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

Sure, sir. And just the last question would be, sir, that -- so now going forward in the next 2, 3 years, what's the plan for...

So we'll see how the economy shapes up. First and foremost, we've got to get profitable and which we are getting profitable with each passing quarter, which is a very good sign. We have become cash positive, which is also a good sign. So step by step, get the -- firstly get all the loans paid off; second, maintain the profitability for further few quarters and then make a decision based on how the economy shapes up in the coming year for the next steps in India.

And that would be towards, sir? So if the economy remains stable, so then what would be our next plan?

We'll decide. At the end of the day, it's Indian economy vis-à-vis global economy and other regions. So I think -- all we can do is execute and get good business performance, and that sets up as well for the future for India.

[Operator Instructions] The next question is from the line of [ Yogesh Seth, ] an individual Investor.

Sir, how is the demand environment currently at INEOS? Because I think last quarter, the volumes were severely impacted due to lockdown. And in one of -- in the last conference call, you had also said that demand in the month of May was around 30%, 40% lower. So just wanted to understand how is the demand environment right now?

So the demand has been improving. So May was a poor month. So June was better and July is even getting better. I would say we are 80% back to where the demand is. So we expect the festive season to uplift the economy and all the segments that we play in. So we are positive about the demand going forward.

Okay, sir. And sir, one more thing is what's your view on the medium to long term view for ABS as a product? Because one of the competitors last quarter, Supreme Petro, so they are going to, I think, an ABS expansion. So just wanted to understand your view on it.

So Supreme makes polystyrene, not ABS, and they are expanding their polystyrene and expanded polystyrene. And our -- and with the LG having to shut down last year due to their issues in their operations because of styrene tanks had fire, if you may remember, right? So they had to shut down their capacity. So that was about 70,000 tonnes going out of the market. So our view is that Supreme, this added capacity will just replace that capacity going forward for polystyrene.

Okay. And sir, just on medium term, 4 to 5 years view on the ABS as a product for India?

No. My view, I think, I've repeatedly said, I would expect ABS to grow at 8% to 10% kind of levels, assuming that there's no COVID or some major calamity, which may happen. So like -- just like India is expected to grow at 6% to 7% as economy, so we would look at 1.2 to 1.5x kind of a growth for polymer materials.

The next question is from the line of [ Nitin Kapur, ] an Individual Investor.

One more question I wanted to ask. Sir, in this -- I've been tracking last couple of interactions with you, and what I find is you sound to be a little more optimistic now compared to previous couple of meetings. But still I feel that the company is not aggressive enough in raising the capacity and other things. Don't you think that if you wait too long, the others will gain market share from you? This is one point. And another is, sir, what are the outstanding loans at the end of the year, which you are thinking of repaying? And one more, the demand was low last quarter. So just wanted to confirm whether you had reduced the production or you were holding some excess stock of finished goods at the end of the quarter in anticipation of demand recovering? So these are my few points.

So your first question was concern on market share. I think as of now, more than the market share, profitability is the most important thing for India, right, and that's what we are focusing on to maximize our margins. There are imports, which eat into the market share, which we don't mind because they are low cost imports taking away some of the low priced ABS. And we do not want to use our capacity for low-priced materials. So that we are not that much concerned, number one. I'll answer your third question first, and then I'll give it to Sanjeev for the outstanding loans, right? So the demand was lower last quarter. And like I mentioned earlier, it's improving with each passing month. It's not just for us, for a lot of industries, right? Not just for our polymer industry, for a lot of other industries, the demand was -- April-May -- May was a difficult month, and you can see it across different market segments that demand is improving.

So sir, just wanted to confirm that whether you reduced the production in those couple of months?

So we -- yes, from a production point of view, we did slow down our plants. We generally do not like to build a lot of inventory because we don't want to get tied up with -- a lot of raw materials are high-cost inventory. So we manage our numbers based on our internal inventory targets and plan accordingly.

Okay. I know that you don't tell us about the volumes. But just wanted to confirm whether there is any certain rise in demand? Or before the festival season or due to uptick in the economy, are you in a position to cater that?

Yes, we should be. Yes.

And just with regard to the outstanding loans at the end of the quarter?

Yes. So if you remember and saw our balance sheet, we had taken INR 100 crore loan from ECB. Out of that, we had already paid a certain portion already in the last year. So balance was only INR 54 crores in the -- as of 31st March 2021. Out of that, we are planning to pay INR 44 crore in this -- already in fact, we had already paid in this quarter. So balance will remain INR 10 crore, which as per ECB guidelines, we will pay accordingly in future. So net-net, 90% of ECB loan will be get repaid for the Moxi plant for which we have taken.

[Operator Instructions] The next question is from the line of Abhishek Jain from VC Corporate.

Sir, I wanted to understand one thing. Do you have any update about the LG plants coming on stream? And if not, then why the people are not -- means even in this environment, why the people are not bringing this capacity on stream? Number one. Another thing is that could you tell me how this slowdown and low volumes have impacted inventory level and receivables of the company?

So I could not hear the second part of your question, but let me try to answer and see how things shape up. So the LG plants, we don't know what their plans are, right? All we know that since May, June last year, they have been shut, and it has been over a year. And basically, all the governmental bodies and all who have been discussing with them, and all the regulatory bodies, and they've not got the approval to restart, okay? That's all we know. Now whether they're going to restart in 3 months' time, 1 years' time, 3 years' time, I don't know. But what we have observed in the market and what we have read in the papers that they are shut. And of course, that has played an effect on the polystyrene volume in India and which has helped some of the other players to maintain good margins and volume.

And another thing is there are 2 questions. One is about the trade. Means as I can see in the international market, the Chinese styrene prices have come down by 10% to 12% in the last 1, 1.5 months. But this ABS prices are remaining quite firm, like $2,300 to $2,500. So basically, means are you anticipating better margin in the September quarter or is the assumption is wrong?

Well, your assumption -- data points are correct, but all data points need not tie together, right, because it depends on what inventory you have, what you are seeing for which month and all. But directionally, if ABS prices are still holding good, styrene is going down a bit, and so are the ABS prices. We just have to wait and see how things shape up. Very difficult for us to predict what their margins are going to be going forward.

Okay. Okay. Fine. No issues. And just the final question. Means what sort of inventory buildup has happened because of the slowdown in the quarter 1 as compared to last quarter? Means year end and the first quarter, how much has been the difference, both in terms of inventory and receivables? Means if possible you can...

Yes, we don't disclose our numbers. But basically, our receivables have been under control. And our inventory has also been well managed from a finished good point of view.

Means it is the raw material that is with us, right, raw material that you were talking about?

Pardon?

Means it is just the raw material that is with the company, means unfinished raw materials, sort of, that is with the company for the -- during the quarter. Means, you were just talking about the high cost inventory sort of, means it comprises mostly of the raw materials and not the financials?

Yes.

Okay, fine. And sir, the last one. Auto sector is the biggest buyer of our -- user of our products. So how the slowdown in this segment is impacting our business profile?

Well, we sell into multiple segments. Auto is one of them. We're into household electronics. We are into distribution. We are into smaller appliances, packaging, helmet industry, electronics, health care. So auto is an important sector. And the slowdown does effect our short-term volumes, but we see a good recovery happening in the 4-wheelers. And 2-wheelers also, July sales are much better than June. So we are optimistic about a rebound in the auto industry.

And if you allow and if you can accommodate, I can ask a couple of more questions, actually, if possible. Shall I proceed?

Yes, go ahead. Yes, one last question.

Okay. The last question then. Sir, can you tell me, means, INEOS is an MNC company and the parent is quite reputed, the biggest one in Europe. So why does this Indian subsidiary don't attract good name in the investor profile even during this time? Means, as far as I understand, ABS is quite a complex chemical and a value-added item, and the specialty chemical boom that's happening, so why does no investor is coming on for this company actually? Means it's quite annoying and suspicious sort of thing. Means are we judging this company as a specialty chemicals or what?

Who's judging? Is it INEOS judging? I mean, is your question about INEOS? How is INEOS viewing India?

No, no. This company, in which I'm a shareholder, INEOS Styrolution India Limited?

Yes. So could you repeat your question? I didn't quite understand your question.

Like what we're seeing in India is that we have got a fancy for MNC companies. As an investor that -- whatever be the company, if it's an MNC parent, regardless of the corporate governance and all these issues, we actually prefer an MNC company. So INEOS is an MNC company. So why is it not attracting good name of investors? No FII, no domestic mutual funds or any big individual Asian bank. Nobody is buying this company or the other one as well. But as far as I understand that ABS is a very, very complex product, and it's a duopoly market. And still in this entire booming market of specialty chemicals, why is -- where's the cash actually? That nobody is entering into ABS segment, no investor is touching the stock. This is just a general question, which you don't need to answer if you don't want to. Means it's really annoying. Means I wanted to understand. This seems to be a very, very complex business actually.

Well, I cannot comment why investors are not or mutual fund guys are not tieing to ABS. But I -- but all I know that our -- the share prices and the market capitalization has improved versus -- vis-à-vis last year. A lot of chemical sector companies, specialty chemicals and ABS and other companies and polymers have shown improved profitability. And that's all I can comment.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Abhijaat Sinha from INEOS Styrolution India Limited for closing comments.

Thank you, everybody, for showing your interest in the company and attending this earnings call. We look forward to connecting with you during the next earning call, which is expected some time in November. Thank you, and have a nice day.

On behalf of INEOS Styrolution India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.