Bodal Chemicals Limited (524370) Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to Bodal Chemicals Limited Q1 FY '25 Earnings Conference Call. [Operator Instructions] I now hand the conference over to Mr. Ankit Patel. Thank you, and over to you, sir.

Thank you very much. Good evening, everybody. On behalf of Bodal Chemicals Limited, I extend a very warm welcome to everyone for joining us on the call today. On this call, we are joined by our CFO, Mr. Mayur Padhya. I hope everyone had an opportunity to go through the financial results and investor presentation, which has been uploaded on the stock exchange and our company's website. We will give you a quick overview of the recent developments in the chemical industry. And then Mr. Mayur Padhya will walk you through the operational and financial performance for the Q1 FY '25. Global economy continues with uncertain geopolitical events, country-specific economic crisis and inflation. There have been multiple global logistic issues emanating from China as well as Red Sea impacting the global trade. Since last couple of months, we have been experiencing stability in demand for our industry products. It seems destocking position has come to an end and gradual recovery, but at low speed, is there. There is still uncertainty before end of war between Russia and Ukraine, but industry has started living with the circumstances. The 2 major markets, the United States and the Europe, have been still slow due to multiple headwinds from rising inflation to uncertain geopolitical scenarios. Slowdown in China impacting the domestic demand in China, resulting in excess volumes originating from China. Most aggressive interest rates in U.S. causing financial condition to tighten, and recessionary trends continue impacting the demand. We are India's largest integrated manufacturer of dyestuff, dye intermediates and hold a meaningful market share in the world. We also have basic chemicals, caustic soda and recently new product group is added, which is benzene downstream products. In today's environment, where Indian suppliers are emerging as preferred partners globally, we have been able to hold our leadership position. Coming straight to our operational performance. During the Q1 FY '25, company achieved total revenue of INR 424 crores, growth by 24% on year-on-year basis and 6% on quarter-on-quarter basis, mainly led by volumes. This is consecutive second significant quarterly growth. It indicates recovery and management expect it to sustain. The absolute EBITDA stood at INR 37 crores, 19% growth on year-on-year basis. Interest, depreciation and other overheads has increased at the company level on capitalization of Saykha's Benzene downstream project. On the other hand, there was negligible contribution by this project at top line level due to the quality stabilization process. Hence, the increased overhead offset partial profitability of the other divisions. Our standalone profit after tax stood at INR 1.14 crores and consolidated loss after tax stood at INR 1.17 crores. Coming to Dye Intermediates. At present, Dye Intermediates, like I said, vinyl sulphone pricing has been stable, giving chance for recovery. For Q1 FY '25, total revenue from Dye Intermediates stood at INR 136 crores, a degrowth of 6% on quarter-on-quarter basis and growth of 46% on year-on-year basis, led mainly by volume. Vinyl sulphone and H acid prices were INR 227 and INR 431 per kg, respectively, in Q1 FY '25. Being an integrated dyestuff manufacturer, we produce major dye intermediate products, and about 40% of these intermediates capacity is captively consumed, resulting in a cost advantage for our dyestuff products. The balance capacity of Dye Intermediates is served in both domestic as well as global markets. Considering the improvement in volume, we are hopeful this division will deliver a better performance in coming days. Coming to our dyestuffs. Revenue from this business for Q1 stood at INR 135 crores due to better volume. The revenue growth in dyestuffs was 18% on year-on-year and 15% on quarter-on-quarter basis. Coming to Basic Chemicals, about 50% of our basic chemicals are captively used for Dye Intermediates. Our overall basic chemicals contributed around INR 40 crores for Q1, which grew by 16% year-on-year and 15% quarter-on-quarter basis. Coming to the Chlor Alkali business. During Q1, Chlor Alkali business has reported a revenue of INR 78 crores, growth by 12% Y-o-Y, led by volume growth of 14% year-on-year basis. Also, revenue grew by 15% and volume grew by 11% on quarter-on-quarter basis. The company is expecting further volume growth in coming days with anticipation of better chlorine consumption by surrounding CPW units, including a new unit. The prices are stable and looking forward positive demand in the end use industry in medium term. Global caustic demand remains balanced and India remains net exporter of caustic with surplus capacity. Our Saykha Greenfield Project has commenced its commercial production of benzene downstream products and achieved the required quality norms by now. Due to negligible scale of production, this unit has not contributed to the revenue in Q1. The company expects quality and production to stabilize by Q2 FY '25, and meaningful contribution in top and bottom line from this project will be in the second half of FY '25. Sen-er Boya, which is our wholly owned subsidiary company, is located in Turkey, and Turkey as a country is experiencing hyperinflation. During the quarter, due to AS 29, there is INR 2.4 crore loss and same is already a part of this declared result. Chinese and Indonesian subsidiaries have performed satisfactory. We have been moving up the value chain and working relentlessly towards diversifying the business from our core dyestuff and dye intermediates business towards the specialty and chemical capital products like benzene derivatives. Manufacturers and exporters in India are having a challenging time managing the overhead cost. Over the years, chemical industry has seen a transformation. Long-term story of India remains intact and the chemical industry is poised to grow from here on. Thank you. And now I hand over the call to Mr. Mayur Padhya to walk you through the financial performance.

Good evening, everyone. The overall performance of the company has been satisfactory for the quarter gone by. Our stand-alone performance for Q1 FY '25 is as follows. Total revenue for Q1 FY '25 stood at INR 421 crores. EBITDA stood at INR 39 crores in Q1 FY '25. Net profit after tax for the quarter stood at INR 1.14 crores. Our consolidated performance for Q1 FY '25 is as follows. Total revenue stood at INR 424 crores for Q1 FY '25. EBITDA stood at INR 37 crores for Q1 FY '25, with a margin of 8.7%. Net loss after tax for the quarter stood at INR 1.17 crores for Q1 FY '25. Division-wise performance on a consolidated basis for the Q1 FY '25 are as follows. Dyestuff revenue stood at INR 135 crores. Dye Intermediates revenue stood at INR 136 crores. Basic Chemicals revenue stood at INR 40 crores. Chlor Alkali revenue stood at INR 78 crores. Total production volume on a stand-alone basis for Q1 FY '25 as follows. Dyestuff reported 4,504 metric tons. Intermediate reported 6,124 metric tons. Basic Chemicals stood at 56,469 metric tons. Chlor Alkali stood at 22,262 metric tons. With this, I conclude the presentation and open the floor for further discussion by way of question and answer.

[Operator Instructions] Our first question is from the line of Aditya Khetan from SMIFS Institutional Equities.

Sir, my first question is -- sir, on to Basic Chemicals, sir, any particular reason that this quarter, the revenue growth has been around 15% on Y-o-Y basis and almost 15% on sequential basis? I believe the realizations have gone up. So any particular reason why the Basic Chemical realizations are going up?

So there are some volume improvements in a product called thionyl chloride. That is one of the reasons why the volumes have gone up and realizations have gone up.

No sir, the volumes have been flattish, but the revenue has gone up. So realizations have gone up, so...

For time being, the finished good prices were a little higher, I think that would be the main reason.

It's a very negligible amount as far as total revenue is concerned.

So this increase in Basic Chemical prices is also a hint that the commodity prices are now inching up. So our basic RM prices also would start to move up?

No. See, when we say Basic Chemicals, it includes mainly sulfuric acid, it's derivative and thionyl chloride. And when we say 15% improvement, that comes to hardly INR 5 crores. So in a company with a total revenue of INR 424 crores, INR 5 crores is a negligible amount. So it does not reflect what you are considering. There are other raw materials like caustic, aniline oil. These are the big raw materials, which affect particular raw materials pricing for our dye intermediates. So there is no upward trend as far as raw materials are concerned. And on the other way, some cooling of pricing in aniline oil has been experienced.

Okay. Okay. And sir, sir, on to the benzene derivatives, so we have not booked any revenue for this quarter. So sir, what the issues have been related to quality. So has the issue been now resolved? And sir, what was the reason like we had -- so we had booked the overhead cost, higher depreciation, higher finance costs. When the revenue is not booked, then how come the bottom line numbers are being looked like. I wanted to know on that part.

See, as per accounting standard and auditor's requirement, when [indiscernible] the production, at that time, we need to capitalize the plant. So in March, we were in a position to start the production, and we have done some production also. But after that, as you know, there are 2 foreign technologies involved. One is [indiscernible] from Germany and another is [indiscernible] from Switzerland. Wherein as per contract, they are required to make up for production of the required quality. And we do not want to go in the market with, in a way, substandard quality. So it was our focus and the technology supplier's obligation to achieve the required quality. So for that, this process time was there, and that's why we have not done much production. And our focus was to stabilize the quality. So this is another technical thing. So that's why we have capitalized in March, but there was not any significant production, and that will start from this month onwards.

Okay. So sir, like for FY '25, how much utilization numbers? And what revenue are we targeting from benzene derivatives?

See, we have mentioned in our presentation also, we are expecting that during this quarter, quality has already been stabilized, so production will also get stabilized. So we will get half year for production for current year, and that half year can contribute INR 100 crores to INR 125 crores, that much top line we can expect if we remain even conservative and say about 60%, 70% utilization of plant is there. So this number we can expect in second half of current year.