Styrenix Performance Materials Limited Q1 FY2025 Earnings Call Summary
Highlights:
- Sales volume increased by 8.6% compared to Q4 FY24 and by 21% compared to Q1 FY24.
- Revenue increased by 16.7% compared to Q4 FY24 and by 28.5% compared to Q1 FY24.
- PBDIT stood at 13.1%, which is better by 0.7% compared to Q4 FY24 and 3.7% better compared to Q1 FY23.
- Profit after tax stood at 8.7%, which is better by 0.5% compared to Q4 FY24 and better by 2.8% compared to Q1 FY24.
- Debottlenecking projects are on schedule.
- FY25 volume guidance remains 15% to 20% growth.
- No guidance on EBITDA margins provided.
- New product lines launched under the brand names STYROLOY and ASALAC.
- CAPEX for FY25 is estimated to be in the tune of Rs. 60 crores to Rs. 70 crores.
Key Questions and Answers:
- ABS imports: There has not been a major shift in imports year-on-year. Ocean freight costs have impacted raw material imports but haven’t significantly affected overall EBITDA margins.
- Sales volume split: In ABS, auto and household appliances are the larger markets. In PS, it’s household appliances and packaging.
- Global spreads: Global spreads have not changed much in the last 1.5 years. The company’s performance benefits from operating leverage as volumes go up.
- Power and fuel cost savings: Some plants have already commissioned cost-effective steam generation projects. The full savings are expected next year. Power cost saving options are under evaluation.
Additional Notes:
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The company stopped disclosing individual product volume breakdown due to competitive reasons.
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Pledges on promoter holdings have been released.
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The debottlenecking project is different from the brownfield expansion project. The basic engineering study for the latter is still ongoing.
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Realization increase is mainly due to product mix changes. The company also sells SAN and polystyrene at lower costs compared to ABS.
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Capacity Utilization: Styrene Performance Materials is operating at near full capacity for ABS and Polystyrene. Debottlenecking projects are underway to increase capacity.
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ABS Spreads: There is disagreement between the company and a caller on ABS spreads. The company claims spreads haven’t changed in the last two years, while the caller argues they have increased 30-40%.
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CAPEX: The company plans a total CAPEX of Rs. 650 crores over the next few years to nearly double ABS capacity and increase Polystyrene capacity by 50%. They will provide more details on the spending timeline in the next few months.
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Debottlenecking: Debottlenecking is expected to increase ABS capacity to 100-105,000 tonnes by the end of the current quarter. The company is aiming to complete debottlenecking for Polystyrene in the next quarter.
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Other Expenses: The benefit seen in other expenses in Q1 is expected to be sustainable, with some variations due to product mix and seasonality.
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New Products: The company has launched new products under the brand names STYROLOY and ASALAC. ASALAC uses a specialized ASA rubber along with SAN and AMSAN. They have received some validations and small commercial orders but expect bigger benefits later in the year.
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Stake Sale: The recent stake sale by the promoter was to retire debt taken for acquiring the company’s shares.
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Revenue Distribution: ABS revenue comes from Automotive (40%), Household Appliances (40%), and other industries. Polystyrene revenue comes from Household Appliances (40%), Packaging (40%), and other industries.
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Impact of Management Change: The new management has implemented changes to improve product efficiency, projects, and customer relationships, focusing on growth.
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Freight Costs: The recent increase in ocean freight costs is not reflected in Q1 results but may be seen in Q2.
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Power and Fuel Costs: The company is implementing projects to use alternate fuel sources, which will reduce costs significantly. The benefit will be seen incrementally from Q2 onwards and fully realized next year.
Overall, the company is experiencing volume growth and stable margins. New product launches and cost-saving initiatives are positive signs for future performance.
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