Alkyl Amines Chemicals Limited (506767) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Alkyl Amines Chemicals Limited Q4 FY '25 Earnings Conference Call hosted by AMBIT Capital Private Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Kumar Saumya from AMBIT Capital. Thank you, and over to you, sir.

Thank you, Sri. Good afternoon, everyone. Welcome to Q4 earnings conference call of Alkyl Amines Chemicals Limited. From the management, we have with us Mr. Udipt Agarwal, Chief Commercial Officer; Mr. Chintamani Thatte, General Manager and Company Secretary; Mrs. Kanchan Shinde, Chief Financial Officer. I'll now request the management for an opening remarks, post which we'll open up the floor for Q&A. Thank you. Over to you, sir.

Thank you, Kumar. This is Udipt Agarwal here. Good afternoon, everyone, for joining our call today for our quarter 4 and annual performance review. Let me begin by giving a few opening remarks about the year that has just gone by, and then we will open the conference for detailed question and answers. As you might have seen in our results, we had a modest growth in the top line, but there has been a significant growth in our volume numbers. And because of the price drops, we see the partial impact coming into our top line, okay? The good thing is that, parallelly also the prices of the raw materials also been going down. So that also has a carryover effect in our margins as you see it. So overall results mixed bag, I would say, although there is a volume growth, but at the same time, the pressure on prices continues. And -- on the -- all our major product projects are moving forward as planned as we announced last year. So all the project -- this new project at our Dahej site is moving as planned. We expect mechanical completion to be over by December of this year or January next year. So we will see the impact of that in our numbers in the next financial year. I think we will have more and more clarity and we have more discussions. And I will open the floor for the question-and-answer now.

[Operator Instructions] The first question is from the line of [ Devansh ], an individual investor.

And had a good result in Alkyl Amines. Can you please throw some colors on related to antidumping duty on Acetonitrile and something related to it?

Yes. As we all know, the Ministry of Commerce Department -- DGTR, Department of Trade Remedies, Directorate General of Trade Remedies announced the imposition of the antidumping duty on product Acetonitrile originating for certain regions and countries. But this is just an announcement from the DGTR. After this, there is another process, which is with Ministry of Finance, and that is still to be completed. Ministry of Finance typically has 90 to 100 days window after the DGTR recommendations. So the impact of that is not there as yet on our business. But you are right, there is an imposition of antidumping duty on Acetonitrile.

Sir, and antidumping duties imposed or not? And this is just investigation running on? Or did you get the antidumping duty by government?

The investigation was completed by DGTR, Director General of Trade Remedies (sic) [ Directorate General of Trade Remedies ]. They made a recommendation and the Ministry of Finance has to approve it now. Okay?

The next question is from the line of Rikin Shah from Boring AMC.

If we can help break down what kind of pricing pressure have we seen and volume growth have we seen this quarter?

So, this quarter, volumes are more or less stable, around 4% to 5% growth compared to previous quarter. But compared to corresponding previous year quarter, there is significant growth of around 15%, okay? And prices now more or less remain stable. Compared to last year, prices have dropped, but compared to previous quarter, the prices are stable. Margins are also stable. You can see stable EBITDA margins of around 21%.

Sure. So is the pricing pressure more to do with the diethylhydroxylamine component? Or is it a broad basket-based pricing we are seeing the pressure?

It is, I think, across -- it is across some product groups, more subproduct group less. Ethylamines and methylamines because of the demand-supply situation are more under pressure. Acetonitrile because of the continued dumping from China.

The next question is from the line of Nilesh from HDFC Securities.

Sir, in our previous conference call, you mentioned that the volume growth was about 8% to 10% in first half of FY '25. Can you guide us how much was the volume growth for full year FY '25?

Around 13% to -- 13%.

Okay. And top line growth was 9%. So pricing pressure, I can see that about 4% because of the value, right?

Yes.

So where you see witness pricing pressures? Is it in your specialty product or the ethyl or methyl chain?

It is more so in ethyl's chain and methyl's chain because of the demand-supply situation. And that's really driving the prices down. And Acetonitrile, we did not see any change in terms of the prices. China continued to dump and prices kind of remain very stable at a low level. I mean, marginal difference, a few rupees plus/minus, that is -- does not have any significant impact on the overall situation. I was saying the Acetonitrile prices remain more or less stable, however, at a very low level.

Okay. Okay. And sir, as you mentioned that in methyl and ethylamines, there are pressure. Is it because of the -- particularly in methylamine space, is it because of the capacity addition in the domestic market? Or is it because of the China dumping?

So methylamines as a product do not have to travel so much. So it is primarily because of the local situation what we have here in India. So methylamines are not imported into India from China. So what we get impacted methylamines is because of the agrochemical demand. Okay? So those -- some of the agrochemicals are being imported into India from China, okay? But primarily -- and some of the derivatives are also being imported into India from China. So that is creating a little pressure upstream on the base methylamines margin.

Okay. And how do you see FY '26 in terms of prices for all 3 categories of your product basket?

I think methylamines and ethylamines will continue to have a similar situation. We will see how the Acetonitrile plays out post the imposition of the antidumping duty, the impact of which they expect or we expect that should be sometime in quarter -- financial year quarter 2, second half -- second part of the quarter 2.

Okay. And just on the update on your CapEx, sir, how the CapEx is moving, the product launch? At what stage the CapEx, the ongoing CapEx plan or the plan is?

So, as I mentioned in the beginning, the announced CapEx are moving forward as planned. So there is no change in that. Last year, we announced a CapEx of about INR 110 crores, INR 120 crores for a new product at Dahej site. So that is ongoing. Other than that, there are a few other projects which are in the pipeline, but we have not decided as yet on the time lines of those and the amounts are still also being finalized. So we will be announcing as and when we are ready at this moment.

Okay. Okay. Okay. And just last bit, can you tell us about the ethylamine demand-supply in domestic market overall?

Nilesh, as you know, you have been following our company. And as you know, I mean, there are 2 major segments of the ethylamines demand, which is -- one is the pharma and the other is the agrochemicals. So pharma side demand seems to be a little bit stable. Agrochemicals, it's up and down. It's a mixed situation. But more or less, I would say, is that, there is a very small marginal increase in the demand over the years. That's on the demand side. However, on the supply side, I mean, you know it that we had expanded our capacity with the new plant in the previous financial year '23-'24. So we have a new plant with the capacity and other competitors also had their existing capacity. So at this moment, it's an oversupplied situation in India.

Okay. Okay. In terms of -- can you quantify how much is the demand as per your assessment, domestic demand?

We see a demand which is somewhere -- I mean, I can give you a range. It depends on how you look at it, because there are a few derivatives also. We generally also do not comment on the capacities and demand numbers. But directionally speaking, since you have asked it, somewhere around, I would say, 25,000, 30,000 tonnes per year.

[Operator Instructions] The next question is from the line of Bhargav from AMBIT Asset Management.

Sir, my first question is that, given that the DGTR recommendation goes through. Is it fair to say -- is this fair to say that --. Hello?

Yes. We are not able to hear you clearly.

Can you hear me now, sir?

Yes, better now.

Sir, I'm saying that if the DGTR recommendation on Acetonitrile antidumping duty goes through, then is it fair to assume that there could be an increase in realization in the range of around 15% to 20%?

Hard to say, honestly speaking. As you read the recommendations of DGTR, I think the lowest is $205 or $207 per metric ton and higher highest goes to $480 per tonne. But I think floor gets settled at the lower end generally in the commoditized semi-specialties markets. We also have to see after this, once the Ministry of Finance accepts the recommendation, how is the approach of the other importers into India, I mean, primarily the Chinese. I mean, how are -- what is their philosophy around pricing, okay? So we'll have to play, but -- and we have to wait and watch how it will play around. But overall, it should help us to improve our position in the market, I would say so.

What is the current pricing for us in Acetonitrile, sir?

Our current pricing is similar to as what we had said at the last call also around INR 140, INR 150.

Okay. Okay. And secondly, sir, we believe that this demand for GLP drugs is now rising. Is it fair to say that every tonne of GLP drug will require about 15x Acetonitrile?

This is true that the demand for these kind of molecules is rising, these kind of applications in the pharmaceutical industry is rising, no doubt about it. More and more pharmaceutical companies are trying to enter into this market segment, which seems to be very lucrative. This is early -- still early stages. People are talking about or the customers of ours are talking about significantly higher volumes in this area. At this moment, we are also trying to assess whether it is really like this, as you described, I mean, multiple times the demand. But I also understand that let's be optimistic about it. But at the same time, we also know that as the drugs go generic in nature, there is also a process engineering which happens. And the prices of the finished goods also come down and resulting the raw materials as well. The pressure comes on to the raw materials as well. But directionally, yes, your information is correct. There's a larger demand or upcoming demand in these kind of applications.

And basically, we are in touch with those customers as well, right? I mean, we are also -- meaning once the opportunity [ fructify ], we will also be benefited?

Yes, true.

Okay. And does our name also feature in the filing when -- for these -- so that there is some entry barrier or no?

What do you mean? I mean, can you come again? I did not...

Meaning these GLP drug manufacturers, do they have to sort of disclose to someone that they are buying Acetonitrile from a particular company or it doesn't work like that?

Again, answer is yes and no. If it's [indiscernible] doing is for the innovator, producing it to the innovator, they probably might have to specify that they have silos, these are the key raw material suppliers or key solvent suppliers, which is generally there. I mean, when you file a drug master file, DMF, they call it. Therefore these are included, you are included there. And then the name is there.

The next question is from the line of Rajeev Rupani, an individual investor.

Sir, I had a question. The U.S. has placed tariffs on China for many goods. So I would like to understand, is there additional pressure or dumping by China to India for our products? Could you please clarify?

The U.S. tariff situation is evolving situation. So what will happen in July, we do not know at this moment, right? So -- but to answer your question, the second part, which is more interesting and more relevant for us is impact on us with respect to China dumping more into India. In our kind of product, we have not seen that as yet. But it depends on what happens in the next couple of months in U.S. But at this moment, no, we have not seen that impact, but speculation, but the theory is right. I mean, if China is not -- would be less and less competitive in U.S. market, all those capacities needs to find a new home. And India, which has already been a dumping ground for the international producers, I expect the intensity to increase.

That was helpful. And my next question was the products which you are going to introduce in the future, would we be the only producer in India for those products?

There are other producers, but with the smaller capacities.

Okay. And my last question is, this PLI scheme for pharma, which the government has announced. So when does that benefit accrue to us in the future?

Not into the pharmaceutical industry. So it is our customers who might get some benefit from it. So we are a raw material supplier to the pharma industry. And there is -- as yet, I don't think there is any PLI scheme for the chemical or specialty chemical industries. It has been in the works for last so many years. We have been hearing about it, but nothing concrete at this moment that we are aware of.

The next question is from the line of Mehul from 40 Cents.

So I have a question on the earlier question about new products. So what are the products which we are going to manufacture the new products?

As a policy, we do not announce it. So, of course, some of the customers where we have tested it know about it. But as a policy, we do not announce it. When the product is ready and we start selling, we will be announcing.

Okay. And what are the time line, sir, for the new products?

As I said, the CapEx is going on, and we expect mechanical completion December this year or January -- early January 2025 (sic) [ 2026 ]. Post that, we would be launching the products in the market. So we will see some impact of that showing up in the next financial year.

Right. And sir, in the earlier discussion, you mentioned about that the tariff situation is evolving as we all know, but you also mentioned that we will know in July. So please pardon my ignorance, but can you just share what are you referring to when you say July?

Yes, July because there was an announcement from U.S. side that the window is for 90 days to 100 days, and that period was ending in July. That's what the time frame I was referring to.

Right, right. And 1 more question, follow-up question on the CapEx...

Information and which may change at any point in time. I mean, we heard about a new trade pact between -- or new deal between China and U.S. yesterday. So situation is evolving, as I said, every day seems to be a new day.

Yes, yes. I mean, we are now -- yes, we are in a very dynamic world in terms of geopolitics. Sir, on the question on the CapEx for the new products, so which site you are having the CapEx being done on which side of Alkyl Amines?

This is at Dahej.

Dahej? And I'm just new to this company. So how many sites do we have other than Dahej?

We have 3 sites. The company started manufacturing products at a site called Patalganga, which is on the outskirts of Mumbai. Second site, which is probably the largest also is in Kurkumbh, MIDC Kurkumbh. And third one is in GIDC Dahej.

The next question is from the line of Rudraksh Raheja from ithought Financial Consulting.

I'm very new to the business, so please bear with me. So what would be your capacity utilization across different plants?

Average is around 60% to 70% across all the plants. So some are in the range of 80% to 85%, some are between 50% to 55%, but average is 60% to 70%.

And this is also a little bit -- could be different because if you're talking about at the finished goods level, it could be a little different because so many products which we also derivatize. For example, methylamines we also derivatize, right? So their base utilization would be different. So that's why Kanchan mentioned that at an average level, the utilization is in that range.

And sir, on an average, at best, what would be our highest utilization level?

Around 85%. Some plant 85%.

The next question is from the line of Rajeev Rupani, an individual investor.

Yes, sir, I had a follow-up question on the new products. So could you just at least guide us the new products? Is it going to be on the specialty chemical side or there are derivatives of amines?

That's more on the specialty chemical side, Rajeev.

[Operator Instructions] The next question is from the line of Kumar Saumya from AMBIT Capital.

A couple of questions from my side. This year, every quarter, we have been in the range of -- EBITDA margin has been in the range of 18% to 20%. So do we see the room for improvement in the next fiscal?

EBITDA margin in the range of 20%.

Yes, EBITDA margin is 21%. Last year, it was around 19%. So our average, if you see in the past, it is around 20% to 21%. So we are like now stabilized at that.

So do we expect to improve to around 21% run rate in the next financial year?

Difficult to say, but at present, we don't foresee any because the pressure on prices continue to remain as in past year.

Got it. And, ma'am, about the CapEx, what is the total CapEx apart from that INR 100 crores Dahej CapEx, do we have any more CapEx that we are planning to do this fiscal?

It's around INR 150 crores, so that is from carryforward projects from past year also and some new projects in current year, around INR 150 crores we forecast for next year.

And this includes INR 100 crores at Dahej, right?

Yes, yes. So out of INR 100 crores, we have already spent something in last year also. All around...

And, ma'am, this year what was the total exports that we have done?

This year, what was?

Total exports?

Total exports? Exports, generally, it is around 20% of the total sales. 20-80, generally, it has continued to remain.

The next question is from the line of [ Devansh ], an individual investor.

Sir, just wanted to ask about it's a bottom for the cycle because I just noticed that promoters who project trading company is buying your shares from open market because it's a good sign to add quantity at that price. Can you please share some thoughts on it?

Difficult to say market what is the bottom level. You never know.

Ma'am, sorry to say, but as you mentioned, sometimes you are getting antidumping duty and you are -- you will -- this will directly impact your margins, too and impact on volume growth, too.

We're optimistic about the volume growth and overall growth in the coming years.

The next follow-up question is from the line of Bhargav from AMBIT Asset Management.

Yes, sir, I just wanted to know 1 thing that what is the probability that the Ministry of Finance may reject the DGTR recommendation, I mean, in your past instances, is there any case where it has happened?

Yes, it has happened. In our case also when we had the sunset review for our product, monoisopropylamine, that time Ministry of Finance -- it didn't go through the Ministry of Finance. So there have been instances, but we also see that of late, quite a number of -- most of the cases are also passing -- going through Ministry of Finance. So Ministry of Finance generally accepts the DGTR recommendation. That's what I'm trying to say. But we have to keep our fingers crossed till the time final notification from Ministry of Finance is out and available to everybody.

And sir, here, does it -- does the pricing immediately improve or there would be some low-cost inventory also in the system. So once that inventory gets absorbed and then just to get some sense?

I think there would be -- every time there would be an inventory effect for sure, yes. And let's not forget that it will not only help us, it will also be -- the same conditions are also applicable for other producers of Acetonitrile in India.

No, no, sir, I was referring more to the Chinese dumping, which they do. So is it that before this antidumping duty announcement, they would preempt it and flood the market or from that perspective?

I think there would be some inventory effect.

The next question is from the line of Vatsal Shah from Kingstone Capital Management (sic) [ Knightstone Capital Management].

So I wanted to ask the split between amine derivatives and specialty chemicals from a revenue point of view.

Around 50% is from amines and 30% is from derivatives and around 18% to 20% from specialty chemicals.

Okay. And from what I understood was from amine and amine derivatives side, the problem is on the oversupply situation in local market and specialty chemicals, the problem is for antidumping duty. Is that correct?

Amine derivatives not -- the base amines, which is the methylamines and the ethylamine, there is oversupply situation, yes. And specialty products, if you look at it, we say that there is a margin pressure because of dumping from China. But at the same time, if you look at our revenue shift, our revenue growth, it's also similar across all 3 segments. So we are growing across all segments, amines, amine derivatives and specialty products.

Got it. No, I was trying to gauge the situation more from the point of view of recovery. So if there is an oversupply situation for amine and amine derivatives, so like for how long will it persist?

Yes. The major supply -- oversupply situation is in the amines, which is the methylamines and ethylamines, base amines. And there, there is a significant overcapacity. But we also have to keep this in perspective that when we build these plants, these plants are built for long term because these are large capacity process plant. It's difficult to put every smaller capacity plants every 2 years. So everybody who puts up these kind of plants, they plan it for the future, not for the short-term demand. So from that perspective, I think it will take a while for the capacities to be absorbed in the domestic market.

Got it. And can you also share the amine and amine derivatives industry growth rate, like what is the current industry growth rate?

Our primarily applications in pharmaceuticals and agrochemical applications and there -- you know how the [ Dubai ] has been growing. I'm not talking about the formulations that grows at [indiscernible] rate. So that's typically 6%, 7%, 8%.

Got it. And volume-wise, we are looking for around 10% in next 2 years?

Yes, we are looking at a double-digit volume growth. The target is...

The next question is from the line of Rajeev Rupani.

Yes, sir, I had a follow-up question on ACN, Acetonitrile. Sir, what I believe is our competitor is commissioning a 60 metric ton a day plant of ACN, which will be commissioned by FY '25-'26. And the domestic demand is about 30,000 to 35,000 tonnes. So what do you think will be impact on the price of ACN when their plant comes up? Will our -- will we suffer some price damage and capacity utilization will be less for us?

It depends on the timing of the capacities, which come into the picture. But if you look at the basic rule of demand-supply, if there is an oversupply situation in the market, yes, then it has an impact on the overall profitability of all the industry players. It's not only us. So that principle doesn't go away anywhere. So as and when somebody expands or new capacities come on stream, this kind of phenomenon is observed in the market.

[Operator Instructions] The next question is a follow-up question. It's from the line of Vatsal Shah from Kingstone Capital Management (sic) [ Knightstone Capital Management].

So there was a news about Aarti Drugs backward integrating into some of your products. So is there -- like is Aarti Drugs a significant customer of yours? Or like what will be the impact from them backward integrating into methylamine?

There is a news which we are also following up. We are also tracking at what point in time they would be able to come in the marketplace. So we will see as and when it happens. But methylamines are -- may sound simple products, like it's a one-step reaction of alcohol plus ammonia, but it is not so simple to produce. Of course, since they have invested into it, they will learn and come on stream. But again, the same logic applies here as well. Whenever there is a new capacity and market becomes oversupplied, there is a pressure on the margins.

Got it. And like are they a significant customer of us or it is negligible?

I would not say significant, but it's not negligible either. They have a decent demand, I would say. But there are customers who have a similar demand.

[Operator Instructions] The next question is from the line of Kumar Saumya from AMBIT Capital.

Sir, just 1 question. During the quarter, how was the demand in particularly for this quarter? Was it similar to what we saw in the last 9 months or something -- some new development or some underlying demand trends a little different that you're observing?

In this particular quarter, I would say, the demand was slightly on the lower side, market demand. But that is not because of any kind of fundamentals changing or any macro indicators. It was more because of certain customers were down, they were not able to produce and/or availability of other raw materials from that standpoint, but not because of any fundamental change in the market, which can happen in any quarter. I would say the underlying still remain the same, no deterioration in the fundamentals.

And sir, these customers that you are talking about, were they from pharma segment or agrochem segment?

I would say more on the applications of the specialty chemicals segment.

Okay. Got it. And are they back to normal? Or are they still struggling, sir?

I think they are back. That's why I said, I mean, there's no change in the fundamentals of this.

The next question is from the line of Rajeev Rupani.

Yes, sir, I had a follow-up question. By when do you think this pricing pressure on ethylamines and methylamine goes away since you and your competitors have a good capacity? So how much time do you think will it take for capacity utilization to improve and the prices to improve a year or 2 or 3 years? Could you just guide us?

Maybe a little longer. I wish it happens sooner, but it all depends on the demand development. And at this moment, if you look at the capacity, there's massive overcapacity. And so, one of your participants in the call also mentioned the Aarti industry, Aarti Drugs impact. So market is going to remain long in the next few years.

The next question is from the line of [ Simpreet Singh ].

I have joined [ the call with the capacity utilization ]. Can you restate what is the capacity utilization currently for our plants?

Repeat your question, your voice was not very clear. I think your question is more related to the capacity utilization of our plants, right?

Yes, sir.

Yes. So it's around 60% to 70% average utilization.

Okay. And 1 more question. Like recently, promoters are buying the stakes. So are Board considering any buyback or any form of reward for the shareholders?

No, we are not aware about any such thing.

Okay. Ma'am, 1 feedback. This time, I didn't see any investor presentation on the website or any on exchange. So that's the only way for us to -- for small shareholders to reach the management or see the presentation.

Tomorrow maximum, the presentation will get updated.

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.

Thanks, everybody, once again for joining the call, listening in and spending the time with us. I hope we have been able to answer some of your queries, and we look forward to your continued support in the future as well.

I'm sorry to interrupt, sir. There's a question.

Yes, please.

It's from the line of [ Devansh ].

Sir, just wanted to ask any guidance regarding for this FY '25 or any -- may you can guide some volume expectations or your views on your demand and supply?

So we expect a double-digit growth in next year, around 10% to 15%, which we have been achieving. Okay? So on volume growth, it will remain. Prices, we will continue to have some pressure on prices, but let's see. It's too early to comment on how prices will move.

Yes, sir, there are no questions. You can carry on with your closing comments.

I was saying just thanks to everyone for listening in. Looking forward to the continued support. Kanchan just now mentioned, we remain optimistic for the future, but at the same time, preparing ourselves for the challenges ahead. So cautiously optimistic approach as we move forward into the next year, okay? The good part is that, our customers are growing, the market demand is -- the market is not going anywhere. The opportunity in India is large enough for us to be able to drive the growth. And with this, again, thank you for listening in, and thank you, AMBIT [indiscernible] for us. Thank you.

Thank you, everyone.

Thank you. On behalf of AMBIT Capital Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.