Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ganesha Ecosphere Ltd (BOM:514167, Financial) achieved a 45.2% year-on-year increase in EBITDA, reaching INR24.95 crore.
- The company reported a net profit of INR21 crore, which is 2.4 times higher than Q1 FY24.
- Capacity utilization for the quarter was at 106%, with a production of 28,270 tons, marking a 4.5% increase over the last quarter.
- Subsidiaries achieved higher EBITDA of INR22.74 crore, registering an 18% growth over the last quarter.
- The third production line of rPET granules has become operational and is expected to ramp up production by September, improving earnings.
Negative Points
- The textile industry is struggling with overcapacity and cheap imports from China, leading to pricing and demand pressures.
- A sudden spike in exports of washed PET flakes to the US and Europe increased raw material costs by 10%, which could not be passed on to customers.
- Sea freight costs have increased significantly due to geopolitical tensions and Chinese demand, impacting export delivery costs.
- The ramp-up of the second production line of rPET granules was slower than expected due to technical issues and delayed price adjustments.
- Political crises in Bangladesh are affecting exports, adding uncertainty to future earnings.
Q & A Highlights
Q: How will the EPR norms impact raw material prices for the RPSF business?
A: Yash Sharma, Director, Ganesha Ecopet: We expect pricing pressure on raw materials due to the EPR guidelines. To mitigate this, we are introducing value-added products and working on forward integration in the PSF business to absorb increased PET bottle scrap prices.
Q: Why do you believe the export of PET flakes will not be an issue in the future?
A: Yash Sharma, Director, Ganesha Ecopet: The aim of plastic waste management and EPR regulations is for each country to recycle its waste. Currently, countries are developing their own recycling infrastructure, so the export of PET flakes is expected to be a short-term phenomenon.
Q: What is the current capacity utilization of the RPSF unit in Warangal, and how do its margins compare to the standalone business?
A: Gopal Agarwal, CFO: The RPSF unit in Warangal is operating at about 80% capacity utilization, producing value-added dyed fiber with margins 2% to 3% higher than the standalone business.
Q: What challenges are you facing with the ramp-up of the filament yarn line, and what are your expectations for the next few quarters?
A: Gopal Agarwal, CFO: The textile industry is under pressure, slowing the ramp-up of the filament yarn line. We expect optimal production by the December quarter.
Q: Can you provide details on the effective capacity and utilization rates for the Warangal plant?
A: Gopal Agarwal, CFO: In the June quarter, the Warangal plant operated at 55% capacity utilization out of a 64,000-ton operational capacity. The full capacity of 78,000 tons became operational in July.
Q: How has the increase in PET bottle scrap prices impacted your raw material costs?
A: Gopal Agarwal, CFO: PET procurement prices increased by about 10% last quarter due to higher export prices for washed PET flakes. However, prices have started to stabilize in August.
Q: Are you seeing increased inquiries and participation from companies regarding EPR compliance?
A: Yash Sharma, Director, Ganesha Ecopet: Yes, we are seeing increased participation from FMCG brands, with around 10 to 12 different converters now procuring from us.
Q: What are your plans for further CapEx in light of the upcoming EPR guidelines?
A: Gopal Agarwal, CFO: We are working on expansion plans in the rPET segment and hope to provide details by the next earnings call.
Q: How do you plan to handle the margin pressure from increased raw material costs and a struggling textile industry?
A: Yash Sharma, Director, Ganesha Ecopet: We expect raw material prices to normalize over time. Historically, we have been able to pass on cost increases to customers, and we anticipate this will continue in the long term.
Q: What is your revenue guidance for FY25, and what capacity utilization is required to achieve it?
A: Gopal Agarwal, CFO: We expect revenue of INR1,500 crore to INR1,600 crore, with an 85% capacity utilization required to achieve this target.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
