Phillips Carbon Black

Here is a summary of the conference call, focusing on financial performance, margin guidance, business segment performance, management guidance for the future, key risks, and industry outlook, based on the provided transcript excerpt:

PCBL Limited Q2 FY25 Earnings Conference Call Summary

Financial Performance:

• Consolidated sales volume for carbon black increased by 14% year-on-year to 148,000 tons in Q2 FY25.
• Consolidated revenue from operations increased by 45% to ₹2,163 crores, driven by better realization, higher sales volume, and revenue from the recently acquired Aquaform Chemicals.
• Consolidated EBITDA grew by about 53% year-on-year to ₹369 crores.
• EBITDA per ton in the carbon black business further increased to ₹2,324.
• Power generation increased by 25% year-on-year, with external sales volume rising from 103 million units in Q2 FY24 to 126 million units in Q2 FY25.

Margin Guidance:

• Management believes current margins are sustainable and sees potential for further improvement due to changing product mix, improving operating leverage, and ongoing efforts to enhance manufacturing efficiency and yields.
• Margins are expected to expand in a lower freight rate environment.
• Aquaform Chemicals is expected to achieve an EBITDA margin of around 25% by FY29.
• The battery chemicals business is projected to have an EBITDA margin of around 50%.

Business Segment Performance:

• The tire segment accounted for 82,83 tons of sales volume in Q2 FY25.
• The performance chemicals segment reported sales volume of 49,836 tons.
• Aquaform Chemicals reported steady performance with revenue of ₹362 crores and EBITDA of ₹50 crores in Q2 FY25.
• Aquaform’s capacity utilization remained above 75% during the quarter.

Management Guidance for the Future:

• PCBL is implementing cost optimization and operational efficiency measures at Aquaform Chemicals to improve capacity utilization and performance in the coming quarters.
• The company is undergoing an aggressive capacity expansion program in carbon black, water treatment, detergents, and oil and gas chemicals under Aquaform.
• PCBL expects to commission specialty carbon black projects in Mundra and Dhamra in Q3 FY25, with the second phase of the Tamil Nadu expansion planned for Q4 FY25.
• The company aims to reach 1 million tons of carbon black capacity by FY27-28 and is evaluating options for a proposed Greenfield capacity expansion.
• A joint venture, Nanovea Technologies Limited, has been established with EV India Private Limited to develop nano silicon products for lithium-ion battery anodes.
• PCBL plans to ramp up global sales volume from FY26 onward, with a significant focus on European markets.

Key Risks in the Business:

• Global business environment remains turbulent, with freight rate volatility and uncertain global economic conditions impacting margins.
• Aquaform Chemicals’ oil and gas chemicals business is facing headwinds due to a challenging market in the US, leading to lower capacity utilization and margin pressure.

Industry Outlook:

• The carbon black industry presents a large market opportunity, with the global market size estimated at 15 million tons and a long-term growth rate of around 3.5%.
• Demand in India is expected to increase significantly in the next five years.
• China’s carbon black industry is consolidating, and future capacity additions in China are expected to be limited.
• Russia’s carbon black exports are facing challenges due to sanctions, limiting their capacity expansion plans.
• These factors create a favorable environment for Indian manufacturers like PCBL, with significant growth opportunities in both domestic and export markets.

Disc: Invested