul Agrawal, Managing Director: Despite new capacity additions, the ABS market is expected to grow at 7% to 10% annually. Even with all announced capacities, the market will still be underserved, providing ample growth opportunities.
Q: What are the strategic focus areas after the Agrawal family took over the company?
A: Rahul Agrawal, Managing Director: Key focus areas include capacity augmentation, cost rationalization, new product development, and sustainability initiatives. We aim to grow responsibly and profitably while maintaining a strong organizational culture.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
