Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated revenue from operations for Q1 FY25 increased by 4% quarter-on-quarter to INR1,176 crore.
- Consolidated EBITDA for Q1 FY25 rose by 10% quarter-on-quarter to INR262 crore, with an EBITDA margin of 22%.
- The company is actively engaged with over 20 potential customers globally in the EV and ESS segments, indicating strong future growth potential.
- New fluoropolymer products are witnessing market pull due to strong growth fundamentals in the semiconductor industry and emission control applications in the auto industry.
- The company has commissioned a post-processing facility to capture a larger share in premium segments and a manufacturing plant for PVDF film for solar applications.
Negative Points
- Profitability was impacted by higher interest rates and depreciation due to increased CapEx in previous quarters.
- Specialty chemicals volumes and prices remained muted, facing headwinds from Chinese competition.
- Logistic disruptions caused by the Red Sea crisis impacted revenue during the quarter.
- The prolonged validation period for EV and fluoropolymers results in a lag in business buildup.
- The company faces challenges in achieving the expected growth rate in the fluoropolymer segment due to delayed shipments and subdued market conditions.
Q & A Highlights
Q: The fluoropolymer business seems to be lagging behind the performance of competitors like Chemours. What are the reasons for this discrepancy?
A: Yes, destocking is behind us, and we are seeing growth driven by new fluoropolymer segments and the exit of legacy players. However, some shipments to the US were delayed, impacting this quarter's numbers. We expect to catch up as fundamentals remain strong, particularly driven by the semiconductor sector. (Bir Kapoor, CEO)
Q: What is the outlook for the domestic demand for FKM, PTFE, and PVDF?
A: We expect positive traction from the first quarter of the next calendar year. Some grades are under evaluation and approval. The domestic market is new, but we are prepared with capacities and grades. (Kapil Malhotra, Global Business Unit Head, Fluoropolymers)
Q: Can you provide details on the contracts expected to be executed by the end of this fiscal year in the battery chemicals segment?
A: These contracts are mostly global, focusing on LiPF6 and electrolyte. The LFP plant commissioning is expected in Q3 of this year. While electrolyte is primarily for the Indian market, LiPF6 and LFP are targeted globally. (Bir Kapoor, CEO)
Q: What is the impact of the Red Sea crisis on your sales and costs?
A: The crisis has caused a deferment of sales due to increased shipping times. We estimate a delay of 1 to 1.5 weeks, impacting sales by approximately INR70 crore to INR80 crore. However, our backward integration minimizes the impact on costs. (Bir Kapoor, CEO)
Q: What is the outlook for refrigerant gases, given the recent price and volume improvements?
A: The last quarter saw good volumes for R22 due to seasonality. We expect subdued volumes in the next two quarters but anticipate an uptick in Q4 as R22 quotas reduce, potentially firming up prices. (Bir Kapoor, CEO)
Q: How do you plan to fund future growth in the EV and fluoropolymer segments?
A: We will fund future growth through external funding rather than internal accruals. We have already made significant investments and will continue to do so based on market opportunities. (Bir Kapoor, CEO)
Q: What is the status of the legacy players exiting the fluoropolymer market, and how will it benefit GFL?
A: One major legacy player has announced an exit by the end of 2025. We expect to capture market share as their customers transition to us, with significant gains starting from the end of this financial year. (Kapil Malhotra, Global Business Unit Head, Fluoropolymers)
Q: How will the new subsidiary in Oman integrate into the EV ecosystem?
A: The Oman subsidiary will focus on manufacturing battery chemicals for the US market, leveraging the FTA status. This will ensure IRA compliance and strengthen our position in the EV supply chain. (Bir Kapoor, CEO)
Q: What are your plans to reduce energy costs, and what savings do you expect?
A: We plan to enter long-term contracts for renewable energy starting next year, which should improve our energy costs and environmental footprint. We expect to save around INR100 crore. (Bir Kapoor, CEO)
Q: What is the expected CapEx for FY26, and how does it compare to previous plans?
A: We will provide a firmer plan by the end of this year. Our immediate focus is on adding reactors to utilize existing monomer capacities. Future CapEx will depend on market opportunities and capacity utilization. (Bir Kapoor, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
