Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Apcotex Industries Ltd (BOM:523694, Financial) reported a 21% year-on-year increase in operating income for Q4 FY24, reaching INR311 crore.
- The company achieved a 34% year-on-year volume growth domestically and a remarkable 71% year-on-year growth in export volumes for the quarter.
- Net profit after tax grew by 38% quarter-on-quarter, with a PAT margin of 4.93%.
- The company celebrated its highest quarterly export volume growth, indicating strong international market penetration.
- Capacity expansion projects have shown promising results, with the Taloja plant reaching up to 65% utilization in one month and an average of 45% for the year.
Negative Points
- EBITDA decreased by approximately 8% year-on-year, with the EBITDA margin standing at 10.08%, indicating pressure on profitability.
- The net profit after tax for the full financial year 2024 declined by 50% year-on-year, partly due to increased depreciation and interest costs from major expansion projects.
- Nitrile latex business faced significant challenges, with utilization rates lower than expected and margins just about breakeven.
- The company experienced lower margins in some product categories due to market dynamics, impacting overall profitability.
- There was a notable increase in receivables, raising concerns about cash flow management, although the company attributed this to a higher proportion of export sales with longer payment terms.
Q & A Highlights
Highlights of Apcotex Industries Ltd (BOM:523694) Q4 FY24 Earnings Call
Q: What is the current utilization in the Nitrile Latex business for Q4, and what are the targets for FY25 and FY26?
A: Utilization was lower than expected, averaging 30% for the year and 40-45% for the quarter. The focus is on increasing customer breadth and ensuring positive contribution margins. If market conditions improve, capacity utilization could reach 100%. (Abhiraj Choksey, Managing Director)
Q: What are the plans if the Nitrile Latex business continues to struggle with low margins?
A: One option is to convert part of the Nitrile Latex assets to produce other latexes like Styrene-butadiene Latex and Styrene acrylics latex. This plan is under consideration but not finalized yet. (Abhiraj Choksey, Managing Director)
Q: How are imports affecting the NBR and synthetic latex businesses?
A: Significant imports have impacted NBR margins, with the company running at full capacity. Synthetic latexes have remained stable with significant volume growth. (Abhiraj Choksey, Managing Director)
Q: What is the status of the anti-dumping duty request for NBR?
A: The DGTR recommended an anti-dumping duty, but it was rejected by the Ministry of Finance. Legal cases are ongoing, and the company may reapply for anti-dumping in the future. (Abhiraj Choksey, Managing Director)
Q: What are the financial implications of repurposing the Nitrile Latex capacity?
A: Initial estimates suggest it would take 6-8 months and cost around $2-3 million. The company has enough capacity for other latexes for the next 1-1.5 years. (Abhiraj Choksey, Managing Director)
Q: What is the current net debt and EBITDA margins excluding the Nitrile Latex business?
A: Net debt is around INR70 crore. EBITDA margins excluding Nitrile Latex are estimated to be 2-3% higher. (Sachin Karwa, Chief Financial Officer)
Q: What is the volume growth for the quarter and the full year?
A: Volume growth was 34% for the quarter and 28% for the year, driven by capacity expansion. (Abhiraj Choksey, Managing Director)
Q: What is the outlook for the Nitrile Latex business and overall volume growth for next year?
A: Demand is not an issue, but margins are. The company expects mid-teen growth rates for other products, with high double-digit growth dependent on Nitrile Latex. (Abhiraj Choksey, Managing Director)
Q: What is the status of the ApcoBuild business?
A: ApcoBuild grew by 18-20% but remains a small part of overall revenue. The company is focusing on deeper penetration in existing states and expanding into new regions. (Abhiraj Choksey, Managing Director)
Q: What are the plans for further capacity expansion in the NBR business?
A: Detailed engineering for the project is complete, but the decision will be made after stabilizing current operations and cash flow. (Abhiraj Choksey, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
