Styrenix Performance Materials Limited (506222) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q2 FY '21 Earnings Conference Call of INEOS Styrolution India Limited. We have with us today from the management of INEOS Styrolution India Limited Mr. Sanjiv Vasudeva, Managing Director; Mr. Sanjeev Madan, Director, Finance; Ms. Amita Mistry, Litigation and Secretarial Officer; and Mr. Abhijaat Sinha, Company Secretary and Head of Legal, India. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sanjeev Madan. Thank you, and over to you, sir.

Thank you. Dear shareholders, investors and analyst fraternity, we welcome you to this earning call. Your company, INEOS Styrolution India Limited, has declared its result for the half year ended September 30, 2020, on October 10, 2020. We will brief you about the major highlights of the performance. Regarding quarterly performance, revenue net of GST from operation in current year is INR 39,458 lakh as compared to INR 43,684 lakhs in July to September '19 and INR 11,552 lakhs as in the previous quarter. Profit before tax in the current quarter stands at INR 5,507 lakhs as compared to INR 705 lakhs in April to June '19 and loss of INR 3,071 lakhs in previous quarter. Now regarding year-to-date performance, revenue net of GST from operations stand at INR 51,011 lakhs in YTD September '20 as compared to INR 88,032 lakhs in YTD in September '19. Profit before tax in YTD September 2020 stands at INR 2,436 lakhs as compared to profit of INR 2,138 lakhs in YTD September '19. Regarding quarterly segment performance, specialties, profit before interest, tax and other unallocable expenditures stands at INR 3,529 lakhs in current quarter as compared to loss of INR 2,435 lakhs in previous quarter. Polystyrene profit before interest, tax and other unallocable expenditure is INR 2,154 lakhs in current quarter as compared to loss of INR 418 lakhs in previous quarter. The outbreak of COVID-19 pandemic and consequent lockdown impacted regular business operations. Gradually, the operations have started attaining normalcy. The company has assessed the impact of COVID-19 on its assets, including property, plant and equipments, receivables, inventories, et cetera. And it was concluded that the impact is not significant. However, the estimate of the impact of COVID-19 may differ from the same -- ascertained up to the date of approval of these financial results by the Board of Directors based on how the COVID-19 situation evolves over the period of time. So this is all about the clarification and detail about our financials for this quarter. We can go now for the -- any clarification, if needed. Yes. Thank you.

[Operator Instructions] Our first question is from the line of Kaushik Poddar from KB Capital Markets.

What is the demand-supply situation of ABS as far as India is concerned?

So this is Sanjiv Vasudeva. Can you hear me?

Yes, I can.

Yes. So the demand has improved across all industries for all polymers, including ABS in the last couple of months. And I believe this quarter also the demand seems to be pretty good for ABS and other polymers.

Okay. But in terms of tonnage, what is the kind of annual tonnage production? And what is the kind of demand?

So the annual demand in a good year -- I mean this is a very -- this was a very unusual year, right, because of COVID, typically, between 250,000 to 300,000 tonnes of ABS demand in India, and production less than 200,000 tonnes. And the remainder of the volume is imported to India.

Okay. And I understand there is a big fire in LG plant yesterday or day before. So consequently, do you see more shortages and hence, the price looking up?

That is for styrene, yes.. So which is one of the raw materials. And yes, it doesn't affect the total supply, demand because Korea is a big supplier of both raw materials and ABS to China. And so that mutually affect our supply, demand.

Okay. And my last question, I mean since there is a deficit as far as India's production vis-à-vis the demand, do you see yourself expanding your capacity?

We have kind of looked into this. We have done some level of engineering, and we continue to look into these kind of options. And as and when the economic situation improves and the cash position of the company improves, we can always consider. So it's always been back of our mind.

As of now, what's your production -- capacity, rather, I mean?

We don't disclose our exact numbers, but we are running pretty close to full capacity right now.

Our next question is from the line of [ Anuj Jain from Globe Capital ].

Congratulations on the good set of numbers, sir. Sir, basically, the demand which we have seen in this quarter is basically from the consumer responding side or any particular vehicle side or mix of both?

See it's a mix of both. As you would read in the paper, right, most of the plants will manufacture for washing machine for -- even refrigerators and all, they're talking about 20% to 30%, depending on which OEM growth numbers versus last year. Similar for automotive, both for 2-wheelers and for 4-wheelers, 10% to 30%, depending on the OEM, they are talking about for increase in production there from their side.

And sir, we are specifically skewed toward passenger vehicle side, if I'm right. I mean we have major portion coming from passenger vehicle side?

We don't disclose exactly, but directionally, we are a strong player in automotive.

Okay. Okay. And sir, given the styrolution prices, like they have moved from INR 750 mark to INR 1,150 somewhere in the last 1 month time frame, so how do you see going forward where the prices will settle?

Very, very difficult for us to predict. But yes, the short-term demand looks pretty good considering the global supply/demand scenario.

And sir, given the margins which we have delivered in this quarter, like 17% kind of EBITDA margin and 9% absolute margin, PAT margin. So are we able -- will we be able to sustain these margins going forward?

Margins depend a lot on what happens with the global supply/demand and the delta margins between the base raw materials and ABS, right? So -- and we cannot predict them. But for now, we are enjoying good margins.

Okay. So we can expect this kind of margin for this quarter also?

We cannot predict what it's going to be for the quarter. But the last quarter went well, and October has also been a pretty healthy month.

Our next question is from the line of Viraj Mithani from Jupiter Finance.

Congratulations on the good numbers. Am I audible?

Yes. Thank you.

Yes. Okay, sir. I want to know that what is the amount of inventory gain in this numbers? Is there any amount of inventory gain in this numbers?

The quarter numbers, which we have -- this quarter number.

I would say not very significant because we are -- any way we are sitting with very small inventory.

I'm sorry to interrupt. Mr. Sanjeev Madan, we're not able to hear you very clearly, sir.

Okay. Am I audible now? Is it better?

Yes, better.

So can you hear me?

Yes, I can.

Okay. So inventory side, I would say, not very significant any number because we -- anyway, we were sitting up with the very small inventory, that's very much clear in our balance sheet as well. So it's not not very material or significant.

Okay. And sir, when I look at your numbers, the major gain has come from the raw material prices going down, like almost by, I think INR 80 crores, INR 90 crores. So how the -- in coming quarters, the raw material prices are expected to remain soft? Or any sense on that?

I mean we cannot predict the prices going forward. But like I said and one of the gentlemen mentioned that ABS prices and all are pretty high, and with the supply/demand situation of LG and in general, what's happening in China, one would expect this to remain for a while.

Okay. And sir, your sales break up is 69% specialty and 21% polystyrene. So is it going to be the same sales breakup going forward? Or are we planning to change it from this?

We will continue to work across both product lines and directionally, specialty has been given over the last few years better profitability. So we obviously strive to push most of specialty sales, but polystyrene is something which also, as you would have seen this quarter, has given very good results, yes.

My next question is, sir, if I see the numbers from INR 93 lakh loss in polystyrene, we made some INR 21 crores profit. So what has changed from that? Have the prices gone up? Market prices or the cost is going down?

It's a combination of all, combination of the delta margin between styrene and polystyrene prices, a combination of supply/demand scenario. Also, as you may know or would have for that LG polymers had an issue with their polystyrene plant, back in May or June. So that kind of helped some of the other local players in filling up the volume gap and commanding higher prices.

Okay. And sir, my last one is, are we back to the pre-COVID levels of your production? Or are we still suffering from some...

Our sales volume is similar to last year.

We are back to almost pre-COVID level, right?

Yes. We are much ahead of the pre-COVID level. And I think if you look at our numbers from the same quarter last year, our revenues will be pretty much similar.

And sir, what is our capital utilization level will be now in the...

So it's on the higher side of our utilization as of now.

[Operator Instructions] Our next question is from the line of Amitabh Sonthalia from SKS Capital and Research.

My question was regarding the recent delisting attempt, which failed and et cetera. Could you just throw some light on the background of that? And what is the thought process? What was the thought process behind delisting? Why it failed? And will that be revived again?

This is Abhijaat here. So regarding the delisting plan, I think the promoter has an interest and wanted to delist this company to get the complete shareholding, and the price was much above their expectations. And -- but currently, so there's no current plan to revise that delisting proposal as of now. But they continue to have interest in holding the entire stake.

Okay. So is buyback or any such -- is there any other option, such as buyback?

We are not aware of anything as of now.

Okay. But just curious -- I mean, currently, the promoters own 75%. Is that right?

That's correct. Yes.

Okay. So they obviously can't do any creeping or anything like that. They have to -- delisting is the only option available to them?

Yes.

Okay. And so basically, they invited delisting bids and then they decided to reject it. Is that right?

The discovered price. Yes, the discovered price was higher than the anticipated, the price that they were willing to pay. So yes, they did not go for it, yes.

And was it disclosed what price they were willing to pay?

No, that was not disclosed.

Okay. Okay. And there's no -- I mean -- and just I'm curious, I mean, you obviously don't want to speak on behalf of the promoter, but what is the time lag between one delisting attempt and the next one? Is there a -- are you aware of that?

No. So there's nothing like as you, I think, rightly said, so I can't comment on behalf of the promoter. Legally, there's no time lag.

Okay. That's what I meant. Legally, promoter can attempt another delisting bid if they want to?