Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- DCM Shriram Ltd (BOM:523367, Financial) reported a 49% year-on-year increase in PBDIT, reaching INR 274 crores.
- The Chloro-Vinyl segment saw a 15% increase in revenue and a significant improvement in PBDIT, driven by higher volumes and lower energy costs.
- The company commissioned an 850 TPD caustic capacity and a 120 MW captive power plant, enhancing cost efficiency.
- Shriram Farm Solutions reported a 15% year-on-year revenue increase, supported by both volumes and prices across verticals.
- The Bioseed business showed stable revenue with improved PBDIT due to a better product mix and prices.
Negative Points
- Sugar and ethanol business margins were under pressure due to increased production costs not matched by market price increases.
- The Fenesta Building Systems business experienced a 400 basis points margin compression year-on-year due to higher fixed costs and lower-than-expected revenue growth.
- The Chlor-alkali business faced a slight 2% year-on-year decline in ECU, despite higher volumes and energy cost savings.
- The Fertilizer business saw a 13% year-on-year revenue decline due to a maintenance shutdown, impacting overall performance.
- Chlorine prices remain negative, affecting the overall ECU and putting pressure on margins in the chemicals segment.
Q & A Highlights
Q: In the Chemicals segment, you mentioned an additional 1200 klpd capacity, with 850 klpd belonging to you. Can you elaborate on the demand from end-user industries and the timeline for full absorption of this capacity?
A: (Aditya A Shriram, Deputy Managing Director) Caustic soda is used across various industries like textiles, paper, alumina, and more. We are optimistic that while there is short-term overcapacity, medium-term demand growth will absorb this capacity comfortably.
Q: With logistic issues increasing import costs, how do domestic caustic soda prices compare to imported prices?
A: (Amit Agarwal, CFO) Imported caustic prices are around $450, but imports are not significant. In Q1, only about 40,000 tonnes were imported, so there's no major advantage from imports currently.
Q: The sugar business saw a sharp decline in profitability despite higher sugar prices. Is this due to the sugar segment or ethanol?
A: (Amit Agarwal, CFO) The decline is primarily in the sugar segment due to no exports and higher production costs, including a $20 increase in SAP and adverse climatic conditions.
Q: Can you provide details on the caustic volume growth and key export markets?
A: (Aditya A Shriram, Deputy Managing Director) We have grown in both domestic and export markets. Exports increased from 0.092 million metric tonnes last year to 0.12 million metric tonnes this quarter, mainly to the Middle East, Africa, and Southeast Asia.
Q: What is the timeline for ramping up the new caustic capacity to optimal utilization?
A: (Aditya A Shriram, Deputy Managing Director) We expect significant capacity utilization by the end of this financial year and optimal utilization by next year.
Q: How are you managing feedstock availability for grain-based ethanol production?
A: (Amit Agarwal, CFO) We are currently using maize and have a team procuring it efficiently at reasonable prices, ensuring decent margins.
Q: What is the plan for increasing in-house chlorine consumption with the new capacity additions?
A: (Aditya A Shriram, Deputy Managing Director) We are expanding epichlorohydrin and aluminum chloride capacities, aiming for 55% in-house chlorine consumption, including pipeline customers.
Q: What is the expected timeline for commissioning the Hydrogen Peroxide and Epichlorohydrin plants?
A: (Aditya A Shriram, Deputy Managing Director) Hydrogen Peroxide will be commissioned this quarter, and Epichlorohydrin will start trials by the end of this quarter, with commercial production expected early next quarter.
Q: What is the outlook for the chemicals business for the remaining part of the year?
A: (Aditya A Shriram, Deputy Managing Director) The chemicals industry has been under pressure, but we expect a bottoming out and gradual improvement in the coming quarters.
Q: What are the expected capacity utilizations for the new caustic soda capacity in FY25?
A: (Amit Agarwal, CFO) We expect the new 850 TPD capacity to reach 40-50% utilization in the second half of the year, with existing capacity at 80-85%.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
