Release Date: June 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Black Rose Industries Ltd (BOM:514183, Financial) reported a substantial increase in EBITDA by about 125% on a standalone basis, reflecting strong operational performance.
- The company remains long-term debt-free, showcasing a strong financial position with a negligible total debt-equity ratio.
- Export volumes for the manufacturing segment, particularly Acrylamide, increased significantly, with 65% of Acrylamide being exported.
- The company has successfully added new products to its portfolio, such as Acrylamide Solid and N-Methylol Acrylamide, contributing to revenue growth.
- The distribution business saw an increase in margins by over 60% year-on-year, despite a global meltdown in chemical prices.
Negative Points
- The Morbi Ceramic market remains subdued due to high gas prices, subdued export demand, and logistic issues, impacting sales of Polyacrylamide Liquids.
- The company faces challenges with international logistics, including delayed shipments and longer transit times, which could impact export markets.
- There is significant competition in the Polyacrylamide Liquid market, particularly from smaller local producers in the Morbi area.
- The company is still in the process of obtaining environmental clearance for its Specialty Chemicals project, which could delay potential revenue from this segment.
- The overall demand in Europe remains sluggish, despite efforts to penetrate new customers under the Europe Plus One strategy.
Q & A Highlights
Q: Can you explain the role of Black Rose Industries in the distribution business and why manufacturers don't set up their own distribution facilities in India?
A: As distributors, we are product specialists who seed the market, educate customers, and provide valuable feedback to manufacturers. This role is different from that of a trader. Our stock and sell model ensures low lead times, helping customers plan their procurement effectively. This value addition makes it difficult for foreign manufacturers, especially from Japan, to operate directly in India.
Q: What is the utilization rate at your current manufacturing plants?
A: For Acrylamide Liquids, we achieved about 70% to 80% capacity utilization in the previous quarter. Other products have lower utilization rates but are still profitable, as evidenced by our strong EBITDA margins.
Q: How much investment is planned for the new specialty chemical plant?
A: The investment for the new specialty chemical plant is estimated to be around INR 20 crores to INR 30 crores. However, the final details are still being worked out as we await environmental clearance.
Q: Are there plans to increase the capacities for N-Methylol Acrylamide (NMA) and Acrylamide Solid?
A: Yes, we monitor capacity utilization and will consider increasing capacities when we reach a consistent sales threshold. The cost of increasing capacities is low due to our robust technology.
Q: What is the status of the Polyacrylamide Solid project?
A: The R&D work for Polyacrylamide Solids is expected to be completed by the end of this fiscal year. Once finalized, the plant setup should take around 6 to 9 months. The building is already ready, which will expedite the process.
Q: How has the volatility in ocean freight costs impacted your export volumes?
A: The logistics costs have been volatile, especially after the Red Sea event. While we can pass on most of the cost burden to customers, certain markets become unviable due to high logistics costs. However, we see logistics challenges as an opportunity to improve margins through our stock and sell model.
Q: What is the outlook for the chemical distribution business in the current year?
A: The chemical distribution business is poised to perform better due to excellent support from suppliers and improved logistics. We are also expanding our sales team and adding new products to our distribution portfolio, which augurs well for the upcoming quarters and FY25.
Q: What is the expected revenue from the new Polyacrylamide Solid project?
A: The initial capacity for Polyacrylamide Solids is 10,000 metric tons. At full capacity utilization and current market prices, we expect to generate around INR 250 crores in revenue.
Q: How does the China Plus One strategy impact your business?
A: The China Plus One strategy, along with Europe Plus One, is helping us penetrate new markets and add new customers. Although the overall demand in Europe is sluggish, we are gaining traction due to companies' policies to hedge their procurement by diversifying suppliers.
Q: What is the total CapEx planned for the current year and next year?
A: The total CapEx for the current year, including the new R&D facility, Japanese collaboration, and land acquisition, is estimated to be around INR 35 crores to INR 40 crores. This excludes the Polyacrylamide Solid project.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
