Release Date: May 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- PCBL Ltd (BOM:506590, Financial) commissioned a Greenfield carbon black project in Chennai, increasing total installed capacity to 770,000 tonnes.
- The company also commissioned a cogeneration captive power plant at the Tamil Nadu site, enhancing total cogeneration power capacity to 122 megawatts.
- PCBL Ltd (BOM:506590) acquired Aquapharm Chemicals Private Limited, expanding its specialty chemical portfolio and enhancing its global market presence.
- The company reported its highest-ever quarterly financial performance with consolidated sales volume up by 20% year-on-year and EBITDA growing by 66% year-on-year.
- PCBL Ltd (BOM:506590) is focusing on research and innovation, securing two new patents and enhancing its specialty portfolio.
Negative Points
- The geopolitical situation, including wars and economic issues in the US and Europe, poses uncertainties for PCBL Ltd (BOM:506590).
- The company faced challenges with high-cost inventory liquidation and weak market conditions in the chemical sector, impacting Aquapharm's performance.
- PCBL Ltd (BOM:506590) has a high debt level, which may not decrease significantly in the immediate future due to ongoing and planned capital expenditures.
- The company is experiencing elevated export freight costs due to the Red Sea crisis, which may impact profitability.
- There is a risk of increased competition and potential oversupply in the carbon black market, which could pressure margins.
Q & A Highlights
Highlights of PCBL Ltd (BOM:506590) Q4 FY24 Earnings Call
Q: Europe ban on carbon black starting in the next 38 days. Do you see any change in the market or buyers' behavior? How much of your export volume goes to Europe, and how do you see that mix improving in the next two years?
A: We are doing about 14%-15% of our international volume in Western Europe, and that market is becoming bigger for us. We are improving our supply chain infrastructure and have opened several offices and an R&D center in Europe. Europe shows a lot of potential, and we are looking to grow quickly in that market. Last year, we did about 28,000 tonnes in Europe, and we aim for fast growth. (Raj Gupta, CFO)
Q: Can you give us the CapEx numbers for the next two to three years, including maintenance and growth CapEx in carbon black and chemical business?
A: We are looking to add 90,000 tonnes in Tamil Nadu and another 20,000 tonnes in Mundra, with a capital outlay of around INR 500-550 crores. We are also planning a larger Greenfield project with a capital outlay of around INR 900-1,000 crores. In the chemical business, we plan to spend about INR 100 crores in India and INR 180 crores in the US over the next two years. (Raj Gupta, CFO)
Q: What are the estimated EBITDA and PAT for Aquapharm in FY25 and FY26?
A: We are not providing specific numbers for FY25, but we expect substantial improvement in Aquapharm's performance. We are focusing on full capacity utilization, new product development, and cost control initiatives. (Kaushik Roy, Managing Director)
Q: How do you see the competitive intensity from China in the carbon black market?
A: The competitive intensity from China varies, but customers have lost confidence in them due to their inconsistent presence. We focus on long-term strategic relationships and believe we are one of the best in the world in terms of technology, productivity, and yield. (Kaushik Roy, Managing Director)
Q: What is the ideal CapEx cost for a new Greenfield carbon black plant, and how do you justify the return on capital employed (ROCE)?
A: The CapEx cost for a Greenfield carbon black plant is around INR 60,000 per tonne. We take investment decisions based on a payback period of less than five years. We believe the market offers significant long-term growth opportunities, and we plan to add 80,000 to 100,000 tonnes of capacity annually. (Raj Gupta, CFO)
Q: What are the sustainable margins and growth profile for Aquapharm over the next two to three years?
A: Aquapharm has historically generated about 20% EBITDA margins at 60% capacity utilization. With higher capacity utilization and new product additions, we expect margins to improve. We are not planning significant CapEx in India but will increase capacity in the US. (Raj Gupta, CFO)
Q: How do you plan to manage the balance sheet and debt levels given your growth ambitions?
A: We are generally debt-averse and aim to maintain a strong balance sheet. However, current market conditions offer significant growth opportunities, both organic and inorganic. We believe our potential to generate higher cash from operations will support our growth plans and debt servicing obligations. (Raj Gupta, CFO)
Q: What is the breakdown of the INR 1,166 crores of intangible assets on the balance sheet?
A: The intangible assets include technical know-how, IP, and customer relations, which are tax-deductible and will be amortized over 20 to 25 years. Goodwill is tested for impairment annually. (Raj Gupta, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
