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

Ladies and gentlemen, good day, and welcome to the Q3 FY '21/'22 Earnings Conference Call of INEOS Styrolution India Limited. We have with us today from the management of INEOS Styrolution India Limited Sanjiv Vasudeva, Managing Director; Sanjeev Madan, Director, Finance; Amita Mistry, Litigation and Secretarial Officer; Abhijaat Sinha, Company Secretary and Head 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.

Good evening, dear shareholders, investors and analyst community. We welcome you to this earning call. Your company, INEOS Styrolution India Limited, has declared its result for our third quarter and 9 months ended December 31, 2021, on 9th February 2022. We will brief you about the major highlights of the performance. First, regarding the quarterly performance. Revenue net of GST from operations in current quarter is INR 31,191 lakhs as compared to INR 48,483 lakhs in October to December '20 and INR 58,840 lakhs in previous quarter. Profit before tax in current quarter stands at INR 7,343 lakhs as compared to INR 13,526 lakhs in October to December '20 and INR 12,061 lakhs in previous quarter. Now regarding year-to-date performance. Revenue net of GST from operations stands at INR 1,55,511 lakhs in YTD December '21 as compared to INR 99,494 lakhs in YTD December '20. Profit before tax in YTD December 2021 stands at INR 31,248 lakhs as compared to profit of INR 15,952 lakhs in YTD December '20. Regarding quarterly segment performance. For specialty, profit before interest, tax and other unallocated expenditures stands at INR 5,645 lakhs in current quarter as compared to INR 8,961 lakhs in previous quarter. Polystyrene, profit before interest, tax and other unallocated expenditure is INR 1,843 lakhs in current quarter as compared to INR 2,999 lakhs in previous quarter. In earlier years, the company had incurred certain expenses aggregating to INR 2,820 lakhs, including applicable taxes towards engineering studies and other directly and indirectly attributable costs for project expansion and included in capital work in progress as at 30th September 2021. In the current quarter, considering the existing available production capacity, business royalties and the continuing effects of COVID-19 pandemic, a continuation of the said project is uncertain. Hence, the company has written off capital working progress of the said project and is included in other expenses. So this is all about the clarification and details about our financials. Now we can go forward for the queries or if any clarifications required or which are needed. Thank you.

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

Congratulations for this results. My question was like what part of raw materials of INEOS India are procured from INEOS worldwide? And is there any specific trend around that?

All right. Thank you. This is Sanjiv Vasudeva. Thanks for the question. So we procure acrylonitrile from INEOS Nitrile. It is one of the raw materials that we use. And we have another supplier for acrylonitrile [ aside from INEOS Nitrile ]. We have multiple suppliers. Yes.

[Operator Instructions] The next question is from the line of Lakshmi Narayan from ICICI Mutual Fund.

A couple of things. One is I just want to understand the demand-supply scenario of our [ C ] products right now. And there was -- one of the players actually had to leave the market because of some accident earlier. And subsequently, there are a lot of disruption on the value chain also. So can you just elaborate in terms of the broad outlook on the demand supply for India? There are some imports. So that will be helpful.

Are you talking about polystyrene only?

Yes, polystyrene to start with.

Okay. So polystyrene, India has sufficient capacity. There are still some imports coming from Iran and from the rest of Asia, but it's a relatively smaller quantity.

Okay. Okay. And what about ABS?

ABS side, the capacity in India is -- the demand is more than the capacity. Hence, you have relatively larger imports coming from Asia and Middle East.

Can you just give me the approximate -- in terms of tons, so how much is the demand? How is it growing? And in particular, what has happened in the last 2, 3 years?

Yes, sure. Sure. I think overall, it depends which data we refer to. But based on the public data and public domain from -- published by CPMA, if I remember correctly, about 2 years back, ABS was about 270,000 tons, 70,000 to 80,000 tons. And after in 2020 -- we don't have the 2021 final numbers but 2020, because of COVID, the demand dropped by nearly 25% or so, 25% to 30%, more like 20,000 tons, yes. And last year, again, has been pretty similar. Maybe 5%, 10% -- not even 5% kind of a growth, yes. But we have seen a bit of higher imports into India in 2021. We expect ABS to kind of come back to a 10% growth level from this year. So that would basically mean getting back to the 270, 280 kind of a number. In terms of imports, we -- the imports are to the tune of about 100,000 tons, yes.

Okay. Okay. And in terms of our capacity, right, can you just talk a bit more about our capacity? And because I think there are, at some point in time, we were actually having some capacity either on compacting or something, right? Sorry if I'm wrong...

We added -- about 2 years back, we added about 1.5 years back capacity in the compounding. Earlier, we had about 65 kt. Now we have about 100 kt -- 100,000 tons capacity to make ABS finished goods, yes. That expansion has already taken place. We've got additional in December 2020, yes. we will not use the [ slide ] that has it completely.

So the demand of 70,000 tons, right, so our cumulative capacity will be around 100,000 tons. I mean what's the kind of total capacity we have? And how do we plan to increase our capacity in ABS since we are -- demand is higher domestically?

So like I said, we have about 100,000 tons, right? And then we have to pick and choose which battles to fight. We need not go for every single kt, yes, because a lot of imports which comes are also lower-end kind of imports, right, which relatively do not have greater sizing of margins, yes. So we prefer not to participate in the complete overall volume here. At the appropriate time, we'll look at the decision of adding new capacity. I think we are going through a -- still going through a COVID phase and we'll see what's the appropriate time to add capacity going forward.

And I think polystyrene demand was around 250,000 tons, if I'm not wrong?

No, you're absolutely correct.

And I mean how that actually panned out in the last -- I mean I remember that it was down there in 25%. How is it shaping up in terms of demand in the polystyrene side?

We again see an uptick in demand, yes, in polystyrene and not to the same extent in ABS. I would say polystyrene will be more like a 5% kind of a growth. That would be my assumption. And -- but yes, but what we have seen quarter-over-quarter, the demand is kind of coming back, right, as COVID is subsiding.

Okay. And one of the players who had 70,000 tons is going away, right? How has it actually benefited us?

Surely, our pricing power gets better, right, because it balances the supply-demand situation. And overall, some of the OEMs that you have in India would always prefer a local supplier rather than banking on imports. So the local players, not just us, we have other local players as well, will get an advantage over imports because for the OEMs, we -- they prefer local supply.

Got it. Got it. Good. And if I just look at your segment results, right, it is down, driven by -- what are the key reasons you attribute it to? And how do you think it [ will fare ] in terms of margins? Or industry [ that are in ]?

Sorry? We still have healthy margins, yes. And polystyrene, in particular, in terms of segment, we had a statuary shutdown, which we had to take every 5 years, yes. It was a long shutdown. And it's -- I think we've also put it in the investor presentation. We have to do it every 5 years. It's cleaning of all the styrene tanks and all, yes. I think that's the issue which happened with the competitor as well, as you know. So that was an important exercise because of which we also lost quite some volume last quarter, which -- hence, you see negative numbers for polystyrene versus specialty, yes. And that actually, we think that polystyrene should be coming back going forward, like was mentioned earlier.

Okay. Got it And [indiscernible] what kind of CapEx capital expenditure outlay outstanding [indiscernible] do you have in mind?

Sorry, we could not hear you.

Yes, my question is that over the next 3, 4 years, what kind of capital expenditure you intend to do, if you any?

Well, as and when we make those decisions, we'll let the shareholders know. Thank you.

Okay. My question is that, right, you are almost sold out on your capacity or you are still having room to grow there?

We have sufficient capacity in polystyrene, and we do have some capacity in ABS.

Ladies and gentlemen, as there are no further questions, I now hand the conference over to Mr. Abhijaat Sinha for closing comments. Over to you, sir.

So thanks. Thank you, everybody, to -- for showing your interest in the company. We thank you for participating in the call, and we look forward to seeing you in the next quarterly call, which will be somewhere around May 2022. Thank you so much. Bye-bye.

Ladies and gentlemen, on behalf of INEOS Styrolution India Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.