Rain Industries Limited (500339) Earnings Call Transcript & Summary

Good evening, everyone. On behalf of Rain, we welcome all the participants to the first quarter 2020 earnings conference call of Rain Industries Limited. The speakers on today's call are Mr. Jagan Reddy Nellore, Vice Chairman of Rain Industries Limited; Mr. Gerard Sweeney, President of Rain Carbon Inc.; and Mr. T. Srinivasa Rao, Chief Financial Officer of Rain Industries Limited. During the call, management will be referencing and discussing a slide show presentation, which is available for viewing on our website at www.rain-industries.com in the Investor Relations section. It is recommended viewing this presentation while listening to management's discussion. Before we begin, management would like to mention that some of the statements made in today's discussion may be forward looking in nature that could be affected by certain risks and uncertainties. The company's actual results could differ materially from such forward-looking statements. Now if you could turn to Slide 3, and I would request Mr. Jagan Reddy to provide an update on key developments within Rain Group. Thank you and over to you, sir.

Thank you. Good evening to everyone. I hope you are all well and staying safe during this challenging time. Here at Rain, we have been fortunate during the global coronavirus pandemic as well. In every country, except in India, where stay-at-home orders have been implemented, our plants have been designated as essential businesses or have received -- and have received the requisite approvals to continue operations because they support the critical industries such as aluminum, steel, carbon black and petroleum refining industries. On slides 3 and 4, we provide a few key highlights on how we have been doing everything possible across our global organization to keep our people safe and plants operating so that we remain a strong link in the global supply chain. For example, nonessential employees are working from home to reduce the risk of contaminating those who are critical to our production process, and we are using our chemical know-how to produce our own cleaning agents with disinfecting properties. In addition, our global safety, health and environmental group has been in continuous contact with the employees at our facilities and those working from home to ensure they have the latest information about the virus and best practice to remain healthy and safe. We are acutely aware that continued operation of our plants is not only crucial for Rain but also for the broader global economy and in our local communities. To date, our diligence, knock on wood, has paid off. I am proud to tell you that since the World Health Organization declared a global pandemic on March 11, we have had 0 work-related coronavirus cases among our employees. Turning to Slide 5. As a result of continued operations, I'm pleased to report that we had a reasonably first quarter -- good first quarter. Our adjusted EBITDA of INR 5.58 billion during Q1 was a 23% improvement over INR 4.54 billion that we recorded in the fourth quarter 2019. Other than the second half of March month, the first quarter went pretty smoothly, much as expected, with the positive conditions from the fourth quarter carrying over and volumes and margins holding firm. We are pleased that our earnings improved sequentially as business conditions remained positive. By mid-March, however, the situation became extremely uncertain due to the pandemic and the oil price war between 2 large oil-producing nations. The resulting collapse in oil prices had a material impact on our BTX, carbon black oil and fuel oil products, which traditionally are highly variable to begin with. The volatility in this case, though, was exceptional and unique, prompting us to take INR 900 million write-down at the end of quarter 1. And you are aware the impact of the oil price and collapse in oil consumption has had broad repercussions across the global economy. While our Q1 inventory adjustment was exceptional, our consolidated performance was in line with exceptions -- with expectations. In our Carbon segment, Q1 EBITDA was up 14% compared to the prior quarter, though revenues were flat. This was a result of stronger-than-anticipated demand and dislocated orders that we picked up due to the early impact of coronavirus on China and their inability to export shipments to global customers. As a result, we gained some unanticipated spot CPC volumes. The shutting down of the global economy over last few months has resulted in swings in many commodity prices. It has gone in both directions. Of greatest concern to us has been the impact on global refinery runs, which has affected us to varying degrees to this point. While CPC prices began to rise early in Q1, they later weakened with the reopening of China. Likewise, GPC prices were initially weak but have strengthened due to reduced refinery runs, which cut GPC supplies in various parts of the world. We are watching the specific developments going forward as the recent events have pressured CTP prices while GPC prices have increased. This margin pressure should be short lived but will largely depend on the availability of GPC going forward. On the pitch side, our Carbon segment -- of our Carbon segment, our performance was in line with expectations in the first quarter, aided by increased volumes in Russia and the restart of major North American smelter. Pitch prices have declined consistent with commodity prices and coal tar prices, which protected our margins. The major area of concern for us has been cuts in metallurgical coke production, again consistent with the impact of global pandemic. Reduced steel production and shutdowns at several plants have resulted in a 35% reduction in coke production capacity. We do not foresee this being an issue for us and have taken several countermeasures to secure additional supply as a safeguard for our distillation business going forward. In other carbon products, volumes of carbon black oil went down in first quarter because of combination of factors, including impact of coronavirus and economic activity, loading issues at our facility in Russia and lower auto sales, which showed a 20% year-over-year decline, and that's really saying something since 2019 was a very bad year for the auto industry. Conversely, creosote volumes were quite strong during this quarter, and we expect second quarter to be robust as the North American rail industry appears to be using this period of reduced travel to ramp up track maintenance. Turning to our Advanced Materials segment. Revenues improved marginally compared with previous quarters, while EBITDA doubled compared to the fourth quarter of 2019. During the quarter, our engineered products business operated at full production capacity for our PETRORES coating product for lithium-ion batteries, thanks to solid electrical vehicle sales. Volumes of our CARBORES, specialty carbon were also strong during the quarter, and that continued into April. More recently, though, we have seen this volume moderate as European plants relined their blast furnaces. Our resin sales during the quarter were strong, and our commercial team has been successful in gaining price increases as we transitioned our traditional product offering to competitive value proposition tailored to customer needs and requirements. In March, we also ceased production at the Uithoorn facility in the Netherlands and have successfully shifted production of profitable resins to our Duisburg plant in Germany. Just as significant, the closure of Uithoorn will eliminate approximately $10 million in annual fixed costs without adversely impacting resins production or profitability. Moving to intermediates. The oil price war had a big impact on BTX and petroleum pitch volumes fell significantly. The petroleum pitch reduction was due to reduced distillation as fuel oil prices were too high as speculation about IMO's rules and inflated price -- had inflated prices and impacted availability. This is clearly no longer an issue. Naphthalene derivatives also saw lower sales during this quarter and were impacted by disruptions in our system due to electrical outages that resulted in several days of lost production at phthalic anhydride plant. On our Cement business, despite increase in revenue by 10% compared to the previous quarter, EBITDA remained flat. This was primarily due to a decrease in realizations in all the key markets as a result of sluggish market conditions. With this business update, I will now turn over the call to Gerry Sweeney to take you through the industry and other business updates on Slide 6. Gerry?

Thank you, Jagan, and good evening, everyone. It is a pleasure to speak with you all again. Turning to Slide 6. Global aluminum production increased by approximately 2.7% compared to prior year quarter primarily related to China and the Middle East. With most automobile and airline production facilities idled due to the pandemic over the last few months, clearly demand is falling for primary aluminum. The aluminum industry is heavily reliant on these industries, and we are pleased to see them slowly coming back into production. Due to the reduced demand, one North American smelter in the Pacific Northwest announced their closure during Q2, and others began to reduce amperage to their cells to keep production lines operating, lowering metal quantity in preparation for sale to the LME to turn cash. We are and we'll continue to watch these developments moving forward. Turning to our major capital projects on Slide 7. We lit the flare during March and began to feed C9 resin into the hydrogenation reactor of our new Hydrogenated Hydrocarbon Resins facility. This was a major accomplishment by our team. Given the unprecedented operating environment, they continued construction. And we're very excited to have reached this point since customers have been anxiously awaiting production of our new NOVARES pure white resins -- excuse me, pure water-white resins. So far, the product quality has been as planned, and we are excited about the potential it brings to this business. Commercial production has begun, and we are preparing commercial-size test cargo to our customers to perform technical testing of the product, which will take several months. We anticipate that HHCR will contribute to our earnings by year-end. Shifting to India. We had to delay the start-up of the Vertical Shaft Calciner due to the impact of the coronavirus. Given the uncertain global situation, we now expect to commence operations in Q3 2020. We also temporarily stopped the construction of anhydrous carbon pellet production facilities in the U.S. and India to minimize the possibility of coronavirus exposure during this peak period to our existing operations. We now expect to commence operation of our ACP production facilities in Q1 2021. With regards to developments in India, we're awaiting the finalization of the national SO2 emission standards for the calcining industry. The release of these standards appears to be the linchpin to clarification on the restrictions imposed almost 2 years ago on the import of GPC and CPC. As we've stated in previous calls, our existing Vizag plant and the new jet calciner have scrubbing systems that can remove at least 98% of SO2 emissions. So we are confident in our ability to meet any new standard that might be imposed. Looking ahead, Q2 is traditionally our strongest quarter as industries come out of winter and ramp up their activities. That will not be the case this year. Q2 demand will be down due to these unprecedented events. Our major focus is on the forward outlook, meaning how quickly global industry will restart and ramp up and how it will impact demand for our products. During the second quarter and until demand returns, we see reduced global demand for aluminum, tires and other automotive components due to the temporary closure of many automobile and airline production facilities that could have a cascading effect on demand for our Carbon and Advanced Materials products. We are prepared with contingency plans in the event of reduced demand for our products. We're taking nothing for granted in these uncertain times. We ramped up cost reduction programs already in place, watching plant profitability so we can act quickly, reducing capital expenditures where feasible and closely monitoring liquidity to ensure we can weather the next 2 quarters. We're a versatile company that has seen many fluctuations in market conditions over the years. We will continue to monitor the market conditions and react based on circumstances that confront us. While the markets are fluctuating in an extreme mode currently, we are comfortable and confident in our position as a converter to maintain our margins and remain competitive over the medium term. With that, I will now turn the call over to Srinivas, who will take you through the consolidated financial performance of Rain. Srinivas, over to you.

Thank you, Gerry, and good evening, everyone. It is a pleasure to speak with you today. In the first quarter of 2020, the company issued consolidated net revenue of INR 28.82 billion compared to INR 31.78 billion in the first quarter of 2019, a decrease of INR 2.96 billion or 9.3% decline. This resulted from decrease in revenue of INR 2.18 billion, up 10.2% in our Carbon business segment and a reduction of INR 0.44 billion or 5.7% from our Advanced Materials business, and INR 0.34 billion or 12.5% reduction in our Cement business segment. Rain's consolidated adjusted EBITDA increased by INR 1,915 million compared to prior year. This resulted from an increase in the Carbon segment by INR 1,801 million, an increase in Advanced Materials by INR 287 million, offset by a decrease in the Cement segment by INR 173 million. Now turning to next slide on the Carbon segment performance, Slide 9. Revenue from our Carbon segment was INR 19.15 billion for the quarter ended March 31, 2020, compared to INR 21.33 billion for the same period last year. During Q1 of 2020, the average blended realization decreased by 19.1% due to changes in industry-related dynamics, which was offset by the favorable increase in volumes due to the timing of the shipments and impact from the appreciation of U.S. dollar versus Indian rupee by 2.9%. Gross sales volume in the Carbon business segment increased by 11.1% mainly due to an increase in CPC by 17.4% and an increase in CTP volumes by 12.1%, which is offset by decrease in Other Carbon Products by 6.7%. Overall, due to the aforesaid reasons, revenue from Carbon segment decreased by 10.2% in Q1 of '20 as compared to same period last year. Adjusted EBITDA of the Carbon segment increased by INR 1,801 million due to increased volumes and margins in CPC business as we will have -- as well as having worked through inventories of high-cost raw materials compared to prior quarters. Turning to next slide on performance of Advanced Materials business segment, Slide 10. Revenue from our Advanced Materials segment was INR 7.24 billion for the quarter ended March 31, 2020, as compared to INR 7.68 billion for the same quarter last year, a decrease of INR 0.44 billion or 5.7%. During Q1 of 2020, there was a 6.7% decrease in volumes, which was driven by reduced production due to scheduled maintenance, weak demand from the North American construction industry and the European automotive and adhesive industries and as a result of the closure of our Uithoorn facility in the Netherlands. During first quarter of 2020, the average blended realization increased by about 5 -- by 0.1% (sic) [ 1.1% ] due to change in the product mix. Due to the aforesaid reasons, revenue from the Advanced Materials segment decreased by 5.7% during first quarter of 2020 as compared to last year. Adjusted EBITDA of Advanced Materials segment increased by approximately INR 287 million due to improved absorption of fixed cost of existing facility by shifting resins volume from the closed facility in the Netherlands to Germany. Moving to next slide on Cement business segment. During the first quarter 2020, Cement revenue decreased by 12.5% compared to the same quarter last year due to decrease in realizations by 6.6% and decrease in volumes by 6.3%. Due to lower volume, Cement EBITDA decreased by INR 17.3 million in the current quarter as compared to last year. Moving to next slide on debt. We ended the first quarter of 2020 with total debt of $1,168 million, including $72 million of working capital loan and lease liability of $74 million recognized due to implementation of new accounting standard on leases. Net debt was $1,003 million -- it's about USD 1 billion. And based on LTM EBITDA, $273 million, we ended the quarter with a net debt-to-EBITDA ratio of 3.7x. Despite the ratio being above our target level, we are still comfortable here as our average borrowing cost stood at 5.2%, and we expect it to remain stable since the floating rate portion of our long-term debt is pegged to EURIBOR, which is still negative. Cash flow and capital expenditures and planned turnaround for the quarter totaled about USD 60 million, of which USD 29 million was our major growth projects. Given the completion of HHCR plant in Germany, the high cash outflow relative to capital expenditure is not a surprise. Regarding liquidity, we ended the quarter with USD 165 million of cash in hand and USD 162 million of undrawn revolving credit facility. Given the current circumstances, we are watching our liquidity position very closely in all regions to ensure that our ability to access credit lines is not hindered by performance. While we have not been put in a position to proactively run our lines of credit as of today, given the current economic situation, monitoring of the situation has become a routine task. In addition, we continue to evaluate various government assistance programs in all the countries where we operate. So we are prepared to access them when appropriate and to product -- protect the jobs of our employees when we can. Current uncertainty has allowed us to increase monitoring of capital spending, further increases to our cost saving programs and reduce credit lines to customers. These efforts will position us to weather the storm that may come in a year where we are completing strategic capital projects. With that, I will now turn the call over to the operator to start the Q&A session. Operator?

[Operator Instructions] The first question is from the line of Chirag Singhal from First Water Funds.

So just a couple of questions. First, what kind of margins will you be expecting from the HHCR plant?

See, we just started operations. And so once -- hopefully, we should stabilize sometime during the -- towards the end of third quarter. And starting fourth quarter, we should be fully operational. And so we just started, so we cannot comment on the thing. But when it's running at full capacity, the margin should be -- the EBITDA margin should be well above 30%, 35%.

Okay. Okay. And sir, now coming to the volumes. In the current quarter, as you mentioned in the commentary, that we'll be seeing -- we already are seeing a lack of demand and all. So what kind of volume loss we will be seeing for the current quarter?

You mean in the second quarter?

Yes.

Second quarter, we cannot comment at this point of time because things are a little -- we have seen some performance during the first half, and now we have to see how it goes on in the second half. For the first half, it was not so down. But as you are aware, with this COVID crisis, we really don't know what is going to happen tomorrow. So we cannot comment on the current quarter's performance, but we know it will be weak. We are not seeing any decline in the first -- particular days of the quarter.

Sorry?

Of the particular days of the quarter, we have not seen a big fall.

Okay. Okay. All right. But you can give me the capital utilization rate, right? A tentative capital utilization rate at the current level?

We cannot give by month and other things because we don't have the habit of -- actually, we don't have a policy of giving out monthly production numbers. So we cannot comment on that. And especially, commenting on -- during this crisis time is not the right time.

Yes. Let me jump in at this juncture, I mean, just to give you as much of a response as we can at this time. If you note from our comments, we have a lot of moving pieces. It's not just a volume aspect here. We have pricing and margin pressure in some of our liquid products and such. So we have a lot of pieces that are moving. That's why as Jagan rightly put it and as we've already said in our commentary, the second quarter is clearly not going to be a strong quarter for us, which it historically has been. And we already are acknowledging that it's not going to be as good as our first quarter because of what's taking place, which is impacting volumes, which is impacting our margins in different areas on different products. So it really is a very evolving situation that regardless of how you look at it right now, it's a complex change from where we usually are.

All right. All right. Okay. Sir, just one last question. Sir, on the inventory loss. So will it take a quarter to normalize for the inventory loss? Or will we see a laggard, like will we see the extension of the inventory loss in quarter 3 as well?

No. It's not anticipated. The -- we don't normally -- we do have fluctuations, especially in our liquid products category. We do see fluctuations of our product prices. They're commodity based, right? So we see fluctuations from quarter-to-quarter, gosh, from week-to-week, from month-to-month. We don't normally take write-downs related to that. However, due to the pressure from the crude oil prices in 4 different product categories, it was a 70% drop-off in values. That's what necessitated the first quarter write-down. There are no follow-ons contemplated to that. We have even seen some recovery of crude oil price of late, but there's -- we do not expect that event to carry on.

[Operator Instructions] We take the next question from the line of Rohith Potti from Marshmallow Capital.

My first question is on our capital structure. So I think we had a very efficient capital structure. But with the changing facts, have we changed our opinion on if capital structure should be changed so that we have more equity and less debt? So broadly, do you think that we should pay down -- when things normalize a little, do you see yourself paying down the debt to bring some more redundancy into the capital structure as compared to before?

I would say, Jagan, you can have the final say on this. I would say, in the current circumstances, our major focus is our operations and our cash flows, right, making sure -- I don't think, in the throes of what's taking place, that we've given consideration to our capital structure. We're very comfortable with it as it exists today. And the only other thing I would say is our focus is always to pay down our debt wherever possible, and we'll be keenly focused on that going forward as we emerge from this crisis.

Just to add to that, basically we have a debt that is payable only in 2025. We have no payments for next 5 years. So from a debt perspective, we are pretty comfortable. And as you are aware, we have been spending quite a bit of funds, internal accruals, for expansions, be it the HHCR project or the ACP project or shaft calciner project in India. So -- but now I think, hopefully, after these projects are completed, we have no new projects in pipeline. So all the cash accruals were -- that may be collected going forward, well, actually can be used for debt reduction. Thank you.

Okay. Understood. That was helpful to know. So the second question I have is, so in the last year, towards the end, you had mentioned that you intend to bring debt-to-EBITDA to 3x, and I understand that with this current scenario that, that target, the time period at least where you're targeting that, would have changed. So if you could speak a little about that, if you think it's relevant. And the second question in debt itself is that you -- there is mention of covenants in the annual report that we have on our 2 facilities, the term loan as well as the bond that's maturing in 2025. How much of a cushion do we have in those covenants? And is that something which is, let's say, in the top 5 things that you worry about over the next year? Or is it that we are quite comfortable? And if it is possible, it would be helpful if you can share the covenants in a separate press release.

First of all, on covenants, I would like to address it. We don't have any covenants. Mainly, interest covenants means that if you want to borrow additional funds, then only we have to achieve those covenants or maintain those covenants. Otherwise, just for our normal operations, we don't need to worry about any of the covenants because the covenants we have -- our debts are covenant free, except getting current. Second is on -- regarding the debt-to-EBITDA. And as I said, basically, it has fallen with our CapEx projects, the new projects starting up and the markets for most of the products and our cost cutting. And we expect our EBITDA to improve very well and to increase well. So -- and meeting the debt-to-EBITDA ratios, as we've targeted, and along with any repayments with all the surplus cash, we are pretty comfortable meeting those debt-to-EBITDA ratios.

And one last question from my end is, I mean, obviously, the GPC -- GPC availability and coal tar availability are extremely vital to our organization. It is very obvious. So in the current scenario and over the next few months, how -- if you could give us a little more color on their availability across the geographies that we operate in, India, Europe and North America.

Gerry?

I'm happy to do that. The -- we'll start with coal tar first. We have very strong relationships -- long-term relationships for our coal tar supply. However, this unique circumstance left us quickly moving to shore up to make sure that we have enough supply because we do have the opportunity to continue to run at full rates on our -- pretty much full at all of our plants worldwide. So we've done that. We have contingency in place. Or if we have any spot disruption of supply due to curtailments, we're comfortable with the plans we have in place for a kind of a Plan B type of scenario. And that's mainly because while we have right now a global pandemic, how economies emerge, whether it's Asia, Europe or the Americas, can be very selective moving forward. And so we're watching that carefully. But we're very comfortable with our tar supply and our Plan B that if we need to move to it, we can move seamlessly into that. The -- on the GPC side, anode-grade GPC side, as you said and as we've commented, it is a murkier situation, and that's just because for what I really described from the tar side and global steel production, you now take that over to refining. What we've seen to this point is we've seen reduced refinery runs because -- consistent with the reduction in demand for transportation fuels. And as such, they're just not running refineries and cokers as heavy. Right now, the major area that we see of impact, and it is pretty much globally, is ultra-low sulfur coke. And in that area, we've seen -- for these conditions, you might say that ultra-low sulfur coke has abnormally risen in price in an environment where you really wouldn't expect it to be rising in price. And that's just purely from a demand and availability dynamic perspective. However, things are moving very quickly where we are comfortable with our ability [ to get ] adequate raw materials. It's just obviously, as we commented earlier, at what cost, and that's what we're acutely focused on so that we can maintain our margin and reach expectations in the business.

The next question is from the line of [ Akhilesh Kumar from Xplore Technologies ].

I joined late. If I have -- if you have commented already, you can skip. I wanted to know about the GPC allocation. We are not informed in the communication. What is the status on that? And have we got allocated for our new plant as well?

See, basically, we expect the new allocation to be given next week for the financial year 2021. Because of the coal prices, there has been delays associated with that. And now finally, hopefully, we should have allocation next week. And in regard to the new plant, also we applied, but we also will know early next week what the status of the same. But we have contingency plans also for that. So we should be all right.

Okay. And there was a complaint from others that -- regarding -- you were talking a shipment. Is there any update on that?

No. Actually, as you may be aware, we did actually import a small shipment into India. And then subsequently, there have been some queries. We addressed them, but we don't have any response from them back again, so.

So we are ready to release. Okay. I have one more query regarding HHCR plant. I remember in earlier calls there has been -- informing us that many of our low-value raw materials will be consumed by HHCR plants. So in value terms, how much it will be there that we will be using our in-house raw materials for that?

And so let me work this. Well, we'll be procuring both in house, but we cannot mention exactly what is that. But I can tell you one thing, is based on our patents, what we have filed for the HHCR project, probably we will be -- as a raw material cost, we'll have probably one of the lowest raw material cost for any HHCR plant in the world. So all I can comment is that because our R&D team was very successful in actually trying to put used raw materials which are not used by others so -- to substantially reduce the cost.

So would that...

I think I can say that.

On working capital requirements, let's say, we will be seeing the increase substantially from that plant, right, going forward?

No. Not really because - -that impacts very much because the raw materials, as I said, some are in-house. For example, the raw materials we are now using, it comes 100% from in-house. But as we grow, it may not be sufficient, so we will purchase from outside. But overall cost of the raw materials may not be that high. So -- and one good thing is, for example, if the HHCR price are down now, so is our raw material price. So we always target -- like in any other business, be it the calcination business, the distillation business, our target is always not on the top line, but the margin, what we'll make between -- the delta between the raw material prices and finished product prices.

Okay. That sounds great. One last thing. We are hearing a lot of news regarding China and chemical industry moving out of there. And subsequently, do you have any impact, positive or negative, on our chemical products in Europe?

No. We do not think -- let's see. Whatever happens, basically, I think, for example, Europe and India have announced some COVID package yesterday. And the U.S. has announced before. All this should actually add to -- basically, they should benefit us. So it should be good for us.

The next question is from the line of Arvind Kothari from Niveshaay.

I had a question regarding the fixed cost of our business. So if -- for a period of a quarter, for example, if the demand is very weak, so what kind of fixed cost we would be working with our suppliers even if the demand scenario is not there? I mean so just figure out how much that could increase if the demand scenario remains low for a year or so.

So that's a very difficult question to say because we don't know how much is the demand going to go down. So we have the flexibility to reduce -- to shut down a plant. Let us say, so 6 months or 8 months or 9 months, if the demand is going to come down, then as we operate several plants, basically we have the ability to shut down the plant, which means basically we will shut down our most highest-cost plant. So we should be able to manage to a certain extent on the fixed cost, to a certain extent. But again, there are SG&A costs and other things which cannot be managed. But being -- in the developed countries actually being the European Union or the U.S., basically we have -- they're supporting quite a bit there with COVID packages and other things. So we should come out all right. But again, today, we are in a very uncertain situation, so making any guesses now is just -- so anything could be -- so that's why we cautioned -- in our annual report, we cautioned here that because there are -- we are not aware basically how this will unfold. Not only us, nobody is aware. So we don't want to really comment on second quarter, please.

Yes. What I'm happy to offer related to your question is that from a major project's -- product's perspective, be it calcined petroleum coke and coal tar pitch, our volumes, while a bit reduced, are still moving. So that's the very reason that our operations are still growing. So we've not seen -- to what Jagan said, is we've not seen a major impact to this point that's of great concern. What we need to watch is what is going to continue to happen with these industries as this continues to play out. Obviously, with producing the products and especially our liquid products, it comes down to the margin aspect of the volumes that we're selling. In those areas, we are seeing reduced demand for the liquid products. Obviously, we're seeing very much reduced prices and everything. And so while on the major product side we're more comfortable, beyond that, right now, we are producing some products that we're having to push into a market that doesn't necessarily want them. That obviously never favors you from a margin perspective. So this is what we're faced with. While we're -- and I want to just indicate that that's why we make a statement like, look, we're comfortable with weathering this, but from a profitability perspective and where we'll wind up, it's still too fluid a situation.

Correct. Correct. So another question was relating to this only. So I mean, our capital allocation has always been to go for CapEx for a project that we -- earlier and use opportunity. But given the current scenario now, I mean, the demand scenario, so going forward, are we willing to alter that in terms of favoring debt payment more over lower CapEx? Or how is the management thinking about the future? Whenever things settle down and whenever you have normal demand coming back and cash flow coming back to our company, what would be the...