Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rossari Biotech Ltd (BOM:543213, Financial) reported a healthy year-on-year growth in both revenues and profits, driven by the expansion of the HPPC business.
- The company achieved significant success in exports, which grew faster than domestic markets during the year.
- Rossari Biotech Ltd (BOM:543213) expanded its customer base for key HPPC products, leading to a robust 18% growth in the division.
- The Institutional Cleaning segment achieved exceptional results, serving major sectors such as airports, railways, hotels, and healthcare.
- The company maintains a strong balance sheet and disciplined financial management, supporting its long-term growth strategy.
Negative Points
- Challenges persisted in the Textile Specialties (TSC) and Animal Health and Nutrition (AHN) divisions due to external industry headwinds.
- The textile division witnessed a slowdown this quarter, primarily due to subdued demand in the textile industry and the softening of prices.
- Gross margins were impacted by a change in product mix and moderation in selling prices.
- High inventories and receivables have increased during the year, stressing the working capital cycle.
- The company faces competitive intensity in the industry, affecting its ability to maintain stable margins amidst raw material price volatility.
Q & A Highlights
Q: In your view, what would be the key figures for an improvement in gross margins going forward?
A: There was a change in the product mix during the quarter, which impacted the gross margin. Additionally, some moderation in selling prices also affected the gross margin. Our strategy is to improve on the R&D side, lower costs, and keep selling prices intact or increase them depending on raw material prices. Given that raw material prices are steady, we should see some improvement in gross margins going forward. (Ketan Sablok, Group CFO)
Q: Are you expecting the revenue run rate to bump up in the second half of FY25?
A: CapExes will come on stream in a phased manner, with some coming towards the end of Q2 and beginning of Q3. We should see some revenue increase by Q4, with a major bump up in FY26. (Ketan Sablok, Group CFO)
Q: Would you want to give any guidance on the revenue front for FY25?
A: It is difficult to provide guidance now given the global situation. We are working towards mid-low double-digit growth, similar to what we delivered this year. We should be able to provide a better outlook in a couple of quarters. (Ketan Sablok, Group CFO)
Q: What has been the volume growth in the textile business for FY24?
A: The textile business registered about 5% volume growth on an annualized basis and about 10% quarter-on-quarter growth. (Ketan Sablok, Group CFO)
Q: Can you elaborate on the plan for the Institutional Cleaning business over the next two to three years?
A: We are bullish about the Institutional Cleaning business, which has almost doubled its turnover in FY24. Our target is to double it again in FY25. This business is slightly cash-consuming, but we are confident it will reach a significant volume and capacity, yielding better returns. (Ketan Sablok, Group CFO)
Q: How is the competitive intensity in the industry affecting margins?
A: We have generally maintained gross margins at about 30%, though they fluctuate quarter to quarter. Given the current market behavior, we expect annualized gross margins to be closer to 30%. (Ketan Sablok, Group CFO)
Q: How do you plan to sustain HPPC growth over the next two to three years?
A: Key sub-segments in HPPC, new CapEx, and the Institutional Cleaning business will drive growth. We expect significant growth in the next two years, especially as the current base is small. (Ketan Sablok, Group CFO)
Q: What is the plan for the new oilfield chemicals?
A: We are targeting both the Indian and Gulf markets, as well as Africa and Malaysia. This year will focus on approvals and feeding stages, with significant business expected in the coming years. (Sunil Chari, Managing Director)
Q: How are we tapping export markets and what is the growth plan for the next three to five years?
A: Focus areas include the Americas, Asia (including MENA and Far East), and Europe. We are bullish on Home Personal Care and Agro segments, with significant growth expected from cross-selling and new chemistries. (Sunil Chari, Managing Director)
Q: How do you see the working capital cycle stabilizing?
A: The working capital cycle has been impacted by the Agro business and Institutional Cleaning business. We aim to streamline this to below 85 days, but currently, a 90-day cycle is more realistic. (Ketan Sablok, Group CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
