Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SRF Ltd (BOM:503806, Financial) reported an 8% year-on-year increase in gross operating revenue for Q2 FY 25, reaching INR 3,424 crores.
- The company successfully launched three new agrochemical products and three new pharmaceutical products in the first half of the year.
- SRF Ltd (BOM:503806) increased its market share in the domestic Refrigerants segment, particularly in the room air conditioner and mobile air conditioner markets.
- The Packaging Films Business saw a 27% year-on-year revenue growth in Q2 FY 25, supported by record production levels and sales of value-added products.
- The company is investing in next-generation refrigerants with a significant CapEx of INR 1,100 crores, highlighting its leadership in eco-friendly technology development.
Negative Points
- The Chemicals Business reported a 5% decline in revenues, with the Specialty Chemicals segment facing challenges due to high inventory levels and subdued demand.
- Margins in the Fluorochemicals Business were under pressure due to lower export realizations.
- The Technical Textiles business experienced weak margins in the Belting Fabrics segment despite higher volumes.
- The company faced increased competition from Chinese imports, impacting several segments including Packaging Films and Specialty Chemicals.
- Finance costs increased compared to the previous year, leading to higher expenses in the P&L statement.
Q & A Highlights
Q: With the recovery seen in the second half, along with the new molecules gaining traction, will SRF Ltd be able to make up for the margin erosion in the Chemicals Business?
A: Rahul Jain, President and CFO, stated that while some key products have experienced price erosion and volume positioning issues, the company expects Q3 to be slightly better and Q4 to show significant improvement. However, providing a precise guidance is challenging due to the current environment. The company maintains its margin outlook of plus/minus 2% to 3% from FY 24 annual margins, expecting positive changes in Q4 FY 25.
Q: What is the status of the CapEx for FY 25, and how much is expected to be commercialized?
A: Rahul Jain mentioned that the total cash CapEx for H1 was INR 600 crores, with an expected range of INR 1,600 crores to INR 1,800 crores for the year. The commercialization has been around INR 225 crores. Some CapEx projects, like the forggen gases and BOPP, BOPE lines, are timed out for FY 26 and 27.
Q: How is SRF Ltd managing the declining HFC consumption in developed markets like the U.S.?
A: Rahul Jain explained that while there is a decline in HFC volumes in the U.S., the company is seeing higher volumes in the domestic market and expects to sell HFCs in the Middle East and Southeast Asian markets. Pricing stability is observed in key refrigerants, which is expected to continue.
Q: Can you provide an update on the Specialty Chemicals segment and the expected demand recovery?
A: Rahul Jain noted that the company is confident about Q4 due to a strong order book. The gradual demand pickup is expected to lead to optimal utilization of new projects within 12 months. The company is seeing decent traction in new products, which should contribute positively in the coming months.
Q: What is SRF Ltd's strategy to counter increased competition from China in various segments?
A: Rahul Jain highlighted that the company's confidence stems from a strong order book and customer discussions. SRF Ltd is focusing on more complex chemistries and products, leveraging its R&D capabilities to maintain competitiveness. The company is also expanding into new geographies and developing new products to enhance its market position.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
