Ladies and gentlemen, good day, and welcome to Apcotex Industries Limited Q4 FY24 earnings conference call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Purvangi Jain. Thank you, and over to you, ma'am.
Good evening, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the investor relations of Apcotex Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the fourth quarter of the financial year 2024. Before we begin, a quick cautionary statement. Some of the statements made in today's con call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions.
The purpose of today's earnings conference call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Now, I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Abhiraj Choksey, Managing Director, and Mr. Sachin Karwa, Chief Financial Officer. Without any delay, I request Mr. Sachin Karwa to start with his opening remarks. Thank you, and over to you, sir.
Thank you, Purvangi. Good evening, everybody. It is a pleasure to welcome you all to the earnings conference call for the fourth quarter of financial year 2024. I hope you had an opportunity to review the financial statements and earnings presentations, which have been circulated and uploaded on the website and the stock exchange. Let me provide you with a brief overview of financial performance for the fourth quarter ended 31st March. The operating income for the quarter was INR 311 crore, which grew by around 21% year-on-year basis, with increased volumes in spite of challenging market conditions. The EBITDA was reported around INR 31 crore, a decrease of approximately 8% year-on-year, due to lower margins in some product categories due to market dynamics. The EBITDA margins stood at 10.08%.
The net profit after tax was at INR 15 crore, which grew by 38% on quarter-on-quarter basis, and PAT margins stood at 4.90%. On the operational front, we achieved an impressive 34% year-on-year volume growth. On the international front, we celebrated our highest quarterly export volume growth at 71% year on year. Now, coming to the financial performance of financial year 2024, revenue stood at INR 1,125 crore, representing a 4% increase year on year. The operating margin was INR 114 crore, which declined by 28% year on year, while the margin stood at 10.12%. The PAT was reported at INR 54 crore, which declined to 50% on year on year, partially because of increase in depreciation and interest costs due to commissioning of major expansion projects.
For FY24, our company achieved remarkable growth with a 28% year-on-year increase in overall volume and extraordinary 95% year-on-year surge in export volumes. While these figures showcase our robust market presence, it's essential to note that our revenue increased by 4% compared to volume increase of 28% due to project mix, falling raw material prices, and thus lower realization. Capacity expansion from new projects stood at 30%-45% on full-year basis. With this now, I open the floor for the questions and answer session. Thank you.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handset while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.
Yeah, thank you, sir, for the opportunity. Sir, on to the nitrile latex business, so what is the current utilization in Q4, and what we are targeting for full fiscal in FY 25 and FY 26?
Thank you. So, as I mentioned last time, the utilization is definitely lower than what we had envisaged at the beginning of the year. We were hoping to be, at this time, at 100%, you know, for at least the last one or two months, at 100% utilization. But the best we have done so far is about 50% utilization for one month. Overall, for the quarter, I think we would for the year average I have, for the average for the year is at about 30% capacity utilization. For the quarter, it would probably be about 40%-45%.
Sir, what we are targeting for the next year, FY 2025?
Yeah, so we're, you know, the whole issue there is, of course, we can scale up immediately, but the issue is about margins. So right now, the focus is just increasing the breadth of customers, making sure we're approved everywhere, and doing business where contribution margins are at least positive. We are also looking at different ways to reduce costs, given that the market hasn't turned as much as we had hoped that it would or expected it to, the glove industry. I think in the last couple of months, there are some signs of some turn, but there is still a lot of overcapacity in the market, and inventory still of gloves that is still being depleted. From the recent reports that I've read, you know, that seems to be coming to an end, the post-COVID inventory.
So we expect this year, you know, if the contribution margins support us, then we will look at increasing capacity utilization, of course, immediately to 100% if we can. Which we should be able to, given that we've got, you know, several approvals from new customers as well.
Okay, good. Sir, so onto the nitrile latex business. So, sir, for coming into this new fiscal year, so we are still witnessing lower margins only, and all this weakness, if this persists for this full year, how we are expecting to increase our, like, value addition? Because we had mentioned that we would be looking to increase our value-added product segment. But our nitrile latex, if that business will continue to struggle, you think this fiscal FY 2024, what margins we have made of 10%, we could be clocking a similar margin for the next year also?
Hey, look, we have a couple of options. One option is to convert these, you know, at least part of the assets that we have made for nitrile latex. So on the flip side, I'll tell you, for our Taloja expansion, that has gone exceedingly well, and there the capacity utilization, you know, at the maximum level for one month, even got to 65%. On average for the year, it's been about 45%. So, you know, here it's been, I think, exceeded our expectations, and we expect that in the next, you know, one to two years, this will be fully utilized.
So we, one option is to use the nitrile latex plant, if, for example, the industry doesn't turn soon, to use part of the assets to make, you know, styrene-butadiene latex, styrene-acrylic latex, and then so on, other latexes in, in our Valia XNB latex plant. So that is an option that we are considering.
Okay. So, so this plan is finalized, or, like, we would be looking if, if situation doesn't turn good or...?
It's not finalized. We still think this is, nitrile latex is a good business to be in in the long run. In terms of macro, the market cycle now, it's been almost a year and a half to two, where it's been really down, a year and a half or so. So, you know, if the cycle turns and margins improve, then it's certainly something that, you know, we will focus on and, and ensure that we get to 100% capacity utilization very quickly, and, and hopefully good margins. In which case, to answer your question, of course, one of the reasons for the lower EBITDA margins is been the nitrile latex business, which has been a drag.
Where honestly, margin EBITDA margins, you know, I mean, it's positive on the contribution margin front, but EBITDA margin is, you know, just about break even, if that. So, that's of course been a drag.
Okay. Got you. Sir, do you have any idea, like, how is the imports which are happening into NBR and into the synthetic latexes? Have you seen any sort of an increase in import intensity from our competitors, like, which is also impacting the realizations of our company also, like, so, in order to maintain our market share, so we also have to cut down our realization. Have we done some of that also?
Yeah, for NBR, we have seen significant imports. We have, you know, through some debottlenecking, we've increased our, of course, capacity a little bit also, but... And so we are running at full capacity for NBR. But yeah, certainly margins have been a challenge this year compared to last year. In FY 2022-2023, especially the first, you know, six months, we also had the advantage of the higher sea freight, which was causing imports to be even higher, which of course, in the last year and a half has not been there. NBR, it has been a more challenging year than the previous two years, you know, for sure, in terms of margins.
In synthetic latexes?
No, that's, they're fairly stable by and large. No major, no major ups and downs. In fact, those have gone quite well. There's been significant growth as well. You know, as, as Sachin reported, for the quarter, we have had 34% volume growth. This has been on the back of, the nitrile latex, as well as the synthetic latex, which is SB latex and styrene-acrylic latex. So we've been focusing on growing volumes this year, given that the market cycles for most chemical companies has been difficult. So, you know, we, we think, focusing on volumes, getting more approvals, exports is now 30% of our overall sales. So really focusing on volumes, and, and when the market turns, hopefully we'll see, you know, EBITDA margins return back to sort of mid-teen levels, as, as we expect.
Got it, sir. Thank you, sir. That's it from me.
Thank you.
Thank you. Next question is from the line of Harshal Parekh from Acuitas Capital. Please go ahead.
Thanks for the opportunity. Sir, my question is again on nitrile latex. So realizations continue to be below pre-COVID levels, and Kumho, which is a major player in nitrile latex. It's also coming up with a major CapEx by second quarter of this year. So how do you see realizations panning out in this segment, and especially given Kumho has already mentioned about their aggressiveness to regain the market share?
Well, a couple of things. One is that the margins currently are not at pre-COVID levels. They are the lowest that they've ever been, you know, at in history, I think, or as far back as we have been tracking it for the last 6-7 years, as far as nitrile latex is concerned. And look, I mean, I don't specifically want to address one particular player in this industry, but there are a few players in the industry, and a few players have announced expansion projects, but they are not sort of, and most of them are on turn. So we'll see as and when that happens, you know? I think the market is big enough for all of us. It's just a question of capacity, utilization, and margins.
Sir, here I meant realizations and not the margins, so sorry for that. Sir, again, given the realizations currently stay where they are, so from a two- or three-year perspective, what would be the ROC we can expect from our nitrile latex plant?
Look, yeah, I mean, as I said, we don't sort of give any data for the future, but certainly the ROC would be lower than what we had earlier anticipated when we initially started off doing the project, given in the first year, our margins have not been there, you know, we have not generated much ROC. So, certainly overall, ROC will be affected, but we have a plan B in place. That look, if this doesn't turn soon, we will need some more capacity by the end of the year or this financial year for styrene- butadiene and styrene- acrylic latex. So we would utilize some of these assets to manufacture styrene- butadiene and styrene- acrylic in the XNB plant or the nitrile latex plant.
Okay, sir. Understood, sir. And sir, on the NBR part, we're earlier thinking of requesting government for an anti-dumping duty. So, do we have any conclusion on that part?
Look, I think we had already, as I told you, the DGTR, which is under the Ministry of Commerce, had already recommended an anti-dumping duty, which was rejected by the Ministry of Finance. Now, we, along with several other companies that are in the same boat, had filed or have filed cases in several courts, and those cases are ongoing. So since it's sub judice, I would sort of, you know, not want to comment much on that. As of now, we're carrying on with our plans, and we may think of reapplying for anti-dumping. I'm not sure. We'll see at the right time. But as of now, we're carrying on with our plans and managing our business without taking that into consideration, you know.
Okay, sir. Thank you. That's it from my side.
Thank you.
Thank you. Next question is from the line of Farokh Pandole from Avista Fund Management LLP. Please go ahead.
Yeah. Hi, Abhiraj. Am I audible?
Yes. Hello, sir. Farokh.
Hi. The first question was that, you know, what would be the time and the cost involved in this repurposing of the XNB capacity? And, sort of what proportion would we be looking at doing at least initially? And the second question is that, XNB the nitrile latex, what sort of margins are we currently running at, at a company level? And what is the net debt that we have at this point?
Okay. So time and cost, Farokh, we're working out. Initial estimates right now are... So first of all, we don't need the capacity immediately. We have, you know, capacity for our other latexes for the next year at least, year, year and a half. So we have enough time. So it will definitely, whatever, if you take a decision within the next 3-4 months, then it shouldn't take more than 6-8 months, because most of the assets are already bought. We would need to buy certain, you know, equipment and tanks and so on, to be able to make other latexes besides nitrile latex in Valia. That would take about 6-8 months, is our initial assessment. And the cost would not be significant, maybe $2 million.
$2 million-$3 million is, is what we have initial assessment is.
Okay.
As far as net debt and margins without... Is that what you asked? Margins, EBITDA margins-
Yes.
without the nitrile latex?
Yes. Yes.
Sachin, do you have those numbers immediately? I can tell you the net debt, the long-term debt as on March 31st is about INR 125 crore, right, Sachin?
Right. Net, so the term loan is around INR 125 crore.
Mm-hmm.
On a net debt, if you want to know, it is going to be around, or minusing the investments, we will be around, including the short-term borrowing, around INR 70 crore odd. It will be around 0.1%-0.2% of the network at best.
What he's saying is working capital plus long-term debt minus our investment at market value is about INR 70 crore net debt.
Okay. Sure. And the margin?
In terms of you just looking at long-term debt minus investments, it's hardly some INR 14 crore.
INR 14 crore, yeah.
Got it. And,
Margin without nitrile latex, can we get back to you? I don't think we have it, but certainly at least, you know, couple of percentage points higher because 2%-3% higher.
Okay. And-
Yeah, I'm venturing a guess, but-
Yeah.
We'll get back to you on the exact number.
... Great, if you could. And just another question, if I may. On the receivables front, there's been a sharp increase in receivables, more than commensurate with what the increase in revenue was. And I just wanted to know what that was on account of, and is it something we need to be concerned about?
No, not at all. Nothing to be concerned about. If you see our receivables are at around INR 200 crore, if I'm not mistaken.
Yes, that's right.
And, you know, we're at a run rate per month of over INR 100 crores now in the last couple of months, INR 100 crores a month revenue. So it's about 60 days credit, you know, that we typically give in the market. And the reason why there's a sharp increase is you would also have, or as Sachin mentioned, that a large chunk of these export sales have come from, or sales—sorry, the growth in sales has come from export sales. And with export sales, you know, typically, the 60 days term starts from the date it's shipped, so it's another 10-15 days. So actually, we receive the money after 70-75 days, and in a couple of cases, we've had to give 90 days credit as well.
So it's just a customer mix kind of issue, and the last couple of months, the revenue has been over INR 100 crore. So that's the reason.
Okay, got it.
Certainly nothing to be concerned about. No significant issue.
Excellent. Thanks very much.
Thank you, Farokh.
Thank you. Next question is from the line of Amar Maurya from Lucky Investments. Please go ahead.
Hi, Abhiraj. Thanks a lot for the opportunity.
Sure. Hi, Amar.
Yeah. So Abhiraj, just wanted to understand, what would be our volume growth, let's say, for this quarter, and what was our full year volume growth on an overall business basis?
34% for the quarter and 28% for the year.
Okay. Okay, so volume growth was not a challenge. And this large volume growth is largely because of the capacity expansion, which we did.
Yeah. Because the previous two years, if you recall, since you've been... I know you've been following the company for a while, we had, I mean, not significant volume growth because we were at almost 100% capacity utilization for FY 2023 and FY 2022. So the additional capacity has certainly allowed for this volume growth. And, you know, we are. Of course, it takes time because in any new plant, we have to again go through some amount of approval cycles and so on. So now the, you know, we feel very good qualitatively where we are in the business. The nitrile latex business definitely has been a challenge, but qualitatively, we, we feel good, and, you know, when the market turns, we are quite, confident of getting to 100% capacity utilization very quickly, across the board.
What would be our utilization currently?
You mean average for the year or?
Average for the year and average for the quarter.
As I mentioned, average for the year, again, it depends. For the new plant in Taloja, we were at, I just mentioned those numbers. I had them somewhere. Yeah, new plant at Taloja, we were average for the year is almost 45%, and for the quarter we would be close to 60%. And for Valia, the nitrile latex plant, the average will be 30%, and for the quarter, probably around 45%.
Okay.
40%-45%. Yeah.
Now, given the realization, which is at the rock bottom, do we see that demand slightly recovering? Do we see that now this kind of volume growth at least looks sustainable, high double-digit volume growth sustainable for next year?
Yeah, look, for us, you know, demand is not the issue. I mean, the market is there. You know, the issue is, for nitrile latex, the issue is margins.
Correct.
For all the other products, I think the demand is pretty good. I mean, at least from where we are looking at, and that's how we've been able to achieve a 34% volume growth in Q4 compared to Q4 of last year.
Got it.
So we're not too concerned about the demand. I think India is doing well. The industries that we are catering to are all doing reasonably well. 70% of our business is still India, so India has been actually it's been a good market for us. And exports are doing well. You know, we've been able to break through to many the customers that we've been working with, you know, take a step jump this year, after 2-3 years of, you know, really trying with smaller volumes. We also had our own capacity constraints. So we feel qualitatively very good about the business.
Okay. Let's say whatever is latex, that Valia business, and let's say we continue to operate at whatever utilization we are operating because of the, you know, realization and the competition from China.
Mm.
Despite that also, do we expect that volume growth for next year would be high double-digit? Because other business is broadly doing well for us.
High double digit, meaning I, I mean, I don't know what you mean by high double digit, but-
20% kind of volume growth for next year.
I don't want to predict anything, but, you know, look, if obviously if there's a big... The big question mark is nitrile latex. If we were able to, you know, if that turns quickly, then that could be possible. But given that we have grown 100% in the nitrile latex business between last year and this year because of the extra volume, but it's been that, you know, very low margins, I'm not sure. I'm not sure if this 30-35% growth we can do without nitrile latex growth, you know. The rest of the business will grow at a good, I would say, mid-teen growth rate, but the high double digits as you're calling it will be dependent on nitrile latex growth.
Okay. And this kind of margin, even if whatever is the pressure on the latex, nitrile latex, this kind of margin looks sustainable or there is a question on the 10%, 11% margin on an EBITDA level, which we are making?
Look, if you were to ask me on an annual basis, this is really the lowest we have seen in four or five years, you know, 10, 11.
Correct. Correct.
Four years, I think, after four years. So I, we think it is quite sustainable. I mean, we obviously, our endeavor is to only improve on it. And yeah, that's what I would say.
Sure. Sure. Perfect, sir. Thanks a lot. Best of luck for the future.
Thank you.
Thank you. Next question is from the line of Ankit Kanodia from Smart Sync Services. Please go ahead.
Yeah. Thank you for taking my question, and congratulations on good numbers in terms of volumes and exports. So my first question is related to, so in Q3, we mentioned that the highest quarterly export growth was led by nitrile l atex, carpet and construction. Are these the only, because this time we have not specified which has been the main contributors of this growth. Are these three the main contributors this quarter as well, in Q4?
So when you... Yes, these three have been the main contributor, which is not to say the other businesses have not grown or the other industries have not grown, but this is what is called. These three are definitely the higher ones. The other one that's been good as well has been the tire cord business. You know, we've been able to get a lot of export approvals for the tire cord business, so we have grown that business. We've done some debottlenecking as well, and we continue to do in the next 6 months as well, which will, you know, it's not much, but it'll grow like our Taloja plant capacity by another 4-5%. We plan to do that in the next 3-4 months, complete that project.
That will be more for the tire cord business.
Got it. So in Q3, we clearly mentioned that we were not making profits on nitrile latex. Is it the case in this quarter as well? We have not made profits.
Yes, that's correct.
Okay. So, and as you have mentioned in the call as well, where that nitrile latex has been the highest growth in terms of volumes, right? So hypothetically speaking, if you get another 30%-35% growth opportunity in nitrile latex, considering the price remains the same, the margin remains the same, would you be still going for it, or will you protect the margin?
You know, I think we would want a little higher margin to go for more growth. We will be doing a little bit more because we have certain customer commitments that we have made, so we have to grow with them. But we will grow because of those commitments, but the margins, yeah, remain a challenge. Now, we are seeing very early signs of a turn, but I don't know if it's permanent. Again, we saw, you know, one or two months of good margins and again, some challenges. So yeah, hard, difficult to say right now.
So now, April has already gone and we are into May. So have you got any signal there, any green shoot in terms of margin?
It's better if we talk about up until March 31st.
Okay. Okay. Thank you. I will come back in the queue. Thank you so much. Thank you.
Thank you. A reminder to all participants, you may press star and one to ask questions. A reminder to all participants, you may press star and one to ask questions. Next question is from the line of Aditya from Securities Investment Management Pvt. Ltd. Please go ahead.
Yeah, hi, sir. Thanks for the opportunity. So my first question is on nitrile latex. So what I understand is that two issues are affecting the nitrile latex. One is, excess destocking by the glove manufacturers, and second is higher capacity by latex players. So has the first issue, the destocking by glove manufacturers, receded, or that is also still going on?
I think the destocking is still going on. From the last reports I read, they, I mean, it's towards, it's almost done, is what they say, but it's still going on. The other issue is, of course, China has, you know, sort of, played a significant role in the last year or so, whereby putting up capacities for glove manufacturing and latex, backward integrating into latex as well. So that's been a challenge for the rest of Asia. So that's been a second challenge, the destocking and the excess capacity, to both.
Got it. And sir, in terms of-
But it's probably coming to an end soon, if it's not already.
Got it. And sir, in terms of nitrile latex capacities, so what would be the supply-demand gap between... for the nitrile latex capacities? Means, how much is the capacity in excess of the demand for the nitrile latex?
Obviously, look, any, any industry, at least in this industry, it, you know, between 80-85%, 80-90% is where then we think, you know, the balance of margins versus volumes is good. Clearly, it's still below that. It's hard to exactly predict quarter on quarter, because we don't get the data every quarter from every, you know, from all countries, but we think it's still below or around 70% or 75%. But the good thing is that the capacities have, of course, stopped this year, barring the people that are already in, like us, who had already invested a significant amount, we had to come in with our capacities, and the growth in the industry is still in double digits. So at some point, you know, the growth, the demand growth will reach healthy capacity utilization levels.
Understood, sir. In terms of our NBR segment, so currently the margins are lower than financial year 2022 and 2023, but-
Yeah.
-those years we had exceptional margins because of the, trade restrictions. But are the margins now back to pre-COVID levels, or they are lower than the pre-COVID levels as well?
Well, it's not fair to compare pre-COVID levels, because even pre-COVID levels, NBR margins were up and down. So I would say the NBR margins are, in this year, if I, the average last year, there were a few good months and a few not so good months. On average, I would say NBR margins were a little lower than what we think they should have been for, for a healthy, what's the word? For, for healthy, business, sustainable business. And there are many reports that say the same, you know, about the NBR business in the last year. And one of the main reasons for that has been that China is very slow.
So China being the largest consumer of NBR in the world, if their demand is slow, then what tends to happen is, all the suppliers, whether it's in China, Korea, Japan, you know, India is, one of the second, I think probably the second largest market in Asia, so obviously it finds its way into India.
Understood, sir. Got it. And sir, my last question is: What was the revenue contribution from our nitrile latex segment?
Revenue contribution from our nitrile latex segment, probably around 10 , between 10 and 15%. I'd say lower digits, 10- 12%. Sachin, do you have the exact data?
Yes, it's sub 10.
Oh, it's sub 10, is it?
Okay.
Okay, so less than 10% again.
Around INR 100 crore-INR 110 crore for this year.
I think I don't have the exact data with me, but, I mean, you can do the calculations. Yeah, sub-10% is what he's saying.
Okay, sir. Thank you. I'll get back in the day.
Thank you. Next question is from the line of Ishmohit from SOIC Research. Please go ahead.
Hi, sir. What is our capacity utilization in the NBR business?
In NBR, we are almost at the, I mean, 100%, almost 100%. 95%, 98%. Yeah.
When do you think we take a call on further capacity expansion of that?
Yeah, look, everything is ready. We've finished the detail engineering for this project. But for any major future capacity expansions, our board has taken a call, management and board, of course, that let's stabilize our current operations and cash flow, and let's see how the first 3-4 months of this year go, and then take a call on further major CapEx decisions.
Sir, apart from our current product portfolio, are you looking for any other product in the styrene chemistry?
Yeah. As I said, look, in the current portfolio, we are always adding more products, and that's how the growth has come as well. It is by adding new products and new customers. But it's been within styrene- butadiene, styrene- acrylics, even nitrile latex. We've added another new grade for a different type of gloves. All this helps in, you know, sort of growth. In addition to that, if there is any significant, you know, other completely new business area, business line or business chemistry that we're looking to get into, we'll announce at the right time.
Right, sir. Sir, just one last from my side. When it comes to nitrile latex division, when do you expect to take a call that we might manufacture some other products? Will it be, like, 3-4 quarters down the line or 5-6 quarters down the line? Because it just seems that the market is very oversupplied and there's a lack of demand at the moment.
I think it would be 1-2 quarters max. Yeah.
Thank you so much, sir. All the best.
Thank you.
Thank you. Next question is from the line of Karan Bhatelia from Asian Market Securities. Please go ahead.
Hi, sir. Am I audible?
Yeah, Karan, go ahead.
Sir, styrene-butadiene raw material prices were pretty much on the downside for the entire year. So can you give us some flavor as to adjusting for the inventory losses, you know, we could be 2%-3% higher on margins, or my calculation could be completely wrong?
Your voice is echoing a little. I can hear you clearly, but I'm not sure if I understood the question. Were you asking if raw material prices... About something about raw material prices?
Yeah. So, with respect to inventory losses for the current year, so if I adjust the 10% kind of margins, will be at 2%-3% more than what we delivered?
No, I think for the year, on average, there was no major... For quarter-on-quarter, there has been some inventory gain and losses, but nothing significant for the year as far as I know, that would, I mean, affect margins by a huge amount. Maybe 0.5% here or there, but I don't think that much, because don't forget in 2020, in fact, 2021, 2022 and 2022, 2023, we had, you know, very large stock gains, because raw material prices were going up during those years on an average. This year, they have gone up, they've also gone down in a few quarters, so we have had some stock losses also. So you can't look at, you know, April 1st prices between 2023 and 2024 and then decide, because in between, what happens also is important.
However, Sachin, do you have an idea of the annual approximate stock gain or loss in terms of percentage, how much it would have affected?
It would be 0.2-0.5, not more.
Yeah, so it's not significant, exactly what I-
Right. Yeah, right. And some color on the revenue mix in terms of synthetic latex and liquid latex.
Sachin?
Compared to a YOY number.
Synthetic-
For the year?
Yeah, for the year.
For the year.
So, synthetic latex, we are 66% and rubber is 34%.
Last chunk of the growth has come from the latex business this year, given that both our expansion, major expansion projects were latex. I think at some point, a year or two ago, we were closer to 50/50 or 55/45, and obviously that has changed. Now, two-thirds is latex and one-third is rubber.
Right. Right, right. And we are yet to freeze the NBR CapEx, right? So in a quarter or so, we'll be able to give some concrete update over there?
Yeah, 1-2 quarters, I think, yeah.
Yeah. So apart from that, maintenance CapEx should be not more than INR 50 crore.
Say that again?
I think apart from that major CapEx, maintenance CapEx would not be more than INR 40-INR 50 crore.
40- 50? No, no, much less.
Okay.
Maintenance CapEx, I mean, look, there are other CapEx that's happening also, which are... The way we look at CapEx is, there's three types of CapExes. One is cost saving, the other is, you know, expansion, and the third is maintenance.
Right.
So if it's a cost saving CapEx, then, you know, it generally has a very good payback. You know, typically 2-3 years is what we look at maximum. If it is a expansion project, it's generally a big expansion project, which we announce. Sometimes a small de-bottlenecking projects or expansion projects which we don't announce, it's part of our overall CapEx cycle. But the maintenance CapEx is not more than, would not be more than, INR 20 crore or so for both plants.
I was referring more from all three categories. High, okay. From capacity expansion, plus some cost saving and other maintenance expense.
Yeah. So that we expect, like, last year, our entire CapEx was INR 35 crore, CapEx outflow, but that also included some, sort of, you know, expansion. This expansion project, some of them we completed in April, May also, you know, some CapEx continued into April and May. So I would say from those projects, so this year also we expect overall INR 30-35 crore.
Right. Okay. That clears my doubt. Thank you so much. That is all, ma'am.
Thank you. Next question is from the line of Om Prakash Dutt from [An individual] investor. Please go ahead.
... Hello, Abhiraj ji. Can you hear me?
Yes, Om Prakash ji. Please go ahead.
First of all, as an investor, congratulations on the INR 3.5 dividends you gave me.
Thank you.
It seems the company is gradually moving towards progress. It also seems that nitrile latex will gradually become a good business. I have a question now, that the interest repayment, payment that is being made now, is around INR 15 crore. Last year it was INR 5 crore. So when will we be able to repay this?
The cash flow that is coming, with that we will repay the interest and loan. So gradually the interest should also decrease. But it will never be zero. In any company, zero is rarely there. There is some CapEx or you know, acquisition funds are needed. So the right number that you see, I request you, EBITDA numbers see, that is a better indication of the company's performance.
Okay, sir. You are managing the funds very well. Thank you very much for that, sir.
Thank you. Thank you for your wishes.
Thank you. Next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.
Sorry, follow-up. Sir, you had mentioned to an earlier participant that this INR 35 crore CapEx in this fiscal, FY24, you had some expansion also, which were going on. So which expansion was this in?
No, no, what I meant was FY 2023, we finished the majority of our both the new expansion projects, right? The nitrile latex in Valia and for our synthetic latex in Taloja. And most of the projects were capitalized, and the plant was commissioned, but there were still some equipment like, you know, finished goods, storage tanks, and a few other things that actually were installed in April, May, and June. So they, they didn't have an impact on the production, but we needed them. So the, the same CapEx about, I don't know exactly, Sachin, do you recall? But I think about INR 10-12 crores would have been spent from that, those expansion projects that came into Q1 of this year, this financial.
Right. 12-15.
12 crore-INR 15 crore, yeah.
Yeah. Okay. And sir, into the nitrile latex also, you had mentioned that you have launched some new grade. So, can you elaborate more, so it is a very simple grade as compared to our current grade, which we are making, or it is some new grade which has some higher value addition or improved, you can say some mix is there into this?
Yeah, look, there is, there's different types of gloves. One is, you know, I mean, we'll get into those technical details if you want, but just very simply, there are different types of gloves like, you know, examination gloves, surgical gloves, industrial gloves. Industrial gloves are also used for different applications. So depending on the application, there are, you know, different tweaks required to our latexes. Obviously, the large volume is examination gloves. It's what, you know, mostly doctors or dentists and all wear. That's the largest segment, and that's where the most of the volume comes from. So when I say new grade, it's for other types of gloves, which obviously are higher value addition, fewer companies making those kinds of gloves.
Because one of the advantages of having, not having a very large capacity is that we can cater to these kinds of specialty niche applications, which are certainly higher higher price gloves and higher value, you know.
Okay, good. Sir, at current, so depressed prices of nitrile latex, what sort of peak revenue we can make at peak utilization levels of nitrile latex?
I mean, 50,000 tons is our current plant capacity, so I think we can look at 700-800, 800, about INR 300 crore, INR 300-INR 350 crore.
INR 300-INR 350 crore. Sir, the remaining, so 35,000-40,000 tons expansion, that was NBR latex and all, how much that can contribute to top line?
That'd be another 230-240 crores. 250 crores. Closer to 250. But, you know, as I said, nitrile latex, the... I mean, I've taken last year's prices, which has really been the lowest ever, so the last year and a half. So we expect that that will also increase, you know.
Top line guidance, which we had given earlier.
Yeah.
Okay. And, sir, just in terms of per kilo, I know, sir, so we don't mention this, but earlier, like, so when we compare the nitrile latex business as compared to our other so traditional businesses like the styrene-butadiene latex, ABS latex. So in terms of per kilo, is it like a, is it a superior or, or is it lower in terms of per kilo margins, if you look at it?
Traditionally, it was always higher. During COVID, of course, it was very high, but pre-COVID also, it was always, you know, 5%, 10%, 15%, 20%, 10%-20% higher. In the current context, it's lower. That's the problem, or about the same or little lower. So that's, that's the issue.
Okay. So, sir, this lower also, so by, if suppose if, if the overall business at EBITDA level, if it is at INR 15 per kilo, how much would this, so, so the Nitrile Latex would be commanding per kilo margins?
I wouldn't give those kinds of numbers on per kilo margins.
Okay. So, sir, this INR 600 crore of top line, so what sort of margins like we are expecting on this?
You know, I mean, as far as when we started the project, obviously our intention was about 15% EBITDA margins at least.
Okay.
That was the plan, based on which we invested this, you know, INR 200 crore or close to INR 200 crore.
Oh, now has that plan changed? Because now we are, we'll not be making that sort of margins. Any sort of a change in that? So what margins are you all targeting internally?
We have certain internal targets, but as I said, the market has to allow, you know, for those kinds of margins, no matter what we target, that's a different issue. So as I said, what we can do is take actions and steps based on what's in our control. And what's in our control is once we are done with the synthetic latex capacity in Taloja, then, you know, one thing we could do is repurpose our nitrile latex capacity to make other synthetic latexes in that capacity, at least partially.
Sir, suppose if we go towards that-
Sorry to interrupt. Could you please return to question queue for follow-up questions, as there are several participants waiting for their turn.
Okay.
Thank you. Next question is from the line of [Prathamesh Chavan from Axis Securities Limited]. Please go ahead.
Yeah, thank you. So just, I wanted to understand, sir, so when we say that we are seeing demand, but at the same time there is no strong realizations. So aren't those statements contradictory by themselves? Because if there was strong demand, we could have seen, you know, a better realization. So what exactly is happening? Because are the prices being dictated by the international players?
Yeah, so for nitrile latex, for example, so demand, I'm not saying the demand is strong. In fact, as a, as an industry, it's, you know, obviously down. But since we are starting from or we started from a very low base, it's easy to increase volumes by giving, you know, by proving that your product is as good or in some cases better, but you still have to give the price that is available, that is there in the market, right? There's no— We can't charge 20%, 10% higher than what the price is in the market. So we're not able to get that kind of premium on it. So when I say demand is there, I mean the market is there for nitrile latex, specifically.
As far as the other products are concerned, you know, we are growing with the market and better, and that's how we've been able to get 34% growth Q1, Q4, over Q4 of last year. The combination of both these.
Okay. Okay, got it. Thank you, sir.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit your question to only two questions per participant. Next question is from the line of Priyank Chheda from Vallum Capital. Please go ahead.
Just a clarification, sir. Synthetic latex, Taloja facility, you said the utilization was 45% or 65% for the full year?
I said it's about 45% for the full year.
Okay.
Average, but obviously, we have grown, right? The first month was much lower, month went up and so on. So I think at the peak, we were at 65% or so in the last, I think, one month in the last quarter.
Correct. And last year, we were at 65,000 tons as a capacity. So what would have been the utilization side, last year on that capacity, synthetic latex?
The old capacities are 100%.
100%. Okay.
Yeah. The old capacity is at 100%, and we added another 35,000 tons, so about 100,000 tons. So when I talk about capacity utilization, it's the new 35,000 tons.
Correct. And just, again, clarifying, the high-styrene rubber plant in Taloja, as well as nitrile rubber plant in Valia, we are running at full capacity.
Yes.
Got it. Thank you.
Sorry, the old plant of, of synthetic latex in... Sorry, what was the question in Taloja? Your voice was not very clear.
The Taloja high-styrene rubber plant, uh-
Uh.
as well as we are running at
high-styrene rubber plant is not running at full capacity. Nitrile rubber plant in Valia is running at almost full capacity. The high-styrene rubber plant, as you had mentioned before, it's our capacity is quite high, but we have been running at 50%- 60% because the market is not there. It's kind of flat for the last 3- 4 years, and we are the only player in India. So we are running at, you know, the maximum level that the demand, the demand is there for the market.
Just the last question from my side: so, nitrile latex, we understand the glove industry has been into overcapacity supply, so a correction at that level, at the industry level on the glove side will lead to higher utilization for nitrile latex.
Mm-hmm.
While for synthetic latex, which is a combination of multiple products, what can lead to a higher utilization over there?
Well, same thing, right? Because I think if you see what happened in COVID was that there are a lot of people who put up gloves facilities very quickly, because those are easier to put up glove lines than latex plants. But at the same time, a few players in China, you know, back in 2021 started building latex plants as well, and most of them were, or some of them were the glove manufacturers, so that they could secure their raw materials. And they were able to do it very quickly, so they built very large plants. I think most of it has to do with China, and of course, the rest of the current players in the market that are out of Korea, Japan and Malaysia, they also, you know, announced many capacity expansions.
A lot of them have been put on hold now, but they also expanded capacities to some extent. So, overall capacity did expand for the glove industry, for glove making, as well as for nitrile latex.
What would be the gap versus the supply versus the demand, the gap, which we should think would get adjusted over the period? The supply versus demand in terms of tons, if you have any sort of sense of that.
We don't have exact tonnage data, but I can tell you in terms of percentage, as I mentioned to the previous caller, that, you know, typically healthy margins are achievable when capacities are at between 80%, 85%, 90%. Between 80% and 90%. Clearly, even in the current context, both gloves and latex, the capacity utilization is below that. Exact numbers are very hard for anyone to kind of get absolutely recent data, but you can judge from the pricing and the margins that we have not reached a healthy, sustainable capacity utilization level yet.
This would be the case for even the Chinese players who would have added the capacities, even they would be running at lower utilizations?
Yeah, probably, yeah.
Got it. Thank you.
Running at high utilization. It's easy to run at high utilization. If I give a price or if we give a very low price to somebody, we can utilize our entire capacity. So maybe they're running at high, you know, some of them are backward integrated also, so maybe they're running at full capacity level. But the point is that the pricing does not allow any of us to make good margins yet, you know, or healthy margins.
Got it, got it. Very clear. Thank you.
Thank you.
Thank you. Next question is from the line of Ankit Kanodia from Smart Sync Services. Please go ahead.
Yeah. Sir, you have not mentioned anything about ApcoBuild in the last few con calls. So, what is the progress on that front? How is ApcoBuild doing? Because since last five, six years, you have been saying that you are getting good growth, but from a, from a total revenue perspective, I still think it is not adding too much, right?
Yeah, I mean, it's still a small portion of our overall revenue, of course, so therefore we don't focus too much on it. But we've been growing it surely and slowly, and this year also, I think we had a reasonably good growth. Sachin, would you have percentage growth in terms of revenue for ApcoBuild or for our B2C business? About 18%, was it?
Just, yeah, it is around 18%-20%. Yeah.
18%-20%.
What would, what would be its total contribution to the revenue, roughly?
Sorry. What's the question?
Roughly, total contribution to revenue. ApcoBuild's contribution to revenue, total revenue.
Very little. If we don't report it, so you can imagine it's in the single digits, right? So...
Yeah, it's in single digits yet.
It's low.
Any, any new geography? Because we were mainly into the western part of the country, with, with respect to ApcoBuild. Have you added any?
We're adding... We're going deeper into those same states. We've added one or two, so we're in MP, Gujarat, of course, Maharashtra, Rajasthan a little bit now, and one or two southern states as well, Karnataka. But we are going deeper into, for example, you know, we were weak in east Maharashtra, so we're, you know, focusing on Nagpur and that area. Similarly, in Gujarat, we, you know, we have added people in two or three different cities. So going deeper into these states because the opportunity is still there. And we're still learning and, you know, growing organically, but, you know, profitably.
Sir, what is your view on the overall market of this product, as in, in terms of the competitive intensity?
Look, it is, it's a very intense market in terms of competition because there are a lot of players, but also construction chemicals is a little misunderstood in the sense that there are so many different. There are, of course, large companies that are, you know, pretty much have everything. They do everything for everyone, and you know some of the large brands. But there are many niche companies, and we are also, you know, we are focusing to be a niche company where we are utilizing our expertise in the polymers and really focusing on products that we understand. And working on waterproofing, repair works, and tiling work, where we really are good with that chemistry. In many cases, we're backward integrated, and in other cases, we do outsource some amount, but again, we control the technology there.
So, we're focused on our, you know, our game and not really looking around because we think we have, you know, enough value addition and enough, what's the word, knowledge about polymers. So we are utilizing that to grow in the B2C space in construction chemicals.
Thank you, sir, and all the best. Thank you.
Thank you. Ladies and gentlemen, due to time constraint, please limit a question to only two questions per participant. Next question is from the line of Bijal Shah from RTL Investments. Please go ahead.
Hello. Yeah, thanks for the opportunity. So a couple of questions. First one, when I look at on a quarter-on-quarter basis, your gross margins are down by almost 400 basis. So this gross margin pressure is a function of you seeing some pricing pressure in any particular segment, or this is just a function of mix where, you know, nitrile latex, the margins are lower, that contribution has increased, or some other segment contribution has increased?
No. So nitrile latex certainly has put significant pressure on the overall company margins. In addition to that, as I said, in last year, the NBR margins were still higher because of higher freight rates and so on. So the NBR margins have been lower as well. China, as I said, has been also not doing well, so a lot of NBR gets dumped into India when that happens. So NBR and nitrile latex is the main reason. The other is, in general, post-COVID, we had a couple of good years, right? So margins have been a little bit under pressure. Look, partly us as well, I wouldn't lie. You know, we had to achieve the... We had this additional capacity utilization, and we went for growth.
So we want, and therefore we, we pushed for 28% growth this year, which is fairly commendable, and, and we exceeded our expectations on all fronts, except nitrile latex, I would say, in terms of volumes. So we're very, very happy with where we are. We've also done it in a healthy way, where we are, you know, almost net debt-free or net long-term debt-free anyway. And quarter-on-quarter margins, you know, go up and down. They may even go lower, they may go higher. But I think for the year, we expect margins, you know, this has been a challenging year. And I think when the market turns, when we also reach good capacity utilization levels, I think things will only look better. This is our overall outlook, at least.
Sure. Just a follow-up. On the paper segment, again, there was some pressure on margins there because both you and the competitor had expanded capacities. So how are you seeing the situation there?
Again, yes, compared to last year, there has been. We have both expanded capacity, and there has been some pressure on margins. But as I said, you know, that these kinds of cycles happen. In our kind of business, you know, we can't linearly expand capacities. So capacities there's a step jump. So when that does happen, for a year or two, margins do fall, and then once good capacity utilization levels are reached, then again, margins are healthy for a few years till, you know, the cycle starts again. So, the good thing is, largely there are two players in this market, so, those kinds of cycles, you know, will happen.
Okay.
Yes, to answer your question directly, yes, the margins in paper as well have been lower than previous years.
Do you see it stabilizing in FY25, or we will need to give it one more year?
Hard to say. I would, I think so. I think FY25 should be a little better for paper. That's my view, but difficult to predict.
Understood. Thank you.
Thank you. Ladies and gentlemen, that was the last question of the day. I now hand the conference over to Mr. Sachin Karwa for closing comments. Over to you, sir.
Thank you, everyone, for joining Q4 conference call. We have finished the year with good volume growth and impressive export growth in spite of challenging market conditions. In FY25, we will be focusing on increasing the volume capacity, utilization, and improving margins. We look forward to see you all in Q1 of FY25. Till then, take care, bye and bye.
Thank you. On behalf of Apcotex Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.