Analyst Meet / AGM - Analyst Meet
Increasing its sales of Premium products which will help in improving margins in next couple of years
The company held its investor update on 13th Sep 2016 and was addressed by CFO Mr. Bhupesh Porwal
Key Highlights
Net sales were lower by around 17% in June'16 quarter due to decrease in sales volume and lower raw material and finished goods prices.
In June'16 quarter, volumes were lower by around 9% to 33.8 Kt due to constrains in supply of key raw material Butadiene. The company did not have enough stock of the material and suddenly due to plant shutdowns of the vendors; the company was not able to source enough Butadiene to meet the demand. However, post June'16 quarter, the company was able to source the raw material and its back to normal business.
The company retained leadership position in Automobile industry. However, there were imports seen from the competition which had impacted its market share in June'16 quarter.
Demand from automobiles and Household segment is expected to remain strong in FY'17. Post near normal monsoon the sentiment is strong and inventory built up is seen.
There was an inventory gain in June'15 quarter which was not there in June'16 quarter which also resulted in lower margins for the company.
On segment wise basis, post the merger of Styrolution India Pvt ltd, the specialties segment (ABS and Styrene) de-grew by 19% in revenues to Rs 250.2 crore for June'16 quarter on YoY basis, while Polystyrene de grew by 13% to Rs 116.90 crore on YoY basis. PBIT for Specialties segment stood at Rs 26.70 crore down by 23% YoY while for Polystyrene, PBIT was lower by 92% YoY to Rs 1.10 crore. Polystyrene business had strong FY'16, but the raw material fluctuations and unavailability of Butadiene have led to lower margins in June'16 quarter.
Management is seeing some demand pick up from automobiles, households, toys, stationery, packaging etc. As per the management volumes are not a problem and are confident of around 8-10% volume growth from H2 of FY'17.
Management expects normal tax rate for FY'17.
The ABS market share of the company will be around 40% as on June'16.
The company is increasing its sales of Premium products which will help in increasing margins in next couple of years.
For FY'17, management expects range bound movement in raw material prices. Good monsoon, 7th pay commission and infrastructure spending will help in improving overall demand particularly from rural sector.
Company expects to regain the lost market share in rest of FY'17. Management expects to further penetrate in other industries significantly and to be a strong player, like how they are in Automobiles and Household segment. Management also expects to improve the distribution network through 3rd party logistics to increase the penetration level of the products.
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