Subdued Q1 For Galaxy Surfactants | NDTV Profit
Transcript
00:00S.K.
00:01Natharajan, Managing Director at Galaxy Surfacants joins in now.
00:04Hi, Mr. Natharajan.
00:05Very good morning.
00:06Thank you very much for joining us.
00:08On the face of it, it's tough for us to tell whether it's been a good quarter and what
00:12really lies ahead for you in F525.
00:15So let's start with the picture in terms of demand.
00:19Last quarter as well, demand looked healthy.
00:21You had guided for a volume growth of 6 to 8 percent, which you've managed to maintain
00:25in this quarter.
00:27Last time around, rural demand outpaced urban consumption.
00:30Does that trend still remain and are you pretty confident that you will be able to make 6
00:36to 8 or 8 to 10 percent volume growth for the rest of the year?
00:40Good morning.
00:41Thank you for having me on the show.
00:45Yes.
00:46So it's been a good quarter with volume growth across all the geographies that we cater to.
00:53In India specifically, I think things are looking better.
00:57Rural demand is coming back.
00:58And more importantly, the rest of the world has started coming back with a good amount
01:04of robustness.
01:05So with all this working well, I think we should continue to keep hitting at the higher
01:11end of the guided range of 6 to 8 percent of volume growth.
01:16The only caveat here is that the supply chain situation shouldn't worsen from here on.
01:22We have learned to manage the situation the way it is, but any worsening of the situation
01:27further can be a headwind.
01:30But then we remain positive.
01:32Talk about those supply chain concerns, because I know freight costs are higher, lead time
01:36is longer, Red Sea crisis is still not completely behind us.
01:40But split it up between domestic and your international market, right?
01:45If you can tell me what sort of volume growth you're expecting on both those fronts and
01:49what's the market share for exports and the local market as well, would be helpful.
01:56If you look at India's market, I think most of our customers have reported volume-led
02:05good performance in the first quarter of this year.
02:08I think they've been reported close to an average of about 3 to 4 percent volume growth.
02:15We do expect this to pick up in the coming quarters, with all of them indicating that
02:20they're seeing a good amount of green shots in terms of rural demand picking up.
02:25And with the current budget, which puts a good amount of money in the hands of the rural
02:29consumers, I think this is always well for the India demand growth.
02:34With regard to the export market, Africa, Middle East, Turkey, we've continued to maintain
02:40the momentum in the last three quarters after close to almost six, seven quarters earlier
02:45of a very dip in growth.
02:47We do see that this continuing and with the rest of the world, which is what was impacted
02:53in the previous year in terms of the restocking that was happening and the absolutely low
02:58demand in Europe, that has started getting better.
03:03And we did record almost close to 25 percent of volume growth year on year with regard
03:07to the rest of the world market.
03:09And we do expect this momentum to continue.
03:13So this is reflective of the sort of business model we have.
03:16So the sort of geographical reach that we have enables us to manage the situation in
03:22a way that we are able to grow across the geographies and then able to take care of
03:27balancing any issues that we may have in one of the geographies.
03:31Mr. Natarajan, good morning.
03:33Tamanna here and great to speak with you on this quarter.
03:37Last time when you had spoken to us, you had talked about the Red Sea crisis and how
03:42this was, you know, making things difficult.
03:45I just want to get a sense if this sort of headwind is behind you now and in terms of
03:52how that impacts freight rates and geographical growth, how do you see that panning out?
03:57Do you see the big push continuing to come from ROW or rest of the world?
04:03I see the Red Sea crisis is continuing.
04:08We do see the challenges in terms of availability of slots on ships.
04:15We have increased transit times.
04:17Freight rates have more than doubled in most of the geographies.
04:21Last quarter saw incoming freight situation worsening with congestion happening across
04:27all the ports in Southeast Asia and India as well, like Thailand, Singapore, Malaysia,
04:33India, all of them had conditions which elongated our clearance time as well.
04:38So, what we see is that our team has managed to adjust to this new normal and if things
04:46remain as they are, we do see this momentum continuing well and we can leverage on the
04:51growth opportunities that we have in the various geographies as we have done in the first quarter.
04:57In terms of your segmental mix, just want to understand how the speciality segment is
05:03moving or going to go ahead and how you see that panning out.
05:08You have seen a low teens volume growth there.
05:10Is that sustainable?
05:12And as well as for surfactants, I know overall you have guided 6 to 8 percent.
05:16Does that continue and what is the mix that you see between these two segments?
05:22This quarter actually the speciality segment grew pretty significantly.
05:26We grew by about 15 percent.
05:28The performance of surfactants grew by about 5 percent.
05:32So, combined we delivered about 8 percent of volume growth.
05:35The speciality segment, I think what we are looking forward is in terms of our premium
05:41specialities which actually got a little bit of a headwind because many of the customers
05:47in US and Europe stopped progressing on projection pipeline because of the destocking that happened
05:53there in the low demand environment.
05:55Things have started picking up.
05:56So, we do see in the coming quarters the premium speciality ingredients that we have should
06:01start gaining traction.
06:03But speciality segment, we are pretty enthused with the way that it has delivered over the
06:09last two quarters and we do expect this momentum to continue.
06:13So, while volumes is solid, demand is picking up, what is happening on margins?
06:19This quarter as well margins are coming slightly softer than what we have seen in the same
06:24quarter last year.
06:25You have already mentioned a few concerns and the fact that your fret costs are much
06:29higher today.
06:30What is the outlook on the margin front?
06:33Is there any upside risk to margins for the rest of the year?
06:38We do see margins getting better from here on.
06:42This quarter typically also got impacted in terms of the higher freight rates which gets
06:46passed on with the lag.
06:47So, we do see that getting taken care in the coming quarters.
06:50Plus, as I said earlier, the premium specialities ingredients business are gaining traction
06:57in the developed markets in the coming quarters.
06:59All is well in terms of our margin growth as well.
07:04I am assuming the margin range will sustain at this.
07:1012.5, 13, 13.5, 14 is largely what we should be expecting as a street.
07:16Last time around it also talked about investing close to 150 crores for maintenance and de-bottling
07:22initiatives.
07:23How are you in terms of capacity and what are the plans there?
07:28Any expansion plans?
07:29You have talked about how you are open to inorganic acquisitions as well.
07:32So, you want to walk us through what is happening on the M&A side of things?
07:36First of all, on the EBITDA margin, we typically do not look at margin percentage.
07:41We guide the market EBITDA per metric ton of 20,500 to 21,500.
07:46So, that is a better indicator of the way that we are able to manage our portfolio.
07:51The second with regard to CAPEX plans, it is very much on track in terms of the 150
07:56crores per annum that we are talking about.
07:59It is happening across India and Egypt.
08:07I forgot your last question.
08:11About the fact that capacity currently is well managed from what I understand.
08:17Are you looking to add additional capacity?
08:20Keeping in mind that the future is probably going to be better than the times that some
08:25of you and your industry peers have seen in the past?
08:30Yes, we currently have about 70% capacity utilization.
08:33I think with the capacity additions that we are looking at, we are preparing well for
08:37the future because we do see that the environment is going to be pretty good moving forward.
08:43There are some challenges now, but the long-term structural story is extremely exciting.
08:48We are preparing for the future and we are well positioned to cater to the increasing
08:55demand that we are seeing in these markets, both on the performance-affected side as well
09:00as on the special ingredients side.
09:03Just one last point, Mr. Natarajan.
09:07What is the non-organic growth path looking for you for the year ahead or even further?
09:12Any acquisitions on the anvil?
09:15I think there was some talk that you would be looking at this route.
09:20We are actively looking at it and we have a criteria basis which we would want to move forward.
09:27Once all the boxes get ticked, I think we will go ahead.
09:34I would like to say here only that we are actively looking at opportunities and we should
09:40see as to how it progresses in the coming months.
09:44Okay.
09:45We will hope to hear something soon from you.
09:47Thank you so much, Mr. Natarajan, for speaking with us.