Q1 2027 Styrenix Performance Materials Ltd Earnings Call
Speaker #1: রূপেশ পোরবাল, থ্যাঙ্ক ইউ, and over to you, sir.
Speaker #2: Yeah, thank you very much. welcome all. Namaste everyone, and a very warm welcome for our Q1 FY27 earnings call. Thank you for taking the time to be here with us today.
Speaker #2: I hope you all have had a chance to go through the financial results and investor presentation, available on our website and the stock exchange.
Speaker #2: The Q1 was marked by an operating environment characterized by heightened uncertainties driven by evolving global macroeconomic conditions, geopolitical developments, and fluctuations across key markets.
Speaker #2: Despite these challenges, we remained focused on disciplined execution, operational resilience, and serving our customers effectively, as demand for our core products continued to remain strong.
Speaker #2: I will now take you through our financial and operational performance for the Q1. Before we open the floor for the questions. First on the standout financial highlights, coming to our Q1 financial highlights on year-on-year basis, total income for Q1 FY27 stood at INR 7,700.5 crores, a growth of 6.6%.
Speaker #2: EBITDA for Q1 FY27 stood at INR 2,014 crores, a growth of 133.9%. EBITDA margins for Q1 FY27 improved to 26.1% and increased in 14-20 basis points.
Speaker #2: Profit after tax for Q1 FY27 stood at INR 137.3 crores, a growth of 150.3%. Profit after tax margins for Q1 FY27 stood at 17.8%, a growth of 102.3 basis points.
Speaker #2: Sales volume for Q1 FY27 stood at 38.9 KT, a dip of 26%. Consolidated financial highlights: now on consolidated basis for the Q1, total income for Q1 FY27 stood at INR 1,014.2 crores, EBITDA for Q1 FY27 stood at INR 2,230.6 crores, and EBITDA margin stood at 22%.
Speaker #2: Profit after tax for Q1 FY27 stood at INR 138.3 crores, and profit margin stood at 13.6%. Consolidated sales volume, which includes both India and Thailand for Q1 FY27, stood at 50.8 KT.
Speaker #2: With this, I conclude the financial highlights, and we will now proceed for Q&A. Thank you very much.
Speaker #1: Thank you very much. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star, and one on their touchstone phone.
Speaker #1: If you wish to remove yourself from the question queue, you may press star, and two, participants are requested to use handsets while asking a question.
Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Neerav Jumuria from Anvil Wealth.
Speaker #1: Please go ahead.
Speaker #3: Yeah, good afternoon, sir, and thanks for the opportunity. Sir, I have a few questions. Sir, the first one, the volume part, like, when we see this Q1, have you ever seen the demand in the Indian market, both for the ABS and PS, when compared on a ROI basis?
Speaker #3: So if you can explain whether it was, like, the availability of raw material for the existing players in India which has lowered down our volumes and this volumes were replaced with the imports coming to India, that is point number A, or let's say the demand was impacted because generally there was unwillingness from the customers to take the materials at the higher price.
Speaker #3: So if you can just share your thoughts here.
Speaker #2: Okay, thanks. Neerav, fair question. So essentially, there was a lot of disruption as you know because of the Middle East, and that started in fact in the first week of March itself.
Speaker #2: We also saw some impact of it in the last quarter, but not to the extent that we witnessed in the current quarter. What happened in March, you know, towards the end of March, essentially, is obviously the prices went up quite a lot, and there was significant volatility.
Speaker #2: And due to that uncertainty, which arose in the market, there was a concern on part of certain segments of markets, specifically the, I would say, the non-OEM sector or the unorganized sector, where there was a less willingness, you know, to buy any material and so there was those concerns which existed during this quarter and which resulted in lower demand per se, particularly in the kind of, you know, unorganized sector.
Speaker #2: In polystyrene, that impact was more, and in ABS, the impact was a little bit lesser, but we saw the impact on kind of lower demand for both the product segments during this period.
Speaker #3: Got it. So let's say, like, when we see on an annualized basis, let's say both for EPS, for ABS as well as the PS, on an average, generally, if we just average out the quarterly demand comes to around 75-80,000 tons, let's say for ABS and close to around 90,000 tons for PS.
Speaker #3: When we just average out the yearly numbers, so if you can just give us some understanding, let's say, on this base of the quarterly demand which we see across, how much it was this quarter in terms of some percentage numbers or quantification of numbers that would be helpful?
Speaker #2: So, like I mentioned, you know, whatever drop in demand that has been seen across both the segments, and whatever, you know, drop in sales we have had, I think both are in line with each other.
Speaker #2: Essentially, so we normally don't give breakup, you know, of volumes between all the different segments. So I would not be able to do that, but if we look at the total polymer that we would have sold for total volumes, whatever dip we saw is in line with whatever dip has been across the segment, essentially, across both the segments.
Speaker #2: You know, for that, for this particular quarter, which would be to the order of, you know, 15 to 20 percent, essentially. Or maybe 25 percent.
Speaker #3: Got it. So safe to assume that, let's say, the OE demand was not impacted both on the ABS as well as the PS part, but it was more of the non-OE demand which has impacted our volumes.
Speaker #2: Yeah, I think in our case that is true. You know, I think there would have been some impact on the OE segment as well.
Speaker #2: But the impact could be far more exaggerated on the non-OE sector, for sure. So I think the OE sector demand impact could have been muted relative to the impact on the unorganized sector.
Speaker #3: Got it. Sir, second question is, like, what would be now our approach when the kind of volatility we have been seeing both on the raw material prices as well as on the freight side or, let's say, on the natural gas side?
Speaker #3: So I was talking just from the operational side. So what would be our strategy in terms of improving our volumes in the quarters to come, A, and B, what could be the demand drivers going forward both for ABS as well as PS?
Speaker #3: So are you seeing some newer applications coming up both for PS and ABS which can take up those incremental volumes in the market, or do you believe that growth predominantly will come more from the existing applications taking more volumes?
Speaker #2: So essentially, Neerav, what happens is, you know, there is obviously a strong correlation between demand and, you know, the supply and pricing, right, in the market.
Speaker #2: And this is not only in the case of our polymers, but if you see across the board, when there is kind of a significant increase in polymers, you do see a dependent demand, right, across the board.
Speaker #2: So it's a broad-based kind of demand destruction, if you will, or I would not even call it destruction. It is more along the lines of a, you know, cautious approach by, you know, on part of certain category of buyers who would be wanting for things to normalize a little bit before the demand picks up again.
Speaker #2: So I think as far as we are concerned, obviously, nothing changes in our strategy as far as the business is concerned. We are still doing whatever we need to do.
Speaker #2: We believe that things would normalize in certain period of time. And accordingly, you know, we would have those volumes which would be ready. So in terms of, you know, demand drivers, you know, there are multiple segments that we are presenting.
Speaker #2: There are multiple segments that we are, you know, additionally also approaching. There are additional product lines. So I mentioned all of this, you know, in previous calls and presentations.
Speaker #2: So the strategy doesn't change any which way, but I think it doesn't matter ultimately which polymer or which blend or which product you go after.
Speaker #2: The demand would have been impacted in all segments. If the volatility remains so much in the uncertainty remains so high, you know, in the eyes of the buyers.
Speaker #2: So if people feel that, you know, in the next 10 days, the price is going to go down significantly or go up significantly, a lot of people would have a kind of a wait-and-watch approach, you know.
Speaker #2: So that segment of that market, you know, would always behave like that. So regardless of what you do, it is always going to be the same situation.
Speaker #2: So our strategy impact has to remain dynamic. To the extent that we have to meet whatever demand is there, we have to make sure that, you know, the raw materials that we procure, we do it in a sensible manner, the most sensible possible manner.
Speaker #2: And, you know, we are able to cater to the demand, you know, which is justifying both the price volatility as well as the acceptance in the market for those kind of prices.
Speaker #2: So as long as, you know, we remain dynamic, we keep decisions which are extremely current with what is happening, and that, of course, has been a lot more volatile in recent times.
Speaker #2: I think that is the only change, if you will, or, you know, modification of our existing strategy. Otherwise, nothing changes.
Speaker #3: Perfect, sir. Sir, last thing, just if you can just share the import situation for ABS and PS, if you have some sense in terms of how you have seen this quarter in terms of the imports of both ABS and PS into India, vis-à-vis the earlier quarters.
Speaker #2: So frankly, Neerav, I don't know if you're aware, but the government.
Speaker #3: You tell we have not been available.
Speaker #2: Has taken a call, you know, where they are not in favor of sharing a lot of import data. Across India. Or export data, for that matter.
Speaker #2: So there are no real channels where this data is easily available. But I think I don't have a very, you know, exact number or exact information which I can provide at this stage.
Speaker #2: But based on our interaction with our customers and, you know, kind of market that we broadly understand, I think, you know, we have not seen any significant variance in imports.
Speaker #2: You know, in the last quarter, you know, it has been more or less similar. You know, for certain countries, I think there has been some challenges in production.
Speaker #2: Because of structural issues, as you know, you know, there is a lot of energy which comes from the state of hormones and also fuel or nafta which comes from there for a lot of the countries which would be, you know, traditional manufacturers or exporters to India.
Speaker #2: So that impact would have been there. And that obviously would result in, you know, kind of some stressful situation for their ability to export to India.
Speaker #2: So and that we have observed as well in the market, where a lot of the players who would have been earlier present had no were no longer, you know, quoting aggressively in the market either.
Speaker #3: Perfect, sir. Perfect. Thank you so much, sir. And wish you all the best.
Speaker #2: Thank you so much.
Speaker #1: Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two to three per participant.
Speaker #1: The next question is from the line of Aditya Ketan from Smiths Institutional Equities. Please go ahead.
Speaker #3: Thank you, sir, for the opportunity and congrats on a good set of a performance. So just a couple of questions. Sir, first is on to if we can provide the split between the OEM and the non-OEM side.
Speaker #3: And also, sir, like as you mentioned, like the demand in the non-OEM side was a bit of impacted. So just wanted to dig it more deeper.
Speaker #3: Like, is it across the clients in the non-OEM side or they were like selective pockets wherein the so there was so resistance to pick up the volumes.
Speaker #3: And secondly, sir, when we look onto the benefits what we have received in this quarter, what would be the sustainable run rate of margins whenever this benefit reversed?
Speaker #3: Like, historically, when I look, we were around at around 10 to 11 around 10 to 12 percent broad margin range. Obviously, this took last two quarters has been quite of an inflated one.
Speaker #3: What would be the sustainable numbers we can work on going at?
Speaker #2: Yeah, thanks, Aditya. So first of all, you know, with regards to OEM, non-OEM, you know, we don't give exact numbers. But broadly, you know, at least on ABS side, you know, our OEM is typically, you know, around 70 percent or a little bit higher.
Speaker #2: And non-OEM would be the balance. And like I said, the OEM sector has some impact, has had some impact as well. But the non-OEM sector is a more significant impact.
Speaker #2: So I think and in the case of polystyrene our OEM, you know, is probably a little bit lower. You know, in the non-OEM would be a little bit higher.
Speaker #2: So OEM probably would be closer to 50 percent. And non-OEM would be the balance. So there, of course, again, there has been an impact.
Speaker #2: So between both the segments, like I said, the non-OEM, you know, has had a much more significant impact. Without being able to give you an exact number there.
Speaker #2: But, you know, you can, I think, very well calculate based on our different volumes what that impact would have been across the two segments.
Speaker #2: As far as, you know, the benefits of whatever has happened, I think this is just a, you know, snapshot in time or specific situation or specific event or series of events which have happened in a specific quarter.
Speaker #2: And it is not indicative of the, you know, the sustainable business of the company. As I mentioned in the past. I think one has to consider whatever happened prior to these events as the sustainable performance.
Speaker #2: And that doesn't change. I think whatever impact we have had on volumes, I think would get corrected once situations normalize. And I think what we saw, you know, towards the end of the quarter, there was some normalization which had come about.
Speaker #2: But again, the volatility remains. As you know, we don't comment on current quarters. Obviously, I specifically and we will not do so also in this call.
Speaker #2: But, you know, there is obviously that normalization which we believe would happen over a period of time. And once that happens, we will be back to the same operational basis which is existed in the past on an annualized basis in the company.
Speaker #2: And that would not deviate from that number.
Speaker #3: Got it, sir. Sir, my second question is on to the Thailand business. Sir, the quarter gone by also have witnessed some higher costs. Sir, it has been six quarters like and the cost is still on to the higher side.
Speaker #3: Any sort of like materials have changed like you mentioned earlier we were looking to reduce the fixed cost too. But that is still not meaningfully visible, sir, in the numbers.
Speaker #3: And secondly, sir, on to the volume side of Thailand. That also looks a quite bit subdued. How should we look, sir, on to volumes for Thailand for FY27, 20 and also for the standalone business?
Speaker #2: So as far as Thailand is concerned, there has been no increase in cost. The costs are where they are. We have not given any specific guidance on any of those costs being reduced.
Speaker #2: either. So I can't comment on that right now. We do believe that it will take some amount of time, you know, for volumes to pick up.
Speaker #2: And obviously, you know, the current climate is not very conducive to giving any indication of when that will happen. I mean, you can appreciate the volatility which exists in the region.
Speaker #2: And hence has significant global implications as well. That it is virtually impossible to give the volume and the demand scenarios given the current scenario.
Speaker #2: So for Thailand, again, very difficult to state. Any of those things. Volume guidance, again, you know, it will entirely depend on how things normalize.
Speaker #2: But I think as a management of this company, our job is to best navigate the current situation and ensure that, you know, we are running our plants to the best of our capability and making sure that our customers are in the best manner possible, which we have managed to do in the past past quarter.
Speaker #2: You know, there has been concerns around energy availability with, you know, fuel being curtailed of course in the interest of the general population, which makes sense.
Speaker #2: There has been issues on supply chain with raw materials. You know, there has been multiple challenges but I think the company has seen through those challenges and, you know, we have still managed to, you know, cater to all our clients to the extent it was required.
Speaker #2: And we intend to do the same thing in the following quarters as well.
Speaker #3: Got it, sir. Thank you.
Speaker #1: Thank you. The next question is from the line of Priyank Chera from Vallam Capital. Please go ahead.
Speaker #3: Hi, Raul ji. Sir, first on the again on you touched upon the demand side. End consumption sectors to which we cater roughly say auto, electronics, households, applications.
Speaker #3: I think they haven't seen that kind of the end consumer demand has not been that down versus what we have witnessed in our volume.
Speaker #3: So I believe this has to do with a lot of OE, non-OE, say inventory or a channel stocking, destocking, whichever happens in the volatile times.
Speaker #3: So what my question essentially is that balance nine months. Should have a very hard catch up in demand, right? I mean, even if we were to catch up for a last year's volume, balance nine months should see at least a high teens of mid teens kind of a volume growth.
Speaker #3: Would you any thoughts on that, sir?
Speaker #2: I think thanks for your question. So again, you know, from what we at this time we speak to our clients. And obviously, there is some aspect of what you're saying is relevant as well.
Speaker #2: You know, where there is some stocking, destocking, you know, in turn, with retailers which could be, you know, our customers' customer if you will.
Speaker #2: But ultimately, I think overall when the prices go up, we do believe there is some impact, you know, at multiple levels. So in some segments, like appliances and all, there has been some impact for sure.
Speaker #2: You know, in auto, I think the effect has been muted. It is not that significant. But across the board, I would not say there has been no impact.
Speaker #2: There has been some impact. And of course, the in our case, that might be slightly more exaggerated. Like I mentioned, because of the non-OE part as well, you know, where the demand is completely dependent on, you know, sometimes on, you know, pricing which takes place from month on month or quarter on quarter.
Speaker #2: So anyway, and especially when there is this kind of significant volatility on normalized price changes you don't see these kind of, you know, gaps.
Speaker #2: But this is a kind of an unusual situation. I think with regards to the next few quarters, again, like I mentioned, we don't know exactly what is going to happen.
Speaker #2: Because uncertainty and volatility continues to, you know, play our systems. I think there is still no clarity on, you know, how things are going to move in the next quarter.
Speaker #2: So I cannot comment on, you know, how that will happen. But if things normalize, we do obviously anticipate that the demand will definitely pick up to the tune of what has happened earlier and we would still we would still return back to the growth levels that we anticipate in the business.
Speaker #3: Essentially, the background to ask was just that because we also compete with, say, imports, that are coming up. So maybe I just wanted to confirm that there is no channel which has, you know, structurally changed the changed its route to imports.
Speaker #3: I mean, there can be channel destocking, stocking in the interim. But ultimately, the volumes has to catch up to the consumer demand.
Speaker #2: No, you're right. It has to. But again, you know, to what extent that stocking, destocking happens, to what extent you know, non-OEM or unorganized sector chooses to manufacture and, you know, keep stock based on the, you know, extreme uncertainty.
Speaker #2: And how those things play out, you know, over the next few quarters is a little difficult to predict unless, you know, you know exactly when the situation will normalize.
Speaker #2: But the underlying demand of the customers obviously, you know, would get some impact also in the face of such volatility. Eventually, when things normalize, we expect that demand to be coming back strong.
Speaker #2: You're already rightly mentioned.
Speaker #3: Perfect. So now when that happens, the we're talking about normalization.
Speaker #2: Yeah.
Speaker #3: When that happens, should the margins settle down higher than whatever they were in the past, right? I mean, the long-term average is whatever we know.
Speaker #3: Should they settle down at a higher level just because, I mean, there would be some supply that would have gone ups and down in the global markets that we our competing with imports and their cost clarity have gone up organically and directionally you are getting into I mean, going into adding a capacities into a higher margin product.
Speaker #3: So some reference on, say, a settlement of the margin levels when everything is normalized.
Speaker #2: I think for the purpose of our analysis, it is best to assume that things would normalize to the same level. And rather than assume that there will be any significant expansion of margins.
Speaker #2: Because there is a lot of volatility again and uncertainty around, you know, when and what will happen in the future. Not like to hazard guesses around that.
Speaker #2: I think like I mentioned, our strategy remains consistent as an organization. Where we are going to, you know, go after the growth sector. And we will go after the additional value added products.
Speaker #2: And obviously, with expansion, we will get whatever cost operating cost leverages that we can get. So the strategy of the company doesn't change. Because from a medium to long-term perspective, you know, whatever events have happened are continuing to happen in the short term.
Speaker #2: Would not have any material impact. And I think for the purpose of your analysis, it would be best to assume that kind of directional basis only.
Speaker #3: Sure, sir. Last thing, you have been a lot conservative then.
Speaker #1: Sorry to interrupt, Mr. Priyank. Can you please rejoin the queue with any follow-up questions? Thank you. The next question is from the line of Rahul Agarwal from Ikigai Asset.
Speaker #1: Please go ahead.
Speaker #3: Hi. Very good evening to everyone on the call. I have three questions. Firstly, on the inventory side, just wanted to clarify a few things.
Speaker #3: Through the quarter gone by, on the finished product side, the demand was low. How did the plants run? Did we produce at full capacity and then anticipating demand will recover into the balance nine months?
Speaker #3: So how is the inventory situation on the finished goods side? In the India business. And on the RM side, I think we would have had some inventory start of the quarter last quarter.
Speaker #3: And then the current situation obviously required for alternate sourcing. Which now I just wanted to know, you know, how is that being sourced? Is that a higher priced inventory now?
Speaker #3: Purely because the transit times are higher, freight rates are higher. Is there some comments on steering monomer and ACM imports in terms of pricing timing availability?
Speaker #3: Second question was on EBS capex. Do I read in the commentary that, you know, this year itself we should start? Just wanted to know the SAN merchant sales from the existing plant.
Speaker #3: Will that completely stop from Jan 27 because of captive usage? And third is just from a pre-war war perspective, we entered this fiscal with a expectation of mid single digit growth in terms of volume as capacities were all running full.
Speaker #3: And the new plant comes sometime in, you know, later in the year. But post-war now, you know, I think we've got some extra bonus and extra cash flow to utilize in the business, you know, in my understanding that's about 100 crores.
Speaker #3: You know, in last two quarters add together. How do you think about utilizing this cash flow better in terms of if there is any option available in the business to, you know, get the business growth higher?
Speaker #3: Those were my three questions. Thank you.
Speaker #2: Thanks, Raul. I think more than three questions, but I tried to answer all of them to the best of my ability. With regards to, you know, inventories, especially on finished goods, I think there is no significant change in the inventories that we have carried in the product.
Speaker #2: Now, if you look at year end, or quarter end rather, between specific quarters, I think our production numbers have been in line with our sales forecast.
Speaker #2: We do believe that whatever sales numbers will come online or, you know, or whatever requirement will be there from the market in the next few quarters, we would be able to cater to that demand based on whatever we need to do.
Speaker #2: With regards to raw materials also, I think we have had kind of a little higher inventory, which we have carried. Because at the end of this quarter, in fact, as opposed to the last quarter, there has been some uncertainty on there was some uncertainty at the beginning because some of our steering monomer specifically used to come from the state.
Speaker #2: Which is no longer an option. You know, so at least in the current climate. We do believe it is normalized, but it may take some time.
Speaker #2: So we have alternate sources. For steering monomer, for instance, you asked specifically, and those sources we have tapped into. So we are fully covered.
Speaker #2: The lead times are a little bit longer. In other for other suppliers, as opposed to the Middle East, which is obviously the closest to us.
Speaker #2: So the lead times can be 10 to 15 days higher from that perspective. And keeping that in mind, obviously, there is a little bit higher inventory that we've carried even in terms of pricing.
Speaker #2: You know, if you look at steering monomer, before the war, it was around $1,000. It went up to almost $1,500, $1,700. It came down to about $1,200.
Speaker #2: And, you know, has moved between $1,100 and $1,400. And since then. So there has been a lot of volatility in steering monomer. April 9th, I landed in all three.
Speaker #2: Butadine, as you know, we buy locally. So there is no real impact as far as the inventories are concerned. But the pricing on butadine also moved up to more than $2,500 from $1,000.
Speaker #2: And it's come down significantly from that peak April nitrile. Also went from $1,200 to close to $1,800, $1,900. And now it's, you know, between $1,400 to $1,600.
Speaker #2: So there has been a lot of movement on all these materials. And that is the pricing trend, which I can give you as of now.
Speaker #2: What is going to happen in the coming quarters is, again, very difficult to predict. It will depend on kind of all these geopolitical developments that we are seeing.
Speaker #2: As far as our ABS expansion is concerned, like I mentioned in our investor presentation, it is online. And we do expect it to be completed accordingly.
Speaker #2: The SAN merchant sales which we are doing are not going to be impacted by this. SAN merchant sales will continue as is. We are expanding capacities on all sides.
Speaker #2: Which is in rubber, SAN, and compounding. To meet the additional capacity expansion requirements. So there is not going to be any impact over there.
Speaker #2: And we will continue to sell SAN. So I think overall in terms of volumes, whatever we may have predicted at the beginning of the year, and the current situation we are in is obviously different.
Speaker #2: You know, if things normalize, can the volumes go back to what we had predicted in the beginning of the year? Yes, maybe. But I think we will have to wait and watch.
Speaker #2: Because there has obviously been some volume which has reduced in the first quarter to what extent we are able to catch up that. And, you know, are able to realize additional volumes in the next few quarters will again depend on how, you know, the entire environment evolves.
Speaker #2: And demand supply situation also. You know, kind of evolves accordingly. So we'll have to wait and watch. And there is not much I can comment on this at this stage.
Speaker #3: And just on the capital allocation, please.
Speaker #2: I'm sorry, on the?
Speaker #3: On the.
Speaker #2: Capital allocation?
Speaker #3: On the extra cash flow. On the extra cash flow which the company earned. Is it a better is there any other incremental thought on that to utilize it better?
Speaker #2: Not really. I think it again, remains in line with our earlier philosophy. So, you know, we obviously try to find the best use for our capital.
Speaker #2: And the most judicious use. So, you know, we don't believe that the company typically doesn't hold on to too much of capital if it doesn't utilize it.
Speaker #2: We have obviously CapEx planned for the year. And that CapEx, along with whatever cash flow we are generating, we try to ensure that, you know, all our shareholders are also fairly treated accordingly.
Speaker #2: We make sure that, you know, whatever resources are required by the company for its growth are kept. You know, in line with that. And whatever cash is not needed is returned to the shareholders.
Speaker #2: So the company's strategy in terms of maintaining its capital requirements, its ratios, has all been very consistent and we continue to do the same thing going forward.
Speaker #3: All right. This is very helpful. Thank you so much. And wish you all the luck for the balance year.
Speaker #2: Absolutely. Thank you.
Speaker #1: Thank you. Ladies and gentlemen, in order to ensure that the management is able to answer all of your questions, please limit your questions to two per participant.
Speaker #1: Thank you. The next question is from the line of Deepak Bodha from Sapphire Capital. Please go ahead.
Speaker #3: Yeah, I'm audible, sir.
Speaker #2: Yes, go ahead.
Speaker #3: Yeah, yeah. Thank you very much, sir, for this opportunity. Sir, I just pricing scenario. I mean, as you mentioned, the current prices are still volatile, right?
Speaker #3: I mean, the volatility that we have seen in our first quarter has continued into second quarter. So has the prices have price level has been higher than what the average we have seen in the first quarter?
Speaker #3: I mean, in terms of volatility, you mean the prices are higher?
Speaker #2: Deepak, are you referring to the current quarter?
Speaker #3: Yes. I'm talking as we speak. I mean, currently in July month or August month. So how is the pricing been as compared to what we are seeing?
Speaker #2: Generally, we do not comment. We do not comment on specific information with regards to the current quarter. But, you know, the like I mentioned, the raw material and the pricing of the finished product normally, you know, kind of moves in tandem depending on, you know, again, mostly normalized scenarios.
Speaker #2: And extraordinary circumstances like that we have today, there can be some gaps which are, of course, short-term in nature. But, you know, we do see obviously some gaps over there, even in the current situation.
Speaker #2: But I will not be able to tell you, you know, whether the price is today higher or lower. You know, because, again, we are in the middle of the quarter.
Speaker #2: And generally, we have to wait and watch because, you know, every week, every day, there are some new changes. There are new news with regards to, you know, what is happening in the state of hormones, what is happening with in terms of raw material pricing.
Speaker #2: So with that kind of a volatility, it is impossible to, you know, give any number. And not that we even frankly give numbers with regards to current quarters.
Speaker #2: But yes, previous quarter's pricing was significantly higher than the earlier quarter. And towards the end of the quarter, that did moderate. And again, there is, like I mentioned, there has been some volatility associated with that.
Speaker #3: Okay, okay. And this gap that you're mentioning, this gap led to a led us to see abnormally high margins, right, in the first quarter.
Speaker #3: Would that be a right understanding?
Speaker #2: Yes.
Speaker #3: Okay, okay. Understood. Understood. That is very helpful, sir. I mean, that would be it from my side, all the way best. Thank you.
Speaker #2: Sure. Thank you.
Speaker #1: Thank you. The next question is from the line of Bhaval Shah from Giri Capital. Please go ahead. Mr. Bhaval Shah? Please go ahead.
Speaker #3: Hello? Am I audible?
Speaker #2: Yes, Bhaval, go ahead.
Speaker #3: Yeah, sorry. My line was yeah, sir. Sir, I would really want to understand the auto sector has done well in this quarter. So were they sitting on the raw material which they buy from, you know, the products which they buy to, were they sitting on the inventory which they would have used up in this quarter?
Speaker #3: Or how would they have managed the demand for the polymer?
Speaker #2: Yeah, so essentially, Bhaval, in terms of production, numbers, and sales numbers don't necessarily fall in line completely for all the sectors. But the production numbers are also available for auto industry and for appliance industry.
Speaker #2: And the production numbers are not necessarily as high for this past quarter. Because the production numbers are more or less, you know, flat. And we have also kind of supplied into the auto sector accordingly.
Speaker #2: Like I told you, the impact on auto sector has been a bit muted. And in the case of appliances, obviously, there has been a greater impact in terms of their production numbers as well.
Speaker #3: Okay, okay. And what sort of inventory do these auto ancillaries maintain typically? You know, for polymer as a raw material. And do they route it via a distributor in between?
Speaker #3: Or do they buy directly from manufacturer? How does it work?
Speaker #2: So most of the auto ancillary units, they buy directly from us. When you're talking about the tier one holders, it's typically we also have in fact, the relationship with the OE, who also specify which grade of our product to use.
Speaker #2: And also the kind of share of business typically which is assigned to us as a manufacturer. So all those things are driven by a formula, driven by a system.
Speaker #2: There could be some smaller volumes which are routed to a distributor from a fulfillment perspective. But I would say large part of the volume is something which we would be supplying directly.
Speaker #2: And I think, again, there in terms of their strategy, it would be changing also from company to company. Because the companies, of course, maintain inventory based on, you know, how much they import, what they buy locally, and also for a specific company, the strategy is different.
Speaker #2: So it's very difficult to give you, you know, an exact number which would be true for all companies out there. But I think if you pick up the kind of balance sheets of some of the listed ancillary companies, I think you'll get a good idea of what kind of inventories they normally carry.
Speaker #2: You know, that's what I would do if I was you. If I was looking at specifically in that sector.
Speaker #3: Yeah. And sir, in terms of the pricing, so did we have a immediate back-to-back pricing with them in terms of, you know, the realizations have gone up a lot in the past quarter for our products?
Speaker #3: So with the customers, how did the pricing happen in such a volatile time?
Speaker #2: So as you are aware, there were a lot of issues, right, with regards to managing energy, which is like the fuel for instance, right?
Speaker #2: There was a reduction by the government on natural gas usage for plants. There was also an issue structurally on the import side. So some of the pricing is, you know, determined based on global pricing markers as well.
Speaker #2: And the global pricing markers also went up because for specific reasons, you know, the pricing had gone up significantly higher. So there is a combination of multiple factors play into here.
Speaker #2: And there was a supply chain disruption. Even on import side, where there was not a lot of material available to be procured. Easily from traditional, you know, competitive sources of material coming into the country.
Speaker #2: So where we were able to still service the customer as per their requirement. And that was adjusted enough, kind of a short-term pricing mechanism which made sure that the customer got what they wanted and we could also transport that, you know, we are able to produce adequately what they need.
Speaker #2: So there is obviously those kind of discussions which take place with all our customers to ensure.
Speaker #3: Okay, okay, okay. Got it, sir. Thank you very much.
Speaker #1: Thank you. The next question is from the line of Krunal Shah from Enam Asset Management. Please go ahead.
Speaker #3: Hi, it is Krunal from Enam Investment. So my question is on the Thailand business strategy. So in India, we saw because of the non-OEM demand decline, that the quarter on quarter volumes decline, if you see.
Speaker #3: But in Thailand, we were probably able to maintain and probably grow also a little bit in terms of the volumes on a QOQ basis as well.
Speaker #3: So just wanted to understand what's the demand environment there like for the Thailand business and the competitive intensity over there.
Speaker #2: Yeah, thanks, Krunal. So as far as Thailand is concerned, as you know, we are not we are operating at fairly low utilization levels on very specific products.
Speaker #2: So the impact for our products per se, for specific areas, was not that significant. I think overall, if you look at demand scenario in the region, also has got impacted just like India.
Speaker #2: There has not been any significant impact. I think our companies specifically for our products in Thailand did not have a huge impact. On volumes.
Speaker #2: We are already operating at a much lower base, of course, because that also must be taken into account in. And but going forward, you know, globally also what we see or, you know, regionally also what we see is similar to what we will see in India in terms of, you know, demand scenario and any kind of demand destruction which can happen due to, you know, significant price increases or demand kind of expert which can happen because of attractive pricing.
Speaker #2: So those scenarios exist globally. They are the same. They don't change much from region to region.
Speaker #3: Got it. And my second question is on the market building activity that you are doing. In the Southeast Asian regions, so how have those changed in the current environment?
Speaker #3: Are we still going aggressively in the new market that we are trying to capture and new customers that we are trying to enter into?
Speaker #2: Yeah, so that activity remains on track, you know. We have seen good feedback. Of course, that feedback has not translated still into any significant volume growth for us in Thailand.
Speaker #2: And that still is something that we are waiting for. The current environment obviously is not a great environment from that perspective because there is a demand reduction across the board.
Speaker #2: Then the opportunity for, you know, getting that new business becomes a little bit more difficult and a little bit more challenging. So that we do see in Thailand as well because or for that matter, you know, if we had massive amount of new production in India and we are already facing a situation where the demand is lower, there is no way, you know, you'll get additional volumes, right?
Speaker #2: So I think this is kind of a, again, specific short-term phenomena which we have to tide over. But, you know, overall, structurally, I don't think anything has changed once things normalize back, even in that region.
Speaker #3: Got it. And if I were to squeeze in one last data point question, what would be the volume of these styrenoid and acetyl acid that we were doing currently on a monthly basis?
Speaker #2: So I think it's about a few hundred tons. Again, we don't give breakup. Like I mentioned, of our products. In the comparative landscape, we are present.
Speaker #2: Nobody does it. So it doesn't behove us to also share such data. But all I can say is that obviously from having zero business, we have definitely moved into say a few thousand tons on an annualized basis.
Speaker #3: Got it. Great. Thank you so much, Arjun. Thank you.
Speaker #2: Thank you.
Speaker #1: Thank you. The next question is from the line of Prerat Gandhi from Suvilo Investment Managers LLP. Please go ahead.
Speaker #3: Hello, hello. Yeah, thank you so for taking the question. So I just have two questions. First was with respect to the bifurcation of the sand production.
Speaker #3: Can you just tell me how much was it used in-house and how much was in merchant sales and what is the mix year on year of quarter on quarter?
Speaker #3: And my second question was with respect to the share of auto EMs and the non-auto mix. So what is the ideal mix which we are targeting going forward in FY27 and in FY28?
Speaker #2: Okay. With regards to, you know, specific breakups, we don't generally share all this information, but whatever sand we produce, again, largely sand is not a very large market, right?
Speaker #2: In India, relative to ADS and say polystyrene for that matter. So relative to the market size, you know, we are, of course, a major player there.
Speaker #2: But, you know, we sell, you know, close to, you know, whatever, 15 to 20,000 tons in a year. And that doesn't change. We have a capacity of sand of close to 100,000 tons.
Speaker #2: So largely it is all used in-house, without giving specific. Settings and calculate that quickly based on the rate I'm giving you. With regards to ADS, again, you know, the split we have always given in terms of auto appliances and rest of the sector, in the current year, I think it will remain that.
Speaker #2: But again, you know, those splits can change a little bit upwards or downwards say specifically between appliances and auto depending on the demand and the growth in those sectors.
Speaker #2: So we do believe that both the sectors are poised for growth. This again, I'm talking in a context of a normalized environment. So in a normalized environment, if that happens, then we believe that both the sectors will grow and it will still remain the same, right?
Speaker #2: If both the sectors grow at the same pace, we expect them to grow. But we'll see. I mean, it depends, you know, how things pan out over the next few years, in the country or a few months in the country as well.
Speaker #3: Right. Thank you so much and all the best for the future. Thank you.
Speaker #2: Sure.
Speaker #1: Thank you. The next question is from the line of Ronak Cheda from Auriga Capital Advisors LLP. Please go ahead.
Speaker #3: Yeah, hi. Thanks for the opportunity. Raul, I have two questions. One is usually in a B2B business, in the terms of crisis, customers tend to, you know, look after their own supply chains and, you know, look for newer suppliers.
Speaker #3: Can you talk about our new business development initiatives in both India and Thailand which may have, you know, kind of benefited from this crisis?
Speaker #3: Have we won new customers? Entered the foot in the door in customers which we were not currently serving? That is question one. Second is on the Capex program.
Speaker #3: You did mention that it's on track. We are four months into this year. Can you not call out the exact time frame on when you think the Capex should go live given that we are nearing that Capex timelines?
Speaker #3: These were my two questions.
Speaker #2: Yeah, so with regards to the supply chain, you know, in the supply chain gets disturbed from a more structural perspective is when you would see, you know, companies really looking for, you know, changing their supply sources.
Speaker #2: Because you see most of the companies that we supply to, they buy not for short-term, but for long-term, you know, usage. Because there is a long speccing process, there is a long, you know, gestation period in terms of kind of new business development from approaching the customer and, you know, developing that customer.
Speaker #2: So you know, you will not have any short-term event triggering that activity necessarily. You will have those kind of activities triggering more from a strategic perspective on part of the customer.
Speaker #2: So if they believe there is a massive structural issue on supply chain, yes, you will have that. And in some cases, we have that, but I think I cannot correlate necessarily what is happening right now with those opportunities.
Speaker #2: So you know, those are coming regardless they came even before. You know, this kind of war broke out and they'll come in future as well.
Speaker #2: So there are no, I would say, any significant benefits per se due to this. As far as new business development is concerned, but yes, there are customers who are looking to expand their supply chain because of other structural reasons which they have seen outside of the current set of events.
Speaker #2: And we are participating over there. With regards to the Capex question, I believe that, you know, we are still kind of very close to doing whatever commissioning that we need to do, but there are, of course, in a running plan where we are doing brownfield expansion and we are doing this kind of, you know, by the current plan is running, there are challenges that do arise.
Speaker #2: And we are working through those challenges. And we are still confident that in this financial year, we would be able to close it. But, you know, if it is a greenfield standalone site, you know, maintaining a project schedule and developing a Gantt chart and giving exact times for execution completion is far more straightforward as opposed to in a running plan because there are other considerations.
Speaker #2: You know, we remain highly committed to safety, highly committed to our environment and all our stakeholders. And keeping all those priorities and considerations in mind, we have to, you know, take calls which are far more dynamic in a running plan.
Speaker #2: So these lead to some challenges where giving an exact month and an exact date becomes counterproductive, right? So it is not in line with our priorities surrounding safety and surrounding our other stakeholders which take precedence over giving a timeline.
Speaker #2: So I hope you can appreciate that.
Speaker #3: No, no. And not asking for a specific date, but I'm just asking you could have could you briefly kind of comment on is it the later part of the year or you would still want to try and see if we can get something in Q3?
Speaker #3: Just broad this thing rather than an open-ended. That is the only question.
Speaker #2: Yeah, so in our chemical plant, where we are talking about a 50,000-ton kind of an expansion, you know, Q3 and Q4 distinction is fairly precise.
Speaker #2: So you know, if I have to keep it broad, I would still say this financial year, yeah?
Speaker #3: Great. No, that's a facility.
Speaker #2: Sure.
Speaker #1: Thank you. The next question is from the line of Bishar Rangadate from Omega Portfolio Advisors. Please go ahead.
Speaker #3: Yeah, thank you for that opportunity. I just wanted to know the polystyrene expansion plan, why is this? Because for pure, if you just, if you get the EBITDA in dollar terms, they are last 10 year median is near about 30 cents per kg EBITDA terms.
Speaker #3: They are 100% ABS. I just wanted to know like as and when your ABS plant will start contributing, so is it fair to assume that our near about 20 cent EBITDA per kg median will reach upwards to reach upwards from that median?
Speaker #3: And the second question would be the Thailand, we did some good EBITDA per kg, just it's not 30 because majorly it's into ABS segment.
Speaker #3: It's not that even the partial EBITDA per kg, is it possible and when we can see that happening? My question is more of a mid-term perspective.
Speaker #2: Can you please define mid-term?
Speaker #3: Three years or so.
Speaker #2: Yeah, so Tushar, as far as, you know, Outlook for the Indian business is concerned, with expansion, you know, we do believe that, again, for the purpose of analysis of our valued investors, it will make sense to assume kind of a similar margins that we have in the existing business.
Speaker #2: You know, it's just that our volumes would increase. And, you know, we will get some advantages like you mentioned already, potentially. But there could be obviously some challenges with competitive intensity in the business as well.
Speaker #2: So there would be a situation where there can be a wash between different factors being played over here. And, you know, that in my opinion is the most sensible view to take, you know, in the long term.
Speaker #2: That is what I mean, for lack of being able to give you any other guidance, that is the guidance that typically give and would continue to do so.
Speaker #2: And, you know, one would calculate in that regard. With regards to Thailand, you know, the cost structure of Thailand is a little bit higher than India.
Speaker #2: So it would not be easy to compare what happens in India with Thailand. However, we do believe that, you know, as far as the volumes are concerned in Thailand, over a period of time, all our efforts to realize and generate more sales would be successful.
Speaker #2: And once we have that, definitely, you know, you will see a much stronger margin profile in Thailand. So it's just a question of timing as and when.
Speaker #2: That would happen. And three year, I think, is a good time where we would obviously also target to do that within that time frame if not sooner.
Speaker #3: Can I question you more on the polystyrene plan? So are you ou interested in more volume growth in polystyrene or focusing more on the ABS front going forward?
Speaker #2: So both the businesses are of importance to the organization. And both the businesses have to be viewed from the lens of what we need to do with regards to customer requirements, organizational objectives, and, you know, context of these capital allocation as well.
Speaker #2: So you know, we have allocated capital to polystyrene in the past. For expansion, which we have done. And we will continue to do so in the future as the business case becomes clear.
Speaker #2: So I think we, as a priority right now, have decided to go ahead with the ABS expansion as we have mentioned. With regards to polystyrene, as and when we have more information, we would definitely share with all our investors.
Speaker #3: Okay, fair answer. That was helpful. Thank you.
Speaker #1: Thank you. The next question is from the line of Vitesha from CNK, UA, please go ahead.
Speaker #4: Hello, sir. Firstly, on the Thailand part, I wanted to understand what is our sales strategy? So we've been saying that the volumes have been constant since the acquisition.
Speaker #4: So what is our strategy going forward to increase the sales in Thailand and also the competitiveness? Do we see Thailand dumping over there?
Speaker #2: Yeah, thanks, Vitesha. So as far as Thailand is concerned, you know, it's been a little bit over a year since we have acquired the business.
Speaker #2: And about a year and six months roughly. So in Thailand, you know, we had some challenges last year, where we had to migrate from the brand, which was of the earlier company, to our brand, which is quite relatively unknown in that region where we supply the material to.
Speaker #2: So in Thailand, we do substantial sales to China, and also to Japan, Vietnam, and within Thailand, not to mention, you know, Indonesia, Korea, and Malaysia, and other regions as well.
Speaker #2: But the sales strategy, as far as our business going forward is concerned, you know, is after transitioning now to our own grade, you know, which has been done with the efforts of our sales team in those regions, the idea is to get more validations done.
Speaker #2: And for those validations, we have obviously a deployed several capable sales team in China, so we have an office in Shanghai, we have an office in Vietnam, we also have our own sales representatives in Seoul, as well as in Osaka.
Speaker #2: And the team is working quite hard to get more validations done and, you know, move the sales along. So all of this takes time.
Speaker #2: You know, validations in some of these countries and some of the sectors that we are present in can range anywhere from 12 months to 24 months.
Speaker #2: So after sales validations, typically the process starts with smaller trial lots, then moving to, you know, bigger lots, then moving to small commercial orders, and then larger commercial meaningful orders.
Speaker #2: So all of this takes time. And we are committed to that process with our teams over there, who are well-versed in the segments that we wish to serve.
Speaker #2: So that will remain exactly how we are saying. We do believe we have a differentiated product profile over there. So while there is significant competitive intensity in that region, especially with huge amount of production capability in China and elsewhere, you know, there is obviously still an interest in our product from Thailand, which remains special.
Speaker #2: And we would get those opportunities with time. So so far, I think everything is as per our strategy.
Speaker #4: Understood, sir. And lastly, sir, you mentioned in your presentation that the ABS expansion is on time for this year. So by which quarter can we expect that?
Speaker #4: And any volume guidance for this year?
Speaker #2: So like I explained in the previous question, you know, we are operating in a complex scenario where we are expanding in a brownfield setting.
Speaker #2: We have running plants. So given that context, I think our teams have done well in terms of ensuring that we are on track with our expansion.
Speaker #2: So it will happen in this financial year, whether it will happen in the eighth month or the ninth month or the eleventh month is something which I would not like to hazard guesses on, because commissioning of these kind of products is a little tricky.
Speaker #2: It takes time. And a lot of priorities of safety, environment, and our obligations in terms of compliance is all of those have to be handled carefully.
Speaker #2: And those remain vital. So you know, it will happen in this year, like I mentioned, exact month will not be possible to give at this stage.
Speaker #4: Yes, sir. And any volume guidance for this year?
Speaker #2: So the volume guidance, we don't give as a company. We mentioned that in line with our production capabilities and capacities, we would be able to sell most of the volume that we produce.
Speaker #2: The first quarter has been very unusual. You know, if someone is to tell me exactly what will happen in the geopolitical environment and the scenario, I can give a very precise volume guidance.
Speaker #2: But I don't think anyone can do that. So unfortunately, it's a difficult for me to give a volume guidance in that scenario.
Speaker #4: All right. Thank you and all the best, sir.
Speaker #2: Thank you.
Speaker #1: Thank you. Ladies and gentlemen, due to time constraints, this was the last question for today. I now hand over the conference to Mr. Chintan Doshi.
Speaker #1: Thank you and over to you, sir.
Speaker #3: Thank you, everyone, for joining us today on our link call. We appreciate your interest and time in the company. We look forward to answering you in the next meeting which will be announced at the suitable time.
Speaker #3: Thank you.
