Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Galaxy Surfactants Ltd (BOM:540935, Financial) achieved volume growth across all regions, with a notable 24.5% increase in the rest of the world markets, driven by strong growth in Europe and Latin America.
- The company reported a 13.3% growth in specialties driven by masstige categories, indicating a positive trend in higher-margin products.
- Despite logistical challenges, the company managed to achieve an EBITDA per metric ton of INR20,197, close to the guided range of INR20,500 to INR21,500.
- India market showed signs of recovery with a 2% growth, supported by strong performance in May and June, and positive outlook due to above-average monsoons and rural spending.
- The company is optimistic about achieving high single-digit growth in the Africa, Middle East, and Turkey (AMET) markets, despite geopolitical and supply chain challenges.
Negative Points
- EBITDA per metric ton was slightly below the guided range due to higher supply chain costs across all locations.
- Logistical challenges, including unavailability of containers and port congestion, adversely impacted volumes and increased lead times.
- The India market experienced slower growth compared to previous years, with only a 2% increase in the quarter.
- The company faced significant challenges in the AMET region due to the Red Sea crisis, impacting the availability of raw materials and production schedules.
- Higher raw material costs, driven by increased lauryl alcohol prices and freight rates, pose a risk to maintaining profitability.
Q & A Highlights
Galaxy Surfactants Ltd (BOM:540935) Q1 FY25 Earnings Call Highlights
Q: Despite logistic challenges and higher freight rates, other expenses have gone down sequentially. Any particular reasons?
A: The decrease in other expenses is primarily due to lower DDP shipments this quarter, which have higher costs compared to CIF freight costs. - K. Natarajan, Managing Director
Q: Have you faced issues with container availability for exports this quarter?
A: Yes, the challenges have significantly increased since May, affecting both incoming and outgoing shipments. However, the team has managed well despite these constraints. - K. Natarajan, Managing Director
Q: Can we expect some softening of volumes in the coming quarters due to these challenges?
A: The demand scenario looks robust across geographies. If the supply chain situation does not deteriorate further, we expect good volume growth next quarter. - K. Natarajan, Managing Director
Q: Which geographies have seen a sharp uptick in demand or volume?
A: Europe, Latin America, and Asia-Pacific have shown strong growth. - K. Natarajan, Managing Director
Q: Are you on track to meet or exceed the EBITDA per kilo guidance of INR20.5 to INR21.5?
A: We expect specialty ingredients to catch up from H2 of this year, which should help us trend towards the higher end of the guidance. - K. Natarajan, Managing Director
Q: How has the trend been in the India market post-June?
A: The faster growth seen in May and June is holding up so far. We expect mid-single-digit volume growth to continue, driven by rural demand and price corrections. - K. Natarajan, Managing Director
Q: What is driving growth in the specialty segment?
A: Growth is driven by a combination of preservatives, mild surfactants, non-toxic preservatives, and new product launches. - K. Natarajan, Managing Director
Q: How has the performance of proteins been?
A: The protein business has seen a revival this quarter, particularly in North America, after suffering from destocking last year. - K. Natarajan, Managing Director
Q: How much of the specialty care growth can be attributed to restocking versus new product launches?
A: Approximately 40% of the growth can be attributed to restocking, with the balance coming from new business in certain geographies. - K. Natarajan, Managing Director
Q: Are there any untapped areas in specialty care products that could drive future growth?
A: We are working on new product solutions in line with consumer trends and expanding our basket of ingredients with customers. - K. Natarajan, Managing Director
Q: Have the incremental logistics costs been fully passed on to customers?
A: Yes, the increases have been passed on with a lag. We are engaging with customers to judiciously pass on any further increases. - K. Natarajan, Managing Director
Q: What is the impact of the rise in lauryl alcohol prices?
A: Lauryl alcohol prices have increased significantly, driven by higher oil and palm prices. We manage this volatility through a robust raw material management framework. - K. Natarajan, Managing Director
Q: Why is the volume growth guidance for FY25 still 6-8% despite a robust demand scenario?
A: We remain cautious due to external uncertainties. We may revise the guidance after assessing the situation over the next two quarters. - K. Natarajan, Managing Director
Q: What is the impact of Unilever reducing palm oil content on your business?
A: There is no impact as we do not cater to traditional soaps made from oil. Our focus is on synthetic detergent soaps and specialty products. - K. Natarajan, Managing Director
Q: How is the demand in Europe and AMET regions?
A: Demand in Europe is looking up, and AMET has shown a 6% volume growth despite supply chain challenges. We expect this trend to continue. - K. Natarajan, Managing Director
Q: What is the reason for the increase in lauryl alcohol prices?
A: The increase is due to higher oil and palm prices, as well as increased freight rates. We manage this through effective raw material procurement strategies. - K. Natarajan, Managing Director
Q: Will the rise in lauryl alcohol prices trigger a revision in fixed contract prices with customers?
A: It depends on the contract terms. We have various models to manage the risk and ensure minimal impact on profitability. - K. Natarajan, Managing Director
Q: Why is the volume growth guidance for FY25 still 6-8% despite a robust demand scenario?
A: We remain cautious due to external uncertainties. We may revise the guidance after assessing the situation over the next two quarters. - K. Natarajan, Managing Director
Q: What is the impact of Unilever reducing palm oil content on your business?
A: There is no impact as we do not cater to traditional soaps made from oil. Our focus is on synthetic detergent soaps and specialty products. - K. Natarajan, Managing Director
Q: How is the demand in Europe and AMET regions?
A: Demand in Europe is looking up, and AMET has shown a 6% volume growth despite supply chain challenges. We expect this trend to continue. - K. Natarajan, Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
