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Bodal Chemicals Ltd
NSE:BODALCHEM
Bodal Chemicals Ltd
NSE:BODALCHEM
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Ladies and gentlemen, good day, and welcome to the Bodal Chemicals Limited Q4 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ankit Patel, Executive Director, Bodal Chemicals Limited. 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're 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'll 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 Q4 FY '23 and financial year '23 full year.
Global inflation has affected the end-user markets like textiles, paper, plastic, agrochem, water treatment chemicals, et cetera. Consumption of end-user industries has been sluggish due to the overall slowdown in the global market. Uncertainty about closure of the war between Russia and Ukraine is one of the responsible factors for inflation in European market, which has led to the decelerated demand scenario of the chemical industry. The two major markets, the United States and the European market, have been slow for more than a year now, owing to the multiple headwinds from rising inflation to uncertain geopolitical scenarios.
China's growth has been slow, which has affected the prices of key commodities around the world, including Dyestuff and Dye Intermediates. At Bodal's, we're India's largest integrated manufacturer of Dyestuff and Dye Intermediates and hold a meaningful market share in the world. In today's environment, where Indian suppliers are emerging as preferred partners globally, we've been able to hold our leadership position.
Coming straight to the operational performance. Overall business performance for FY '23 has been weak as the company's total revenue stood at INR 1,586 crores, a degrowth of 23.5% due to the subdued performance of Dye Intermediates and Dyestuff. Lower demand and price volatility of key raw materials has affected many textile players in India, resulting in suboptimum capacity utilization and inventory destocking and slow exports.
Coming to Dye Intermediates, at present, Dye Intermediates, like H-Acid and Vinyl Sulphone, pricing has been at lower level, putting a strain on the industry players. For Q4 FY '23, total revenue from Dye Intermediates stood at INR 136 crores. H-Acid and Vinyl Sulphone prices were near to INR 422 for H-Acid and INR 227 for Vinyl Sulphone per kg. Being an integrated Dyestuff manufacturer, we produced major Dye Intermediate products and over 40% of these intermediates capacity is captively consumed by resulting in a cost advantage for our Dyestuff products.
The balanced capacity of Dye Intermediates is served in both domestic as well as global markets. Many intermediate players in India are still under pressure due to slow demand. Going forward, we can expect a nominal improvement in the Dye Intermediates business.
Coming to the Dyestuff. End applications like textile, leather, paper, consuming industries have not been performing well during the last few quarters. All leading textile companies are facing global headwinds, which have curtailed the outlook for Dyestuff products. The Dyestuff business for Q4 '23 stood at INR 99 crores.
Coming to Basic Chemicals. About 50% of our Basic Chemical is captively used for Dye Intermediates. Our overall Basic Chemicals contributed around INR 39 crores for Q5 -- Q4 FY '23.
Coming to Chlor Alkali business. The Chlor Alkali business continued to perform reasonably well with revenue of INR 327 crores for FY '23, driven by a healthy volume uptick. During the quarter, the realization of caustic soda has been normalized. Our Chlor Alkali business will contribute meaningful business in the coming period on back of technology upgradation. We foresee demand for caustic soda to remain healthy from FMCG, textile, paper and other industries. Since very few players have a presence in North India, we'll have a competitive edge to a certain extent.
Coming to the Benzene Derivatives Greenfield Project, as highlighted in the earlier call, our main goal is to replace imports and capture business in the pharma and agrochemical markets, where PNCB and ONCB are used. we'll be installing the capacity of 63,000 metric tonnes per annum of Benzene Derivatives.
The Saykha Greenfield Project is progressing well and is expected to start the trial run by September 2023. Most of our subsidiaries have reported a satisfactory performance, except Sener Boya. The heavy earthquake in Turkey has affected Sener Boya's performance for the quarter. In a medium- to long-term view, these subsidiaries will bring meaningful business. However, in short term, we're expecting a modest performance.
We have been moving up the value chain and working relentlessly towards diversifying the business from our core Dyestuff and Dye Intermediates business to other specialty chemical products, like Benzene Derivatives. Once we have a recent visibility of demand for our product portfolio and the new site is stabilized, we'll restart our Sulfuric Acid project at the Saykha Greenfield site.
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. However, we expect overall demand to remain grim for the short period.
Thank you now, and I hand over the call to Mr. Mayur Padhya, who will walk you through the financial performance.
Good evening, everyone. The overall performance of the company has been muted for the quarter gone by. Our stand-alone performance for Q4 FY '23 is as follows: Total revenue for Q4 FY '23 stood at INR 393 crores. EBITDA stood at INR 29.19 crores in Q4 FY '23. Net profit for the quarter stood at INR 2.11 crores.
Our stand-alone performance for FY '23 is as follows: Total revenue for FY '23 stood at INR 1,563 crores. EBITDA stood at INR 129.12 crores in FY '23. Net profit for the year stood at INR 124.26 crores.
Our consolidated performance for Q4 FY '23 is as follows: Total revenue stood at INR 393.5 crores in Q4 FY '23. EBITDA stood at INR 30.8 crores for Q4 FY '23, with a margin of 7.8%. Net profit for the quarter stood at INR 2.81 crores for the Q4 FY '23.
Our consolidated performance for FY '23 are as follows: Total revenue stood at INR 1,586 crores for FY '23. This includes export of 69% and domestic sales of 31%. EBITDA stood at INR 144 crores in FY '23, a degrowth of 38.8%. Net profit for the year stood at INR 38.03 crores against INR 98.66 crores in FY '22.
During the year, our subsidiaries, Sener Boya and Bodal China, has performed satisfactorily. During the year, Sener Boya and Bodal China has reported a total income of INR 62.28 crores and INR 29.27 crores, respectively, and have reported noteworthy profitably.
Performance of the other subsidiaries has been lower than expected due to soft demand. Segment-wise performance on a consolidated basis for the FY '23 are as follows: Dyestuff revenue stood at INR 541 crores. Dye Intermediates revenue stood at INR 393 crores. Basic Chemicals revenue stood at INR 172 crores. Chlor Alkali revenue stood at INR 327 crores. TCCA revenue stood at INR 20.38 crores for FY '23.
Total production volume on a consolidated basis for the FY '23 are as follows: Dyestuff reported 13,652 metric tonnes. Dye Intermediates reported 14,779 metric tonnes. Basic Chemicals stood at INR 1,97,051 metric tonnes. Chlor Alkali and TCCA stood at 89,223 metric tonnes and 942 metric tonnes, respectively.
With this, I conclude the presentation and open the floor for further discussion and question and answer.
Ladies and gentlemen, we will now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Aditya Khetan from SMIFS Institutional Equities.
Sir, onto the Dyestuff and Dye Intermediates business, sir, when we look at your consolidated volume performance in FY '23, that is well below your past 5 years trend, like for Dyestuff, historically, you were operating at 18,000 to around 19,000 metric tonnes. And we had witnessed a good volume jump in FY '22. For FY '23, it is at around 13,000 tonnes. So can we assume for the next 2 years that we'll be back to that original run rate of 18,000 to 20,000 or now because of the structural demand issues, which is there in textile so that -- so reaching to that level would be difficult now from hereon?
It looks like at the moment, it is definitely difficult to reach those highest levels that we have -- we had reached. But I think a couple of quarters -- after a couple of quarters, the overall demand scenario should be better. So for the FY '24, I think we should be doing better than at least FY '23.
And similarly for Dye Intermediates also, sir?
Similar situation is there in Dye Intermediates also. As currently, there's a lot of pressure and there's a lot of uncertainty from China and from the Dyestuff and textile demands. So that also we feel the same that I think for at least a few months, we don't see any major revival happening.
And once the overall global -- there's few factors that is disturbing the global trade, I think once they are all back to normal, I think then only overall demand should improve. And with that, the textile and the Dyestuff and the Intermediates demand should improve. So I, again, don't see a much turnaround or a revival for at least the next 4 to 6 months in the Dye Intermediates space.
And sir, in terms of cycle, when we talk about Dyestuff, so for Dye Intermediates, as you mentioned, that there is still 4 to 6 months pain is there. So in terms of cycle, so where are we standing now? So considering your current quarter performance, also, it seems like we're standing near the bottom or somewhere, so down the line only.
So is there a chance? So if suppose that things start to pick up, we can see improvement in numbers also from hereon. And in terms of cycle, I wanted to understand. So where are we standing right now, at the bottom or still we're in the middle?
In terms of the cycle, I think, we're in a better place now because of 2 things. One is if you compare the top line of Q3 and Q4, there is definitely a good improvement about 30%. So that's one thing. So I think the worst is over. I think the worst was maybe Q3.
And now the top line is now getting back to about 70%, 80% of our top best quarters. And the second point is many and majority of the raw materials have corrected. So a couple of quarters back, there were still many raw materials that were high in demand globally. So it was -- there was a delta between the prices of Chinese raw material and Indian raw materials. So it was difficult to compete with the Chinese in terms of Intermediates.
But now most of the raw materials have been corrected, they have come back into -- in the normal range. So that is going to add some margins. And volumes are already back if I compare to Q3. So it's definitely now better. In terms of the cycle, we're definitely going upwards now. But we don't see a very fast -- faster pace. I think it will be slow. But I think -- but definitely, there will be some slow improvement.
Okay. Sir, in your FY '23 for full fiscal, sir caustic soda business has been around 21%. Sir, despite like such a high-margin business, caustic soda, we had clogged up full-year margin of 8.5%. Sir, we were with that -- so we were with the belief that considering now Bodal is moving into newer segments, which are having much higher margins so that margin range, which we were at around 10%, 12%, that can shift to around 15%.
But despite caustic soda like ramping up to the highest level margin, so trajectory doesn't seem to be that moving towards the higher range. So what will that -- so what will be that trigger? So now if suppose that Greenfield Plant of Saykha that will come on stream, so that will be a trigger point where we can see much improvement in the margin or will we be into this range only, somewhere around 7 to 10 percentage?
So when you say 20 -- 21% of the caustic business revenue out of total revenue, the caustic plant was operating on the older technology until November 2022. So because of the older technology, it was consuming a lot of electricity. So that's why the margins were not at par with the industry players. That is one reason.
So it has only got about 4 months of performance. And also because in November, we started -- it was not running at optimum levels. So now recently, that plant is now running at around 80% of the installed capacity. And now going ahead in the next couple of months, it should be operating at more than 95%. So also, there are still 2, 3 developments and upgradation that are still happening.
So I think we are yet to see the best performance from the Chlor Alkali business. I know price has corrected, but the price is still in a positive margin set. And so in terms of top line and margins, I think we should see improvement when it comes to -- on an annual basis, I'm saying, when it comes to the Chlor Alkali business.
So that's one thing. And Benzene Derivatives, yes, like we have been commenting, it is about 15% EBITDA business. So that is the -- that is our target to have about INR 300 crores, INR 400 crores of turnover from the Phase 1 of the Benzene Derivatives, which should start by end of December commercial production and start selling the product in the market. So we're going, I think, Chlor Alkali, after all the improvements and utilization of the installed capacity when that happens, which is, I think, almost about 80% we have reached. So that and the execution of the Benzene project, I think that should affect the overall margins, and that should help us to improve the overall margins.
So going ahead, sir, so what numbers are you all building in? So considering if the Benzene Derivatives also, that will run at peak utilization levels, caustic soda upgradation will happen, and the Dyestuff and Dye Intermediates also business will improve at least from the current level for the next 1 to 2 years. So can we assume our current margins of 8% to 9%, this can move to around at least 11% to 12% range or higher than that? What is your take on it?
So when we include the new Benzene business on an annual basis and also Chlor Alkali with all the improvements and upgradations and everything is done, I think then -- and some improvements that we're expecting in the next couple of quarters from the Intermediates and Dyestuff space, I think just put together, I think we should be able to reach around 11%, 12%.
Our ultimate goal is to reach around 13% to 15%. But looking at the Dyestuff and Dye Intermediates business, how it is shaping up now. I think it is going to remain under pressure for some time. But still with the Chlor Alkali new plant and new capacity and improvements and also the new Benzene business, I think we can reach that 11%.
And sir, any reason why we have scrapped that forward integration into the Benzene Derivatives, you were planning to make MPDSA also. So now we're making only PNCB and ONCB. Any reason, sir, why we had scrapped that forward integration?
So the reason we were trying to integrate our new Benzene Derivative business with our Intermediates and Dyestuff business, but meanwhile, while we were -- we started executing the project, the prices of steel and cement had gone very, very high. So overall, projection of the project was resulting in a much, much higher investment than we anticipated. So because of that, we had to move some of the products in Phase 2.
So we -- other than MPDSA also, we have another list of 5 products, which integrated very well with the Benzene Derivatives and also integrates to our existing business. So that is -- we also have environmental clearance for most of them.
So that we're quite ready to go ahead with. But then we don't want to -- we don't want when our margins have been corrected, when we -- in our base business, which is Intermediates and Dyestuff, when we see some uncertainty in that business, we don't want to commit too much of an outflow. We don't want to end up with a lot of debt. So that is why time being, in last 3, 4 quarters, we have decided to hold our Sulfuric Acid project and also there's a couple of small projects that we did not go ahead with.
But they are all ready, so we can -- once -- like we -- like I commented earlier in my speech, once this project -- this site is stabilized and this first phase products are stabilized and overall company is doing overall a little better in terms of margins and all, we can immediately start with these products.
[Operator Instructions] The next question is from the line of Aniket Kulkarni from BMSPL Capital.
Yes. Am I audible?
Yes. Loud and clear.
So my question was -- I have a couple of questions. So.....
Sorry to interrupt. Mr. Kulkarni, your audio is breaking up.
Am I clear now?
Sir, can you use the handset mode while speaking?
Hello? Am I audible now?
Yes, sir.
So my question was -- I have a couple of questions. So first on Vinyl Sulphone and H-Acid prices......
I'm extremely sorry, sir, but we're unable to hear you clearly.
Wait. Just a moment. Yes. Am I audible now?
No, sir. Sir, if you're using the speakerphone, we requested to pick up your handset while asking your question.
Hello? Am I audible now?
Yes, sir. This is better.
Yes. So my questions were on basically the Vinyl Sulphone and H-Acid prices. So you have mentioned the prices, but can you give an idea on how these prices are trending? And how the demand is holding up for both of these?
So the prices are still in the similar range of that they were in Q4, and it's around 425 levels per kg for H-Acid and about 225 for Vinyl Sulphone. And the current demand is -- definitely there is some pressure. The overall demand that comes from textile -- we're seeing a very, very dull demand coming from the textile space, and that is affecting the Dyestuff operations, and that hence, the Dye Intermediates demand is down.
Okay. And the second question is regarding the Chinese market. So has China reopening improved in current market conditions? And could you explain just how things have shaped up once China has reopened?
It did not change the overall price trend too much. And in fact, in June, so coming month -- next month, there is a forecast that there's going to be millions of COVID cases again in China. So that is -- again, it's a little scary situation where -- they are taking it lightly that it's not like old times where they have to really respond. But still, I think with -- if the outbreak happens with so many millions of cases, I think that will definitely affect their overall demand, overall trade, overall manufacturing.
So whenever that happens, there's a lot of imbalance that happens, and that affects their consumptions go down and sometimes they are desperate to sell it to Indian markets. In the past, such things have happened. So there is definitely some uncertainty about Chinese markets right now also.
And if you look at last couple of quarters, their GDP has also gone down. So that is a sign where I think China has also slowed down in my view. In the last about 6 to 10 months, it has slowed down as an economy. So these are not good signs because U.S. is going through inflated cycle, Europe is also going through, some of the countries are going through recession and inflation. And again, China, one of the largest economies, again showing some declined numbers in terms of GDP. So overall -- I would say, overall, it's not a great time in terms of overall demand for consumer level products. So I feel that I think there is some more time to go till things get better, things revive.
Okay. Best of luck with the future quarters.
Thank you.
[Operator Instructions] The next question is from the line of Aditya Khetan from SMIFS Institutional Equities.
Sir, onto the Chinese economy slowing. So considering their economy is slowing, but the production levels, I believe they are still on the higher side only. So is -- are you witnessing any sort of increased imports in Dye Intermediates from China to India? And that is also putting some pressure onto the Vinyl Sulphone prices due to which the market is not performing. Is there any such idea on this one?
No, that was happening 3, 4 months back. But last, I would say, about 45 to 60 days, there has not been much of import pressure, the product coming from China. So even the prices they are quoting are much higher than what they were quoting 3, 4 months ago.
So today, I think China's position in terms of H-Acid or Vinyl Sulphone or Intermediate stocks to be sold, I think they are very comfortable. When I say that their economy is slowing down, where the Dyestuff or the textile space is very, very small, it's probably not even 5% of the total GDP.
So what I commented was that overall GDP has come down around 5%. So that is just a sign of things slowing down. But I think currently, last about a month, there's definitely not much import product from China available for Indian markets.
Any other countries, sir, from where we have a recent increase in imports, just particularly?
Import of what products?
Import of Dye Intermediates and Dyestuff.
No, there are no other countries where Dye Intermediates are produced. They are only produced in India and China. Dyestuffs are produced in some other countries also. But majoritily, it's done in India and China. So there are no imports.
There are some established companies, which are Taiwan and South Korea based in Dyestuff space. So they do sell some products to countries like India and Bangladesh and Vietnam and all that. But they don't have a significant share of the market.
Okay. And as you have mentioned, so the Chinese players have also increased the prices. So we would be also revising our contracts upwards only. So that would be reflected from the coming quarters, right, sir?
Yes. So the prices have not been falling for like last 2, 3 months now. There has been some demand. That is why I think the prices stopped falling further, though there is some correction in the raw materials, still the prices are not going down.
So yes, like you said, yes, the current orders, current contracts are definitely happening at this -- at the current levels, which are not going -- which have not been going down in the last few months. So with some of the raw materials going down, we're hoping for a better -- definitely for better margins than Q4.
Okay. And sir, onto the CapEx guidance, sir, for this -- for the Greenfield Saykha plant, what was the CapEx figure we have outlined?
Saykha, as we have mentioned in the revised projection also. So total INR 390 crores, we're going to spend for Benzene Downstream and our soft costs as well as infrastructure costs. At the same time, we have already spent about INR 64 crores for Sulfuric Acid.
So putting apart from Sulfuric Acid, about INR 390 crores, we're going to spend in Saykha. Out of that, about INR 250 crores is to be spent in current year and balance we have already spent by 31st March.
[ INR 247 crores will be this year ]. So sir, our guidance is to complete the project by September or by December. So that INR 250 crores would completely be incurred, so during the left 6, 7, 8 months?
Yes. By September, that will be incurred.
Okay. And sir, onto the debt levels, like what levels of debt we're seeing for FY '24 post expansion of [ Saykha ]?
Yes. See at present, our total debt is INR 755 crores in March '23 balance sheet. And another about INR 200 crores, we will add, at the same time, some repayment will also start from current year. So net, we're expecting about INR 150 crores will further get added to this level. So next year -- and we will be in the range of about INR 900 crores to INR 950 crores. This is a broader range where we will have our debt -- total debt, including working capital.
INR 950 crores?
Yes. So that will be of a -- debt equity of about 0.8, and that's a decent one for our sized company.
[Operator Instructions] As there are no further questions, I now hand the conference over to Mr. Ankit Patel for his closing comments.
With this, we conclude the call and would like to thank everyone for joining us today on this earning call. If you have any further queries, you can connect to us any time. Thank you, and have a nice evening.
Thank you.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Bodal Chemicals Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.