Styrenix Performance Materials Limited (506222) Earnings Call Transcript & Summary
February 11, 2021
Earnings Call Speaker Segments
Ladies and gentlemen, good day, and welcome to the INEOS Styrolution India Limited Q3 FY '21 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjeev Madan from INEOS Styrolution India Limited. Thank you, and over to you, sir.
Thank you. Dear shareholders, investors and analyst fraternity, we welcome you to this earning call. Your company, INEOS Styrolution Limited, has declared its results for third quarter and 9 months ended December 31, 2020, on 10 February 2021. We will brief you about the major highlights of the performance. Regarding quarterly performance. Revenue net of GST from operations in the current quarter is INR 48,483 lakhs as compared to INR 33,968 lakhs in October to December '19 and INR 39,458 lakhs as in previous quarter. Profit before tax in current quarter stands at INR 13,526 lakhs as compared to loss of [ INR 437.6 lakhs ] as in October to December '19. However, loss before tax and exceptional items, it was INR 581 lakhs. And profit before tax in previous quarter stands at INR 5,507 lakhs. Regarding year-to-date performance. Revenue net of GST from operations stands at INR 99,494 lakhs in YTD December '20 as compared to INR 122,000 lakhs in YTD December '19. Profit before tax in YTD December 2020 stands at INR 15,962 lakhs as compared to loss of INR 2,239 lakhs in YTD December '19. However, profit before tax and exceptional items, it was INR 1,557 lakhs. Now regarding quarterly segment performance. For specialties, profit before interest, tax and other unallocable expenditures stand at INR 10,402 lakhs in current quarter as compared to INR 3,529 lakhs in previous quarter. Polystyrene profit before interest, tax and other unallocable expenditure is INR 3,348 lakhs in current quarter as compared to INR 2,154 lakhs in previous quarter. Company has elected to exercise the option permitted under Section 115BAA of the Income Tax Act 1961 as introduced by the Taxation Laws (Amendment) Ordinance, 2019. Accordingly, the company has recognized provision for current tax for the 9 months ended December 31 [indiscernible] its deferred tax basis and rate prescribed in the said section. The full impact of this change has been recognized in the financial results for the quarter ended [Audio Gap] certification and details about our financials. Now we can go forward for the queries or any other clarification which are needed. Thank you.
[Operator Instructions] The first question is from the line of Rushabh Sharedalal from Pravin Ratilal Share and Stocks.
Just had one question pertaining to the revenue growth and the profit growth. So we have seen a significant growth in the revenue as well as the profit. Just wanted to know that how much of it is actually sustainable in the quarters to come, if you can just throw some color or light on that.
Yes. It's Sanjiv. Actually, I'll take this question. So both revenue and the profits are related to what happened in the market inventory. So this [indiscernible] the global market, both for ABS and for polystyrene. And we have seen over the last 1 year, the prices of ABS going up very dramatically. How long this sustainable value, it's difficult to tell for us. And same, we are seeing for the margins, which have kind of improved a lot, very difficult for us to predict how long this can sustain. But for now, the business is in good shape and we are enjoying the margin.
Yes. But if you can just repeat yourself as to -- you said that this profit -- revenue and profit came from somewhere. But I just lost your line there. So if you can just repeat that portion, please.
So profit has come because of high margins, right? Margin is the difference between your selling price of your -- of ABS and the cost of your raw materials, yes? So those margins have improved significantly over the last 1 year. And how long that will be sustainable is very difficult for us to forecast.
The next question is from the line of Vaibhav Badjatya from HNI Investment.
So I have a couple of questions. So one is that in our presentation, we have reported polystyrene and specialties, they are 2 different things. So since most of our specialties business, is polystyrene uses as a raw material or it is something else?
Sytrene is a basic raw material. And polystyrene and ABS and SAN are the end products that we sell in the market.
Okay. Styrene is a basic raw material.
Yes. Styrene, along with acrylonitrile and butadiene rubber, yes, which is used for ABS.
Okay. So basically, polystyrene is not used in any of the other specialties...
No, polystyrene is an end product in itself.
Okay. Got it. And sir, you have earlier said that the prices of ABS have gone up dramatically in last 1 year or so. So can you just explain a bit actually what is -- what are the various driving factors of ABS? And who are the other global players that they shorted in some other markets and that's why the ABS price has gone up? Actually, what is driving this sharp run-up in ABS prices, if you can explain that?
Yes. We've seen a steep increase in prices of ABS post COVID globally, predominantly driven by Asia, and within Asia, by China, yes? So right from February, March onwards is when China kind of recovered. And soon, [ we recovered ] half of this year. The overall goods market, automotive market in China picked up very fast during the course of 2020, and of course, India in the half of 2020, which has resulted in a very strong demand for ABS in China and which has influenced the overall prices in India and globally. I mean, it also depends on how much this capacity [indiscernible] the demand should be. The capacity addition will [indiscernible] on ABS. But demand-supply has led to high prices driven by China, yes.
Okay. Got it. And as far as I understand, most of our raw materials are linked to the oil prices. So do you think there are some -- on the -- on one side, we have witnessed good pricing on our finished products. On the raw material because of some kind of maybe lag effect or something, the prices of the raw materials still subdued. And that's why on the [indiscernible] side, we have -- we have benefited significantly. Is it the case?
So prices on some of the raw materials, like ABS prices increased more dramatically than the prices of styrene. Styrene is one of the key raw material for us, right? Though the styrene prices also kind of doubled in the span of last 1 year, but ABS prices went up nearly 2.5x, right? So that has made a kind of a difference in the margins here.
Yes. And sir, lastly -- so we -- in terms of the prices at which we sell our products, so we have the contracts with the customers, which, as far as I understand, the contracts provide for a direct pass-through of the fluctuations in the raw material prices. So can you explain a bit more as to what is the lag impact there? And what raw material -- what period of -- like, for example, the current prices are based on raw material prices of the previous months. Or how does it work in terms of -- so that we can understand the lag effect, if there is any, in the short-term numbers.
Yes. So we do have contracts based on [ n-1, n-2 ] prices for last 2 months, right? Because most of the OEMs, they already... [Technical Difficulty]
Sir, sorry, the audio is breaking from your line, sir. Please check.
Is it any better now?
Yes.
So the prices are based on the previous [indiscernible] prices, right? So typically, it's [ n-1, n-2, ] yes? And in some cases, we also have quarterly prices with some of the OEMs. And we have a blend of both contracted customers and spot customers.
Right. And what is the -- and basically then, what is the processing time in terms of -- from the time we procure the raw material to the delivery of finished goods, what is that duration? Is it less than a month or 2 or it is more than a month or 2?
[indiscernible] in India, so it's procured from other parts of Asia. So there is a timeline associated with that of us purchasing and the shipping time and receiving, et cetera. Then there's a [indiscernible] time and then we also have lead times with our customers, right? So typically, it will be kind of a 2-month time frame.
Right. Okay. So basically, if it's 2 months' time frame, then technically, I mean, you have some match on the pricing of the finished product and the pricing of the raw material. So is it my understanding correct?
So what is the question?
So basically, I just wanted to understand that if -- so today, if they are supplying to a customer at x prices so that x price is dependent on the price of the raw material, which was prevailing, say, 2 months earlier, right?
Correct, a month earlier or 2 months earlier. That's correct.
Yes, or 2 months earlier. And we -- and given our processing cycle, we are anyway much have procured the raw material 1 month or 2 months earlier. So it is pretty much a match in terms of the price that is there in the contract and the price at which we actually acquire the raw material.
That's correct. But this is not true for all customers. Like we have a blend of contracted and non-contracted customers, yes. So...
Got it. And for non-contracted customers, the current pricing is what is [indiscernible]?
That's typically based on what the market prices are, yes.
The next question is from the line of [ Dilip Mehta ] from [ Suncity Advisors ].
My first question is regarding the capacity of the company. Can you tell me what is the installed capacity? And what is the capacity utilization for this quarter and likely for the coming quarter? And is there any capacity expansion is going on, when it will be completed? And how much it will contribute to [indiscernible]?
Well, our nameplate capacity for our plants is about 28 kt. And our Moxi plant has a capacity of 100 kt. And as and when we have plans for future investments, we'll let you know.
So it is 128,000 tonnes per annum?
That's correct.
Okay. Is any of this capacity is used for the final product or it is a cumulative capacity?
So the Moxi makes the final product while the [indiscernible] raw materials.
Okay. And what is the capacity utilization currently going on?
Well, typically, we don't run the plant 100% based on the nameplate. So it's a factor lower than that. We don't generally disclose the exact number.
But in general terms, sir, what you can...
All I can say are our assets are well utilized. That's all I can say. We normally inform the shareholders on the nameplate capacity only, not the exact utilization percentage.
And what is the capacity expansion going on?
If there's any expansion plan, we will inform the shareholders.
So sir, in the last annual report, there were some INR 100 crores CapEx [indiscernible] work in process. So is it not for the capacity expansion?
It is. Those were to do with the technical study expansion.
No, sir. This -- sorry, this INR 100 crores which you are talking about was related to Moxi. And then which was...
That's correct.
[indiscernible] already capitalized. So that amount is included in this 128,000 tonnes?
That's correct.
The second thing is regarding the margins because INEOS being the market leader and pioneer of this product. But your margins are less than the competitor. There is only one competitor, India-known competitor, Bhansali. So in their Q3 results, they have own some 45% EBITDA margin whereas INEOS has given a 30% margin. Can you explain why we are operating at a less margin?
Yes. We have a good blend of both contracted and spot customers like I was mentioning earlier to one of the questions. And obviously, we don't disclose out that ratio. And apparently, that ratio is different for the competitors.
[Operator Instructions] The next question is from the line of Samir Rachh from Nippon India Mutual Fund.
Sir, my questions are not [indiscernible] questions. So I just wanted to get some sense that how our parent looks at India as an opportunity. Our company has been around for many years. And somehow, I think its performance has been subpar. So what are the reasons for that? And is there something likely to change in future with taking some higher interest in the company? That's question number one.
Well, all I can say that INEOS is looking at Asia as a region for investment. They announced an investment of an ABS plant in China. And needless to say that India, China are 2 of the largest economies. So India and the growth of India is surely on the radar screen.
So can we expect some bigger things from them in the years to come from the way they announced in China?
That is something for the parent company to decide. I cannot make a comment on that. But all I can say is if India is a growing market and with the results that we have and the business performance has to be a sustainable business performance, surely investments should follow.
And sir, if I look at our history of our performance and the way our competition has gone ahead of us despite being a global leader, does it say something about the past performance? And I'm sure -- I mean, you are not responsible for that. But when I look back and look at lost opportunity, and I think we still have a lot of room to cover lost ground. So what do you feel about the overall opportunity in India? And what will be your plans to like recover the lost ground over the year?
Well, like I said, India, we have a very good brand for different markets. We are betting on some specific segments based on our Triple Shift strategy. We believe that some of the segments will really play for us going forward, automotive, in particular, okay, the high-specification segment. So there are times when you have to put -- you need to have some period of patience. And we've had lesser profits in some of the years for various reasons, okay? So there were times when we have had inventory losses because of the tough supply chain, the dramatic fall in international prices, so -- and then we had to take some other exceptional item hits, different reasons associated. Having said that, we see the future to be bright. I think India has recovered well post COVID. And with the government's focus on making manufacturing more predominant as part of the GDP in India, the so-called [indiscernible] in India, I expect overall market to improve. And for us, accordingly, we should be able to grow our business profitably going forward.
Sir, third and last question from my side. Like I believe we have enough land at some of our sites for future expansion. Like is that like understanding correct?
Could you repeat your question?
Yes. So I believe that we have enough land at some of our sites for future expansion. So is that understanding correct?
We have a piece of land in Dahej, which is not utilized.
Okay. That's only surplus line?
And that's not the biggest issue, right? The biggest issue is the business profitability and the growth in India. Because then you can always pursue it, right? And if you want, you could go greenfield, yes? So we do have -- surely having the land always helps with the whole process. But that's not a concern here.
The next question is from the line of Raj Kumar from Green Portfolio.
Sir, could you like to provide some light on what are the status of the K-Resin product launches in India?
Can you repeat? What are the...
Status of product launches of K-Resins in India, K-Resin product.
Yes, correct. So K-Resin has been launched in India. And we sell a few thousand tonnes of it already in India. And we expect to improve in the coming years.
Okay. So how much is it going to contribute to revenue?
It's less than 10% of the revenue. That's what I can say.
Okay. So will it improve or it will rebound?
Sorry?
Will it improve or it will rebound?
Difficult for us to say. Our job is to grow all the different products that we have, K-Resin included.
Okay. Sir, I just want to know that how much toy manufacturing industry contribute to the revenue?
Toy manufacturers are one of the customers for us. And I do believe that manufacturing is an area of focus from the government. So it will surely help us as well.
Okay. Sir, actually, I just want to know, automobile is a greater component of the revenue. So that's why I was asking if toy manufacturing will improve. Because in the earlier con call, we were asking about that it will improve.
Yes. So automotive still is one of the biggest areas, right, and much more structured. Toy manufacturing [indiscernible] position and also to some more directly. But that's an area which will improve going ahead, so will automotive, so will household, so will the electronics segment. So all segments are supposed to grow in India, yes.
Okay. Sir, the next question, as you -- that the prices of the products are improving very fast. So will this price be sustainable or the demand will come from more on the side of the volume?
It is very difficult for me to predict how sustainable the prices are going forward. But from our side, the efforts are to maximize our margins and improve our profitability to price to the market.
We'll move on to the next question from the line of Shivan Sarvaiya from JHP Securities.
A couple of questions. Sir, one is the inventory gain for Q3. Could you just give some color on that?
Yes, could you repeat your question?
Yes, sir. So I just wanted to know what were the inventory gains for Q3?
Sanjeev, can you take that question?
Yes. So for Q3 inventory gain, I mean, I will not say very significant, although because in the last quarter, we all know that the inventory was not very high from that perspective. But yes, overall, around, I think, INR 10 crores approximately, you can say that.
Okay. So sir, going forward, if these are normalized profits, then we expect to maintain these gross margins over the next couple of quarters?
Like I explained earlier, it's very difficult for us to predict. Because the margins are dependent on what happens with the [indiscernible] and the prices of ABS, polystyrene, which are driven by the overall demand -- supply-demand situation globally and in APAC as well. So it's very difficult for us to predict. But like I said, we are in a good position right now and we'd like to maximize margin and keep improving our product mix and segment mix going forward.
Okay, sir. And one other question was on the sourcing of raw materials. So you've mentioned there are some container shortages, which we have been experiencing. So sir, if you could give some color on that.
The container shortages between Korea, China and the whole APAC region, predominantly driven by the shipping lines, where we saw the prices of some of the containers going 4x, 5x than the normal container costs. And even if people who are prepared to pay 4x, 5x higher, the containers were not available. So there was a supply-demand issue happening in the China, Korea, that side. That has improved over the last 2 months. And we expect the situation to get normalized in a month or so.
Okay. And sir, if you could, since we faced a lot of issues in our raw material procurement, is the company looking at backward integration to manufacture the product within India? Is that a possibility going forward?
That's varies because the key [indiscernible], like I mentioned, is styrene. And for styrene, the total demand in India is about 1 million tonnes. And for 1 million tonnes, you would put a multibillion-dollar kind of a plant, which is a very, very, very big step. So as of now, we have no such plans.
The next question is from the line of [ Anuj Jain ] from [ Globe Capital ].
Congratulations for a great set of numbers. I have broadly one or two questions. One, I just wanted to understand how is the demand scenario on ground, I mean, which we have seen in the last quarter from October to December. So how it is panning in the month of January and until now February? So how is the demand scenario on the ground?
Yes. We see the demand to be pretty good. You see a very big V-shaped recovery last year, right, across -- when you look at the automotive number, the household electronics numbers and in general, the refrigerators sold, the air conditioners sold. Everything was up 30%, 40%, 50% share. Automotive was up nearly 35%, 40% in some cases. Now -- but they have come down double digit, I would say. I just look at the SIAM data, it's still double-digit number for two-wheelers. And based on the forecast, I still believe the next 3 to 6 months should be pretty strong. Look, none of us can predict what happens in India, right?
Yes. But I mean just a normal business scenario.
Yes. Directly, it's sustainable.
Okay. And the other thing is not -- I mean I just want to understand how -- I mean about the -- on the inventory side. I mean how you are managing -- I mean what are your plans on managing the inventory side? Because the raw materials, styrene and ABS, are on a pretty high level. So I mean what kind of -- how much inventory you are maintaining? I mean what is the pricing we are maintaining?
Well, we typically try to maintain a month's inventory, okay? How much hindsight...
1 month is a normal scenario, in a normal business scenario?
Yes. You would have it in a month [indiscernible], okay? And so there's always a bit of a concern, what if the prices decline, correct, which just happened in the past. At times, [indiscernible] suddenly drops for raw materials. And that's why some of the contracts come into play. Because when the market prices drop, your contracted customers still value and respect the old prices based on your contracts. It's in the formula. While the spot prices, if I go to the market with the spot price, I may not be able to realize the complete raw material costs. So our take on this is balance it with -- have a very balanced portfolio, both contracted, non-contracted customers, number one; number two, try to keep your inventory all the better and have a very accurate forecast planning from our sales guys, right? Because inventory is in relation to what sales forecast you have and depending on the different raw materials. So those are the kind of levers that we use. But the supply chain as such, right -- because styrene is not manufactured in India, butadiene, probably lesser, right? Because butadiene, now we have manufacturers in India. You have IOC, OPaL, right? These guys make butadiene, so we can source locally. So there's no need to carry a month's inventory, correct? Because you can source it here in India. But acrylonitrile, styrene, you need to get it from other parts of Asia.
The next question is from the line of [ Ayush ], individual investor.
Congrats on a good set of numbers. So what was our volume growth during the quarter?
What is?
Year-on-year versus quarter 3 of last year.
We generally do not disclose volume numbers. I think we disclosed the revenue numbers, but it was double-digit growth.
Double-digit growth. Okay. And because our new capacity, I guess, almost 30% capacity came in last year. So at least on the volume side, can we expect a double-digit growth going ahead?
We hope so.
Yes. And sir, just wanted to understand, so what were the ABS spreads during quarter 3? And how have they moved in January and February?
So ABS prices were more like INR 2,300 kind of levels, [ INR 2,230 ], around INR 2,300. And they are at around INR 2,000 levels right now. So it went up from INR 1,800 levels to INR 2,300. And they are at INR 2,000 levels right now.
So actually, I'm talking about the spreads, not the prices, the spread between our ABS and raw materials.
The spread is also pretty healthy.
So it has continued to be healthy in January and February?
I went on February. January, you can check the data on ICIS between ABS and styrene prices, but spread is healthy.
Okay. And sir, on the LG Chemicals, has the plant restarted?
To the best of my knowledge, they have not restarted.
Not restarted. Okay. And lastly, what kind of capacities are coming in ABS over the next 1 year?
We do understand that there's at least 500,000 tonnes coming in China in the next 1 year.
The next question is from the line of Vaibhav Badjatya from HNI Investment.
Yes. About the mix of contracted and non-contracted customers, so you also said that it is somewhat different than what the competitors have. So is it like our mix towards non-contracted customers are higher than our competitor? Is it the case?
Look, all I can say is we have a mix of contracted and non-contracted customers.
Yes. But I think earlier, you indicated that the mix was higher. So I just wanted to -- I missed those comments. So I just wanted to confirm.
I think I've said that we have a good mix. Our mix is probably different than what the competition's mix is.
Okay. Got it. And on the polystyrene, there is this antidumping duty. And on the top of it, LG Chemicals -- LG plant has got there. So what's your current sense on the margins there in that segment? Is it here to stay? Or you are seeing some kind of new capacity coming in somewhere within India to put pressure on margin? What's the sense on the margin trend in that segment?
Are you talking about antidumping duty for polystyrene?
Yes.
That has not been implemented yet. And there was a recommendation made by the DGTR to the finance ministry. And eventually, it has not happened. So that's something we are observing very carefully. And also there were delays due to the COVID, right, in this whole process. So that's something that we expect should happen. LG Polymers, like I mentioned, to the best of my knowledge, they have not started. So the supply-demand scenario is healthy. I have read that Supreme, in their annual report, talked about adding new polystyrene capacity in a year or so. So that's the information we have here.
The next question is from the line of [ Gupta ], individual investor.
My -- I have just two questions. One, of course, there are certain questions around capacity addition. And my understanding is that you had commissioned a study a couple of years back to be evaluated if it's sensible to go for us for the expansion or not. I just wanted to understand what's the progress on that, number one. And number two, can you throw some color on exports? Is that a strategy at all for the group or you're concentrating more on domestic?
So from a study perspective, yes, we have done some studies. We have the kind of cost analysis of what's needed to make investments in India. The business has made no decisions yet on the investment plans. Because of COVID, we had a very unprecedented kind of time, where you're not sure what's going to happen with demand, what's going to happen with India as a country, right, globally for that matter. So I think everyone's kind of -- is kind of still recovering. After the COVID, we are all glad that things have improved for India. And let's see if we can have good, sustainable, profitable growth, not just for us but for all the segments in the country in general, the GDP. And as and when applicable, if the economics make sense, the company will consider the investment, yes.
Okay. And how long does it take, what's the period of time? You said that everything right on the capital expansion?
It takes a couple of years, right? Like it's the [indiscernible] decision, it takes a couple of years.
Okay. And my next question was on export. Can you throw some light on that?
Yes. I do understand that on the products that we sell, polystyrene is exported by one of the competitors. We don't have any plans to do our export of polystyrene. Obviously, because [indiscernible], right, their demand -- the Indian demand is pretty good. On the ABS side, again India is short of ABS. [indiscernible] India's demand is imported. So there's no reason for yet to export until unless you get much, much higher prices than what you sell in India, which is not the case because these are the prices [indiscernible] based on the global prices. So yes, to answer you, ABS, we also do not have plans to export as of now.
Okay. Can you give me a rough sense of the market share, if you could, please, at a high level, your market share in the domestic market?
Our market share would be higher than 30%.
The next question is from the line of [ Nitin Kapur ], individual investor.
Yes. Sir, can you hear me?
Yes, we can hear you.
Yes, sir, I just wanted to confirm, in the statement, you have said, we expect that ABS and the styrenics market to get long sometime this year. Sir, can you elaborate on this? What can I infer from this?
So today, it's a sellers market, right? It's very short, correct? The prices are very high. But in due course -- I mean they're not going to have these kind of margins and prices, right, sustained for whatever happens. Oil prices never stay at $120 or never say at $48, right? $48 becomes $50, becomes $60, right? It's only the price of diesel and petrol that goes one way. They keep going up.
So the meaning is that get long. What's the inference from this? To get long sometimes, does long means normal or what?
Long means -- yes. So long means the supply-demand situation, so it becomes more of our buyers market, yes?
Okay. Right, right, right. And secondly, sir, just one more question. What's the scope of -- what this is -- you don't have any expansion plans. And what I understand is that your capacity utilization is still quite high. So from where the future growth is expected in the company?
Well, we do have -- being a multinational company, we do have our sister plants in other parts of APAC and in globally which can support the growth in India.
Sir, any fresh products that you plan to produce in India, sir?
We do keep new products, some health care-related [indiscernible] in fact, not just in India, it's also meant for some of the other air purifiers and other materials which are used during this COVID time, yes. So we keep identifying new areas predominantly on the health care side, where we can specify some new products. Now not all those new products are made in India yet. We start with imports. And later, we can always look at them as the market becomes bigger.
The next question is from the line of Shivaji Mehta from Nippon Mutual Fund.
Sir, you mentioned Supreme will also be adding some capacity as per their annual report and also LG, once their capacity kind of comes back after some time. How do you really see the supply-demand scenario shaping up in the next few years?
So we are going with these assumptions, right? So the two assumptions you are making is whatever Supreme has, they will do. And number two, assumption is that LG will come back, right? So I think we'll have to, first, if both assumptions come true, then we are talking about 80 to 100 kt coming from Supreme and another 70 kt or so coming from LG, correct? Then of course, the supply will again become higher than the demand because the demand in India is around 250,000 tonnes for polystyrene. So the scenery will change. But again, these are assumptions, we'll have to just wait and see what happens in the coming 1 year and then take it from there.
Sure. So also, what would be the price difference between, say, the contracted customers and non-contracted customers?
We don't disclose those information, sorry.
Sure. If you could also help, how would the end user industry be spread for us in terms of revenue? Is that something you could share?
Well, like I said, the segments that we focus on are automotive, household electronics, of course, toys, and then emerging segments like health care, where we can get more high-value products. Construction is one segment that we are focusing on. And yes, so we have -- we try to play in most of the segments, more so in some segments than the others. And I mentioned a few times like automotive is key for us.
The next question is from the line of [ Ayush ], individual investor.
So actually, I'm coming back to my previous question. So I was asking you what kind of capacities are coming in? And you mentioned some 5 lakh tonnes is coming up in China, right?
That's correct, for ABS.
For ABS, so what kind -- so what is the average demand growth for the industry for the year? And how much of the supply can be absorbed basically?
Well, the demand in India is more 250,000, 300,000 tonnes for ABS, right? And then you can take a double-digit growth.
No. But I guess global demand and supply will affect prices, right? So I'm talking about globally. So with the...
Good question. I forgot to remember the global demand outside of -- I would say about 30 million tonnes of ABS. I have to check on that.
Okay. So basically, my question is are the capacities that are expected to come over the next 1 or 2 years, can they be absorbed by the demand or it is significantly greater than the demand?
No. A lot of capacities are announced. And which of them actually come through, it's something to be seeing, okay? Generally, there's a healthy balance between supply and demand and capacity -- new capacity will come maybe in 3 years, right? But the demand goes steadily, correct? Demand is more like, how do you say it, like 45-degree angle while your capacity comes in steps. So there will be a period where it's tight, where it's long. Very difficult for us to predict, but the businesses work like this, right, in cycles, okay?
Okay. Okay. And secondly, sir, do we have any HRG rubber capacity in-house? Or do we completely import it?
No, that's what we have in the base, that's HRG rubber.
28,000 tonnes is HRG.
Yes.
And how much is -- so we have the ABS capacity of 1 lakh tonnes. So is the 28,000 tonne capacity enough for catering to 1 lakh tonnes of ABS capacity? Or is more required?
Yes, it is.
It is enough. Okay. And on the -- so we had also faced some issues on job book, right? Like there were some job book issues, which we expect, which we had mentioned that. Once the new capacity in Moxi plant commences, the job book issues will also lower down. So has that played out accordingly?
Yes, that has happened.
The next question is from the line of Vaibhav Badjatya from HNI Investment.
Yes. I had just a follow-up on the earlier participant's question. So on the HRG rubber, you've indicated that it is sufficient. But in the credit rating report, it has been clearly mentioned that there are some capacity contracts on HRG at year-end. So I'm just trying to reconcile the two facts. Is it -- have they been solid for December 2020, which is the latest credit rating report? Or there is some misunderstanding over there?
HRG, we have the capacity of 28 kt, right? And I think one of the gentlemen asked is that enough to make 100 kt of imports, correct, based on Moxi. And typically, you use up to 25% to 30% HRG in the formulation. Okay, that's not rocket science. I mean, you can visualize and you'll find out how much HRG is needed [indiscernible]. So from that [indiscernible] is that if you want to grow further, right, we'll be short of HRG, yes.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to Mr. Abhijaat Sinha for closing comments.
Hello. Thank you, everybody, for your interest in the company and attending the earnings call. We look forward to connecting with you during the next earnings call, which happens probably in May. Thank you, and have a nice day.
Thank you. Ladies and gentlemen, on behalf of INEOS Styrolution India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.
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