Alkyl Amines Chemicals Ltd
NSE:ALKYLAMINE
Earnings Call Analysis
Q2-2024 Analysis
Alkyl Amines Chemicals Ltd
The company's primary product, Acetonitrile, is experiencing price declines, creating challenges for profit margins. In response, the company has taken initiatives to reduce power costs, which comprise about 20% of the related expenditures, and rely on fuel, mainly coal. They are benefiting from a recent stabilization in coal prices, moving from highs of INR 15,000-16,000 per tonne to the 'new normal' of INR 10,000-11,000 per tonne.
To further offset costs, the executive mentions investments in turbines running on extracted materials and the expansion of solar power capacities. These initiatives should contribute to reducing costs over the next 3 to 6 months, augmenting the company's financial health over a medium-term horizon.
With historically low Acetonitrile prices of around $1.4 per kg CIF, the company is on the brink of applying for antidumping duties to protect its margins from international market pressures, particularly with respect to aggressive pricing from Chinese competitors. While antidumping processes are lengthy, this move could bolster the company's position in the market.
Despite falling product prices and challenges in the international market, capacity utilization of their 30,000-tonne plant has been maintained between 60% and 65% in the first half of the year. The company aims to preserve this utilization level, although market volatility and further aggressive pricing may affect this outlook.
While the company and its competitors have added significant capacity, which exceeds domestic demand, the executive clarifies that net capacity additions are not as substantial when considering phase-outs of older capacities. Going forward, there is no plan to use additional plants beyond the newly commissioned one, which should streamline operations and potential excess supply concerns.
Adhering to a conservative communication policy, the company refrains from discussing future product developments until commercialization. This approach is intended to manage market expectations and avoid speculation about the company's strategic direction.
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Ladies and gentlemen, good day, and welcome to Alkyl Amines Chemicals Limited Q2 and H1 FY '24 conference call hosted by AMBIT Capital. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jaiveer Shekhawat from AMBIT Capital. Thank you, and over to you, sir.
Thank you, Nirav. Good afternoon, everyone. On behalf of AMBIT Capital, I welcome you all to Alkyl Amines 2Q FY '24 and 1H FY '24 Earnings Conference Call. From the management side, we have with us Mr. Kirat Patel, Executive Director; Ms. Kanchan Shinde, Chief Financial Officer; Mr. Udipt Agarwal, Chief Commercial Officer; Mr. Chintamani Thatte, General Manager and Legal and Company Secretary.
Without further ado, I would request Kirat, sir, to start with his opening remarks, post which we can open the floor for question and answer. Thank you, and over to you, sir.
Thank you. Welcome, everybody, to the half yearly investor call for Alkyl Amines, and thank you for the interest. Let me just take a few minutes to give you an overall of the quarter that has -- the half year that has just concluded in 30th September, and then we will take the questions.
As you can see, this half year, especially the second quarter, has been a little difficult for us in terms of margins. And this is largely due to some amount of domestic competition and a large amount of competition from the -- across the border from China in 2 or 3 specific products.
However, we have some silver lining on the cloud, where we have volumes which have gone up by over 15% across various products. And our market share in the most products has, if not remained steady, increased.
And the domestic market seems to be doing all right. Yes, there is some pain faced in the agrochemical sector and to some extent, pharma. And of course, as you all know that Europe and America are going through a really more difficult time than earlier. So is China.
So against this background, our results, which [indiscernible] disappointing and -- are to be taken with a little bit of concern that we have done all right. Let me then, I think, with this overall background, open the line for questions -- specific questions on any aspect of the company. Can you open the line?
[Operator Instructions] The first question is from the line of Nirav Jimudia from Anvil Research.
I have 2, 3 questions. So sir, first is specifically on ethylamine. So if we see 4, 5 years back, ethanol cost used to be around INR 28, INR 30. And now if we see they have been consistently moving up and have been hovering around those INR 50, INR 55 levels.
So just wanted to understand like over these years with this increase in the raw material cost, whether we have been successful in passing on the raw material cost increases to the customers or the industry dynamics have changed in a way that the industry is loaded with higher capacities and probably demand is not able to catch up to the levels of capacity additions which we have seen over last 1 or 2 years?
Okay. There are 2 aspects of this question, Nirav. One is about the price of alcohol. You're right, that has moved from around INR 30 to around INR 55 over the last 2.5, 3 years. And we can expect this price is likely to remain for us at least going forward for the next year or so around this level or maybe slightly higher.
Obviously, this has put a little pressure on our margins because we have not been able to pass on all of these cost [indiscernible] in the -- into the market.
In terms of the structure of the competition, well, as you know, we have 2 players in domestically and the rest are from the Chinese or the European active in the market. Over the last year or so, over the last 6 months, we have not seen much activity for imports because our competitor had increased this capacity and has been able to push out the imports to some extent.
However, we have managed to retain our market share in this product albeit with some sacrifice in margins. Going forward, given that now the capacities are more or less balancing out between the 2 domestic players and we have extra capacity coming on because of the new plants, which we have just commissioned in October, the ethylamines plant, which has just been commissioned, which have added capacity and will give us some headroom in terms of growth in the future.
So we expect to continue to progress in ethylamine, okay, steadily. And it is fortunate that most of this goes into the pharma industry. And pharma is a very steady growth industry. Even if you take a slightly longer term, 1 or 2 years, we are not that gung-ho, but more or less, they keep growing. So we are very confident that the ethylamines market is going to improve over a period of time.
Got it. So sir, just to add here, like if you can just walk us through in terms of the domestic capacity as well as the domestic demand currently? And what I would make up from your remarks is that probably with the industry demand and supply getting balancing out probably at some point of time, again, we could be back at those per kg margins, which we would have been able to clock before 2.5, 3 years. And this is not a structural problem in the industry where the new normal is the margins in between those which we have achieved before 2.5, 3 years and what we are currently getting on. If you can just help us understand that.
Yes. So I think looking at the scenario going forward, it can only improve because there is no new capacity coming on, and the market is growing. And as you know, slowly, the market will grow. We have already invested, and we don't need to spend any more money for capacity increases.
So the benefit will always grow to us. Yes, the margins, whether they will come back to those 2.5 years, margins over the next 6 months or 1 year, I'm unable to predict. But certainly, it come back at some point in time.
Got it. And in terms of the industry capacities and demand, if you can just help us.
The demand has been growing, I think, in the region of about 25,000 to 30,000. This is the domestic demand. And both our competitors and us are both exporting to some extent. The domestic demand keeps growing at about 5% to 7% every year. And between the 2 of us, I think we have about 70% market share, and they would probably have about 25% and [ 5% ] is [indiscernible], something in that region. Okay.
So our capacity with this new plant is close now 30,000, 35,000 tonnes, and probably competitor would also be at around 15,000, 20,000 tonnes. Is it the right numbers with which we are working on? Or am I missing something in between, sir?
Well, I think you're right that our target -- the plant which we have set up is 100 tonnes per day that we have announced earlier, which would come to 30,000, 35,000 per annum. However, in the initial phases, we don't intend to run it at full 100 tonnes per day. We intend to run it at a slightly lower capacity, optimal [indiscernible] and do a swing campaign to keep up with the market.
Yes, the capacity of our competitor is nameplate, I think, about 15,000, but I think its practical capacity may be about 10,000. We have the [indiscernible]. They always have an issue. So our estimate is it would be in the region of about 10,000 to [ 12,000 ].
Got it. Sir, my second question is on the cost part. So if we see like last year -- last 3 years, we've been continuously seeing increase in the power cost. So last year, we were at INR 220 crores. Year before that, we were at INR 180 crores. So -- and with one of our major product, Acetonitrile, we have seen the prices falling.
We also mentioned in our last call also that prices have been lower. And most of the players have not been able to optimally make profits at this sort of realization.
So just wanted to understand from you that what is the situation currently on the power side? What initiatives we are taking there to reduce our power cost in absolute amount as well as on a per kg basis?
And apart from this, are there any cost initiatives which we are currently undergoing, any specific area in terms of either process innovation or in terms of reducing our variable cost, which could help, to some extent, negate the per kg margins, which we have been suffering on the product side?
Okay. So this question on the power cost, when we give those numbers, we included what we call our water and fuel because they are all plugged together. So power forms about 20% of that amount. The major part of that is fuel, which is coal. The coal is the main component which goes up and down. Fortunately, in the last 6 months or so, it has remained reasonably steady. It has come down from the peaks of whatever it was, 15,000, 16,000 a tonne, down to about 11,000 a tonne. So to that extent, we have benefited a bit.
In terms of power, we have in both [indiscernible] commission turbines which run on extracted [ steel ]. And that would save us some money. Plus, we have solar power being what -- being put into the plant from both in the [indiscernible] into the plant, both in the [indiscernible] and in [indiscernible], we have expanded our solar capacities, of course.
And in the [indiscernible], we are just about commissioning solar facility which should get commissioned in the next 15 days or so. So on both those counts, we hope our cost will drop as we get -- go down in the next 3 to 6 months.
Coal, of course, it's a question mark. It tends to track crude oil. And predicting where coal will be is a bit difficult. But it has remained steady for some time. So I think we are better off than -- of course, it's not the old days of INR 5,000 and INR 6,000 a tonne, but whatever. The new normal is probably INR 10,000 to INR 11,000 a tonne.
Correct. And sir, any other cost initiatives which we are currently...
Yes, a new boiler, which we have just commissioned in December for running the plant is technologically better than the old boilers. I expect to see some marginal improvement in efficiencies there. So the utilization of coal-to-stream ratios may be better.
Correct. Sir, just a last clarification on the other expenditure where we have seen a sequential jump by close to INR 5.5 crores, so INR 84 crores to INR 89.5 crores. So was there any one-off element in this? Or it was something cost increases which we have witnessed this quarter and because of which the sequential cost increases have been there in the P&L?
Sorry, which costs are you talking about?
Sir, in the result document which we published, the other expenditure has gone up from INR 84 crores in Q1 to INR 89.5 crores.
There is nothing significant just CSR expenses have been like more in Q2 compared to Q1. So nothing significant other than that.
Okay. Okay. So it has nothing to be with the onetime plant start-up costs, which we have incurred because the [indiscernible] plant has been commissioned and some of the start-up costs which would incur and that have been debited in this quarter?
Because we just started at the end of the September, so there was hardly 1 or 2 days cost of start-up. So -- and that has been capitalized as cost.
[Operator Instructions] Next question is from the line of Rajiv Rupani, individual investor.
I had a question on ACN, Acetonitrile. So first question I'd like to know is, have we applied for antidumping duty, number one? Number two, I believe there was dumping by Chinese companies of ACN. So what is the current prices of ACN? Sorry. Go ahead, sir.
Okay. The question about the antidumping duty. We have not yet applied, but we are in the process of putting the papers together to apply for antidumping. And as you know, antidumping process goes to Ministry of Commerce then the Ministry of Finance. And the whole process is about 6 months. So we are just on the verge of applying for antidumping, and it may take some time.
The current prices of Acetonitrile, the CIF is about $1.4 a kg or so in that region. Yes, it's fairly low compared to -- maybe historically low where ACN is concerned.
Okay. And last time you had guided us that the capacity -- we have a 30,000-tonne plant. So the capacity utilization will be 60% to 65%. So for this current year, can we expect lower levels or similar levels of capacity utilization?
Well, the first half has been in that region, 60%, 65%. Second half, we hope to see that -- I think the Chinese have some sense. So for that, we can maintain this 60%, 65% capacity utilization.
But you never know if the prices are -- they become more aggressive and this kind of prices persist. We could have some impact. But hopefully, I think some settle down. And we try and maintain this 60%, 65% capacity utilization if we can.
Okay. My next question was on [indiscernible]. On the con call now, you have said we have added about 30,000 to 35,000 tonnes capacity, and our competitor has, as far as I know, 22,500 tonnes. And you have said the domestic demand is 30,000 tonnes. So I mean, how do you expect to utilize our new capacity? And do you think new capacity, could you guide us?
Yes. So I think there is -- both of us, it's applied to both us. When we add new capacity, when we added the 15,000 tonnes, the older capacity has not [indiscernible] or used for something else. Similarly, for us, our original 15,000, 16,000 tonne capacity will be -- and this has, in fact, as we speak, it has -- the plant has been brought down.
And only the new plant, which is 30,000 tonnes, well, in the first phase, not that much, [ 24,000 ] tonnes will be commissioned. So you're not adding 30,000. We are adding 15,000 in our case capacity in 2 phases.
And in their case also, they have gone from 6,000 to what we estimate is about 10,000, 12,000. So it's not a dramatic change. Yes, but there is an overhang of capacity compared to the domestic market.
And even if you add the 10%, 15% exports that both of us do, yes, there is a capacity available now in economies. We were a little tight until the new plant got commissioned in terms of capacity. And we had to bring in Patalganga plant also online to support Kurkumbh. But now we don't see any -- going forward, I don't see any reason we will need to use the Patalganga plant for [indiscernible].
Okay. And my next question is in last con call, you had talked about new products. One is DEK, which we have already commissioned and 2 derivatives were mentioned in specialty products. So sir, could you let us know the names of the 2 derivatives and specialty products which we are going to introduce?
Yes. No, we will not -- we -- as you know, as a principle, we do not talk about future products until they are already commercialized. And we -- even for example, DEK, we started talking about them only after February after we had launched it in the market.
And the product DEK is now commercialized. It is having some difficulties with [indiscernible] coming in and the market being a little tight. But we are fairly confident that, that will meet its target sales and capacities as we go along.
The other 2 products are to be launched a little later. And one of them, of course, we'll have to wait until the old [indiscernible] plant comes down and as we refurbish to be repurposed to this thing. So it may be another 6 months before we launch another new product, the rest of the products. They're all going to come next year.
Okay. My last question is this PLI scheme for by API industry. So when does this benefit our company? So how long?
Difficult to say because we are suppliers to the people who make the APIs. And depending on how they react to making the API, we will benefit. At the moment, PLI takes a period of time before it materializes. So it is a kind of a 5-year horizon before its impact really is felt because we make it, then they will apply for PLI, then they will get it after [indiscernible]. So the whole cycle is changed. The whole cycle is the longest one. But it's a good trend. I would say that it is a positive trend in the -- for us.
Next follow-up question is from the line of Nirav Jimudia from Anvil Research.
So sir, you mentioned about the ethylamines market. You mentioned that the pharma is one of the areas where the demand was slightly lesser and because of which, those additional capacities are putting pressure on the realizations.
So apart from this, are there any other sectors or industries which were putting the similar amount of pressure on the realization part? And then that tends now getting improved because of which we are confident that the demand/supply situation is getting more balanced at this point of time?
The pharma industry comprises a large segment of the ethylamines market. The others are other chemicals and agro. And yes, the agro has been having some difficulties in the last 3 to 6 months. The chemicals also has gone through a somewhat difficult period.
But both those segments of customers are talking about they're seeing light at the end of the tunnel. So a little -- it looks like we may be -- pharma, as we said, the destocking which was there last year is over, and they are growing. And I think the other 2 segments also will probably turn around now. I'm a little positive about ethylamines.
Got it. And sir, on the methylamines part, if you can talk similar like before 3, 4 months, we have seen ammonia prices making a low of around $350, $400, and they are now again inching up closer to $550, $600 FOB Saudi. So what's the situation there? Like in terms of the industry scenario where there also, we have been able to pass on the raw material cost increases to the customers. How is methylamine versus ethylamine at this point of time, both in terms of industry as well as where we are placed in terms of not only methylamine but the derivatives of methylamine also.
Okay. So the methylamine is very different from the ethylamine in terms of what the market has been because there is not much overcapacity where we [indiscernible] have had these capacities in place for some time. [indiscernible] I am told is expanding the market capacity, but it's a little down the road.
So at the moment, we have all been able to pass on these increases of raw materials on to the customer, and the market has been balanced. So it has been -- they have maintained their margins in the whole retail chain.
Couple of our derivatives have done well and in [indiscernible]. And on the whole, [indiscernible] has not been the big worry for us at all. In fact, it has done well, the chain. And we still have some headroom in capacity in [indiscernible], but as you know, we have a plant in Patalganga also available in case required.
Sir, [indiscernible] at 45,000 tonnes of capacity. And let's say, if the derivative starts doing well, let's say, DMAHCL or [ DNA ] or the other products, we would try to use those capacities at the Patalganga plant and could further be diverted towards these derivatives? Or we additionally need to expand the derivative capacity also to utilize the plant?
Well, the derivatives that we make out of DMA and MA are -- we are...
I was talking about DMF.
Down the line, we may have to debottleneck either of -- both of the major derivatives we make. But for the next year, we don't see any additional capacity [indiscernible] because the problem may be more than because of the number of [indiscernible]. [ Die ] is always a short supply and mono is obviously excess. So that balancing is where the whole trick comes. All of us, whether it's [indiscernible] always struggle with the availability of DMA.
So DMA is doing well and because of which, the chain is doing well. That's a safe assumption to make?
Yes. I would say, more or less, there is a balance there. So there's no great competition. Fortunately, that's a product which you -- we don't have Chinese competition or...
Unavailability of imports coming to India probably.
Yes. The element -- in between about 2 years ago, the Middle East has tried to compete. But they also, I think, have now desisted from trying it because it's [indiscernible]. And when you make the [indiscernible] out of it, where you're transporting water. Transport water, the freight cost goes up.
Yes, correct.
And it's not a very high-value product as we know. So it doesn't work out economically.
Got it. Sir, just last question from my side is on the volume growth of 15%, which you have mentioned. So that is for H1 FY '24 and not for the quarter, right?
Yes, it's for H1.
Okay. So from each of the product segments out of [indiscernible] Acetonitrile we have achieved this sort of 15% volume growth, if you can break it down in the...
Largely secular. It's across products. It may be 10% in one, 20% in the other, but it's -- every product has grown a bit. 1 or 2 smaller ones have not grown, but yes, we have an issue with -- as we have mentioned in the last call about MIPA going out of antidumping. But that's a very small product overall. So that has had a problem, but all the others have grown.
Correct. Sir, just a last bit because if we remember last quarter, the last con call, what we were running to aspire is that, let's say, if we do close to 25%, 30% of the volumes, we could surpass our earlier PBT targets of close to INR 400 crores, which we achieved in 2021.
So if we see '21, '22 -- '22, '23 we were close to INR 300 crores. This first half, we have achieved INR 100 crores. So now if you can just help us understand like -- that can be surpassed the FY '20 to '21 numbers -- '23 and '22 numbers in terms of the PBTs what we have achieved, let's say, what sort of volume growth needs to be done in current environment so as to surpass this sort of PBT?
I think the volume growth is not -- in fact, our volume this year is pretty good. If you see 15%, it's not a bad volume growth at all. It's one of the best we've had for many years. The margin is where the problem is. And predicting margins as I've always said, it's very, very difficult thing. So I will tell you that it will take me 3 years. And for all I know, the next year we may profit if the margin is widening.
So we could [indiscernible] INR 300 crores PBT next year. Is it a safe assumption?
I mean -- it's your call. I would love to have it. We would like to plan it that way. But plans are what you keep planning while life goes on.
Correct. Correct. So just to conclude, like methylamine is doing well, but the problem in terms of the margin contraction is predominantly coming from the Acetonitrile part as well as [indiscernible] part?
Yes. I think there are -- and the other smaller, smaller products are helping us stay afloat, methylamines and the other derivatives. So yes, [indiscernible] main pain point. [indiscernible] sort itself out. Acetonitrile, we have still to work on the antidumping and the competition from a product.
So sir, at $1.4 a kg, are we making profit at the contribution level? Or the realizations need to be improved from here to make money at the contribution level?
I'm not going to comment on the profitability of individual products. But since we are selling, you can guess that we are still water above -- we are -- our heads are still above water.
Next question is from Jaiveer Shekhawat from AMBIT Capital.
So there have been a lot of challenges that we have seen on revenue and the margin front, not only this quarter, but over the last 2 years. And these challenges somehow do not seem to be subsiding. So given your multi-decades of experience and the fact that competitor intensity is only increasing, I mean, do you see these challenges continuing over the next 1, 2 years as well? And what does it take for those to subside?
Okay. You are comparing the period which was we had the core profits of INR 400 crores, where we had margins which were very wide to set up numbers which are a little low. I would say that somewhere in between is the norm, not the great times which we had 2.5 years ago during this COVID period and certainly not as low as we have today.
The competitive scenario in terms of domestic, I think it's settling down, and there is no great concern there. Where the Chinese are concerned, yes. It's not just us, but it's probably appear that all manufacturers in India are now struggling with. Most chemical companies have faced some sort of -- or the other Chinese competition here and there.
And it is not helping that Europe is not doing well. That cannot absorb the overflow from the Chinese, and the Americans have put trade barriers out of the Chinese. So for them, the next large market is India. And unless we put our barriers up, we are going to suffer for a little while, and these take time. But I'm sure the government is well aware of what the industry is facing. And they will make up and plan.
And sir, it does appear that the profitability or even the revenues, to a large extent, are still determined by the industry process. And there is a little possibly that is in control of the management to sort of drive that. I mean, one, would you agree with that?
And secondly, given that we've also commissioned there -- commissioned the [indiscernible] capacity, especially at a time when we have been taking a lot of pressure on realization, and could we have been more agile in terms of shifting on the products where possibly outlook is better and sort of investing our money there?
Yes. As somebody said, hindsight is always 20/20. We could have delayed the plant for another year or 2 for -- given the scenario just now. But it's very difficult to predict. And I don't think in the longer term, it does make so much of a difference.
Maybe 3, 4 years down the line, if you ask me the same question, it will look like the plant was a great investment. These plants are, by the way, fairly specific to products. So it's not easy to refurbish and align them for newer products.
They are not like the batch plants, which, say, the drug manufacturing people have, the API people. We have continuous dedicated equipment for these plants.
So we have to go through that -- these difficult periods, but it also implies that this industry is difficult to penetrate. So it also creates a barrier for new entrants.
Competition hasn't changed much. The Chinese are always there. No new player has come in. In fact, it has got consolidated, the amines business. So it isn't as if the competition has increased.
It is just the market [indiscernible] balancing. You cannot have anti [indiscernible] like we had 2.5 years ago continuously. It's not -- even then, I think if you recollect, we had always pointed out, we had always said that be careful. These are unusual margins in those days. And it is difficult to predict whether they will be continued. But yes, today, we have unusually low margins. So it is a [indiscernible] effect.
Right. And just to finally get the sense [indiscernible] growth, when do you see these challenges sort of stop? And what exactly would it take for those challenges to stop because there are people who are putting up capacity. There's still Chinese pressures. So why do you think those should go away over, say, the next 1 or 2 years?
I don't know if anybody else is putting up amines capacity in this country, barring our competitor who has announced [indiscernible] plant. And I think he may also be not in a great hurry to do it, given these circumstances just now.
But other than that, I don't think competition is -- your other question about what can the management do. The management actually focuses on improving its efficiencies and its cost in these times. In fact, these times are good for a company because what happens is that you tighten your belt, you understand what your strengths and weaknesses are. And you come out fighting out of this.
And it's happened to us every decade or so. 1 year or 2 years, we go through like this, and we come out much stronger. So that is something over the last few decades, it's happening in the cycles. So I don't think there is going to be a structural change in the market.
The Chinese have to absorb their excess capacity at some point or close it down and learn that -- learn to live within their territories. They can't dominate the world if they feel they can.
The next question is from the line of Nilesh from HDFC Securities.
Sir, particularly on the CapEx, so how much CapEx we incurred in first half? And what are our plans in FY '24 and '25?
Yes. So in first half, we incurred around INR 85 crores, okay? That was mainly -- most of it was on new plant, which we have commissioned, okay? Most of the expenses are now incurred on that barring few modifications.
And in next half, we will incur around INR 50 crores. Major in that will be solar plant, which we will commission in few days, okay, and a few other small projects. So around INR 140 crores to INR 150 crores.
And for FY '25, what are our plans?
Well, FY '25 plans are not yet formed, but I would give a good guess. It's, again, going to be about INR 150 crores or so.
And sir, now we are done with the [indiscernible] capacity, so what different products you're planning to launch apart from these couple of products you talked about and the capacities particularly, the incremental capacity where you will be spending close to, as you said, about INR 150 crores in FY '25?
So this INR 150 crores or whatever CapEx we are going ahead, the portion which is for growth, there's always some normal CapEx, which is for efficiencies and all for existing businesses. But the portion which is for growth will be not in the current business but will be in the new product business, new products, which, as I said earlier, we will discuss after we launch those products. They're still at various stages of R&D, engineering, procurement and in one case, erection of equipment.
So you mean we are moving away from the amines to that...
No, no, no. It's not -- we were always adding newer and newer products. But our core business has always remained amines growth. Yes. As a percentage of the total, if you see historically, we were a totally amine company then we became amines derivative company, then we became amines plus derivative plus specialty company. And now it is, say, about 25% specialty, 35% derivatives and 50% amines. So yes, the proportions will change, but the amines will still remain our core business for some time to come.
[Operator Instructions] Next question is from [indiscernible] Gandhi from [indiscernible] Advisors.
What is your expected time frame by which this Chinese excess production will be able to absorb whatever surplus is there in the market?
It's difficult to say, but I am sure it will take at least 6 months before we can get some protection and maybe a little longer than that for the Chinese to actually find the optimum capacities and pricing. They are going through, as you can read in the papers, they are going through a tough time themselves. A lot of overcapacities, wrong investments, and they're trying to find markets wherever they can.
So it is going to take some time for that. But in the meantime, we are having to survive through our own efficiencies and through whatever there is government protection we can get to ensure that we don't get or suffer permanent damage.
Right. And...
So as you can see that in the -- basically, this is, of course, [indiscernible] you're talking about. But our domestic competition is all kind of backed out of the market because they feel it is too low for them. And at some point, it will all come back once the margins come back to normal.
So maybe FY '25 should be starting with a better positive side, that's the way we can think, right?
Yes. I would say that yes, we are hopeful that FY '25 will be a better year than FY '24.
Sorry, just 1 second. I have just -- what is the current difference between the landed cost and our selling price for where we are targeting antidumping not [indiscernible]?
Normally, the antidumping, today, we would be targeting about 15% higher than where we are, 15% to 20% ended up being duty we would like to get. At the moment, I mean, the past records, looking 6 months ago, it would not come to that much, but now it is close to 15%, 20%.
Next question is from the line of Rajiv, individual investor.
Yes, sir. I had a follow-up question on ACN. Do pharma companies prefer ACN through acetic acid route or the other way?
I don't think it's preferred either way if you have the right priority because in the Acetonitrile, there are many grades. And we are in Alkyl Amines have managed to make all the various priorities which are required by various people. But different customers have different specifications.
So earlier, India used to only -- before we came into the picture, it only has to make only the trade with the agrochemicals [indiscernible]. But since we have started manufacturing and improving our qualities and adding more, we have been able to service the whole range of pharma and electronics.
Okay. And one more question. Do we have reached a registration for exporting methylamine?
Methylamine?
Yes.
No. Methylamine, we don't export to Europe. It's the same logic where exports to India are difficult. So methylamine exports are also difficult except that in countries where they don't have a methylamine plant. And there are. And we do export methylamine to Southeast Asia and to Latin America, Central and Latin America, where they don't have methylamine plants. So there you can compete. But selling to Middle East or to Europe or to America and Japan doesn't make any sense.
So my last question is on the raw material side. Could you guide us what are the current prices of ammonia, acetic acid and methanol. And going forward, will they stabilize or you can expect lower prices or higher prices?
I'll just hand this question over to Udipt, our Chief Commercial Officer.
My name is Udipt Agarwal. The raw material prices, [indiscernible] to the Chinese strategy. Mr. Kirat Patel already alluded, the Chinese capacities which are there in the marketplace. Plus at the same time, let's not forget that we are also getting into the winter season. So what happens to the energy prices there because that is also related to the raw material costs, yes.
I think earlier in the discussion during this call, there was some discussion about ammonia prices, how they are going to move and what are the price level. So we have some kind of information into that. I think there was also some discussion on ethanol prices, yes.
So what we have is in the system is that these are commodity products. And they move -- they behave like commodities, and they move in cycles. So while acetic acid, which was very, very low during the last financial year, the second half of last financial year, things have moved on from there. It has gone -- it has increased significantly, and now it's again seems to be showing some downturn.
So there are different factors if all the producers, major producers tries [indiscernible] shut down at the same time, then suddenly, there is a supply-demand issue internationally, which has an impact on our raw material price.
Next follow-up question is from the line of Nirav Jimudia from Anvil Research.
Sir, in terms of the sales mix for this first half, if you can break it down between the amines derivatives as well as the specialty chemicals. Hello?
Can you hear us? [Technical Difficulty]
Sir, just wanted to get a breakup in terms of the H1 sales for amines, derivatives and specialty chemicals. So what was the mix in this first half?
As I have mentioned earlier, it's about 50% amines, 25% derivatives, and that mix hasn't changed dramatically. It's about the same.
Got it. And sir, in terms of our current capacities like [indiscernible] 40,000, 45,000 tonnes, in time, we added [ 30-plus ] swing capacity, which we are having. Acetonitrile, we are at currently 28,000, 30,000 tonnes. So apart from this, those specialty products, which are the smaller products, where probably the margin pressures are not there. So what is the capacity of those smaller products in total? I'm not talking about the individual products, but what are the capacities of the smaller products where probably the margin pressures are not there, one?
And secondly, when we intend to put up or launch newer products? One we have already launched. Some more would be launched based on our R&D and the commercial success of the product. What could be the end capacities of these newer products, which we are intending to set up over the next 2, 3 years?
It's very -- the capacities are very fungible. You are already talking about the various capacities of the amines and [indiscernible] and we have some higher amines capacity. So overall, I don't know. If we add it all up, it may be about 2 lakh tonnes per annum, all reporting plants that we have.
Okay. So currently, it is 2 lakh tonnes.
They're actually at full capacity, so all pieces.
So total currently is 2 lakh tonnes, including the derivatives as well as the upstream [indiscernible] combined together.
Yes. I mean, my best guess would be close to 2 lakh tonnes.
Got it. Got it. And sir, the newer products which we intend to put up over the next 2, 3 years, so would there be blocks of those 5,000, 7,000 tonnes single product? Or the capacities would be smaller and that would be the higher realization products, which we intend to put up over the next 2, 3 years?
No, they would be in that 5,000 to 10,000 tonne kind of range, not smaller than that because we have some minimum kind of -- because to absorb the overhead and everything, we need a certain amount of volume now. They'll not be very small products. They will be in the region of 5,000 tonnes.
Sir, just a last bit on this. So the products which we are targeting in the newer -- in the subsequent years in terms of the products which we intend to launch, are there -- are those products imported in India? Or this would be predominantly for the export markets which we are targeting? And any understanding if you can share?
It is a mix of both. There are a couple of products which are imported into the country, and we are looking at domestic market. And there are some that we are looking very optimistically at the global market also because we may be among the top 2 or 3 producers because these are all very specialized products. So there are not too many producers of that. So that we need a global market.
Correct. So the competition intensity here would be lesser as compared to the existing line of products, and probably the contribution margins once those volumes are ramped up would be far superior than our existing product [indiscernible] lives?
So that's the hope. That's the logic and the strategy. But of course, reality sometimes goes differently, but I think that is -- you're right, that's the way we would like to go. And that's how we have planned these.
And sir...
On volume, very few players abroad. And hopefully, we will get better margins.
Correct. And sir, once we put up a plant and start selling those volumes, how quickly we can fill up those capacities for all the products put together? And if you can share that, let's say, currently, we are at a run rate of INR 300 crores, INR 400 crores on a quarterly basis, which sums up to close to INR 1,500 crores, INR 1,600 crores. So over a period of time, let's say, over the next 3, 4 years, what portion of our sales or what absolute amount of sales these newer products could contribute to overall sales mix of Alkyl Amines?
Once they are launched, I would say that looking at the products they are because they are a slightly higher value product. In terms of sales, in the next [ 5 years ] after they are launched, it would be probably next year or the year after. They would comprise at least 15% to 20% of our overall sales. But at the same time, you must accept that the...
Existing would also grow. Correct.
So there is a possibility that there will be -- I mean, today, add it up. It will look like 20%, but by the time 5 years down the line when we get there, there will be only 10% of the [indiscernible].
I asked about the absolute amount of sales, which we could fetch from these newer products which probably...
Not give you the exact number.
And sir, just the last bit. So these products would be predominantly towards the agrochemical market or that would be a newer industry usage which we are targeting for the products which we are going to launch?
It's both agro, pharma and some other uses also.
Next follow-up question is from the line of [indiscernible] Crest Advisers.
I have 2 questions. One is what is expected the overall power cost selling for the full year, maybe FY '25 if you can share?
Sorry, power costs?
Yes. Post implementation of [indiscernible].
Power costs. Is that what your question is?
Savings on power costs post implementation of the [indiscernible].
Because of the -- what I was talking about the solar and the turbines and the new boiler, is it?
Right.
Okay. What would be -- we haven't totaled it up, but I would have to come back to you on that. But it's a good question. I think we need to work that out and see what the combined energy, say -- I mean, what will our impact on today standard prices. Assuming that the prices remain stable, how much would be saved.
Of course, prices never remain stable, but it's a good question. But I guess would be and don't hold me to it, it would be at least INR 10 crores to INR 20 crores.
Yes, because then you are putting INR 60 crores, at least 10% [indiscernible] extra could be...
Because I think it will be at least INR 10 crores to INR 20 crores, given the standard prices, today's prices.
Maybe I'll catch up off-line subsequently.
Yes, if you can. We'll work this out. It's a good question.
And the second thing, in [indiscernible] of the time, what was the utilization, and H1, what was the utilization?
Of the capacity utilizations?
Yes, overall, all put together.
All put together, I would say today, we would be at about 50% to 55% utilization. Some clients are working, well, 80%, 90%, which in our kind of situation means you need to look at a new plant, and there are some which are working at 20%, 30%. But overall, we would be at about 55% capacity utilization, 50% to 55%.
And...
Earlier [indiscernible]. So we have a -- our capacities are about 2 lakh tonnes. And I think this year, we would be in the region of about 1 lakh -- 1 lakh, 10,000 tonnes.
And what were they when -- in the best of your times and the good days [indiscernible] when you are not...
It goes up and down because sometimes it becomes very tight and then we have to add capacity. So there's different periods of time, which is very different.
But somewhere around 80%?
That plant-wide sometimes it reaches like methylamine when we -- before we commissioned the new methylamine plant, it has reached 100% for 2 years almost, [indiscernible] 90%, 95%. Every day we lost -- we were losing market.
As there are no further questions, I will now hand the conference over to the management for closing comments.
Thank you, everybody, for the patience and listening. And I would look forward to meeting you again after 6 months. So hopefully, with better numbers and better view of the future. And all of you, please have a Happy Diwali, and Happy New Year. Thank you.
Thank you very much. On behalf of AMBIT Capital, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.