Ladies and gentlemen, good day and welcome to the Camlin Fine Sciences Limited Q4 FY24 earnings conference call. This conference may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on the date of this call. These statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing Star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to the management at Camlin Fine Sciences Limited. Thank you, and over to you, sir.
Thank you. A warm welcome to you, ladies and gentlemen, to our fourth quarter earnings call. I have with me here, Nirmal Momaya, Managing Director, and Santosh Parab, CFO. We will begin by Santosh giving you a brief synopsis of the quarter and the year, after which Nirmal will be there to answer your questions. I hand over to you, Santosh.
Thanks, Ashish. Good afternoon, and thank you for joining us today. As you know, this call is being recorded, and we make available the audio and the written transcript on our website in due course. You would have seen the results, and you would have also observed the struggle of global chemical sector, which is reflecting in our results for the quarter and the year. We have seen unprecedented demand weakness across all sector in which the company is operating. Predatory pricing and excess supply by Chinese producers have also put extreme pressure on the margins and has also resulted into geographic anomalies in the business. The price headwinds have hampered our top line.
In all verticals, except that of Aroma, we have hold on to our market share, and in some cases, we have, in fact, increased our volumes. The corresponding fall in raw material prices have, to some extent, helped our margins, but the falling prices did overshoot this benefit. As you have seen, the consolidated revenue was INR 402 crore, which is 4.1% higher than the sequential quarter, but it's less by 6% than the corresponding quarter. The gross margins stood at significantly lower percentage of 34.9%, owing to the prudential mark-to-market provision of inventory of catechol and its downstreams of around INR 36.81 crore. The adjusted margins after adjusting this prudential mark-to-market stood at 44%. Thus, the other broad products, mainly hydroquinone and downstreams and Blends, have seen marginal fall in margins.
The highlight of the quarter has been revenue from blends, which clocked INR 190 crores. Though lower by INR 10 crores, the growth momentum is expected to continue in the coming quarters. Increase in performance chemicals was due mainly to sale of catechol in the current quarter, but due to the low prices thereof, the sale impact, this sale impacts the margins negatively. Looking at the current environment and the progress of the downstreams of catechol, it is more than likely that a large part of stock of catechol held as on 31 March 2024, will be sold in the open market. This has triggered the recognition of mark-to-market loss in the current year, which I just mentioned.
Coming to Aroma business, we have liquidated the major portion of legacy inventory of vanillin, amounting to about INR 17.5 crore in quarter four, and the continuous falling prices have forced us to recognize the mark-to-market provision for vanillin in quarter four as well, which I just mentioned. In the current current month, we have now started the campaign of production of methyl vanillin. In the meantime, we have stabilized the production, improved the quality further to match it with the main competitor, and are planning to have consistent production to optimize the cost. Production of vanillin in August went well for the company, as the impact of cost of catechol is well absorbed in the cost of vanillin, and hence we don't foresee further mark-to-market on catechol.
The validation for approval is an ongoing process, and we have approved our product with significant customers in flavors and fragrances and foods and beverages. We are envisaging a capacity utilization around 40%-50% in FY25 and are confident of ramping up the sale to match the pricing trends and market demand. Our plant in Italy, as you know, remains under shutdown. However, as mentioned in our last call, we are planning to repurpose the plant to produce alternative products such as MEHQ and guaiacol. We are in the process of completing the designing of the repurpose, the repurposed plant, and it is in the process of achieving financial closure. We'll keep you apprised on the progress of this in the future.
Since we have arrived at a decision to repurpose the plant, the erstwhile inventory, which mainly consisted of internally manufactured catalyst for production of diphenol has been rendered as unusable. We have prudently recognized a one-time provision for mark-to-market for these inventories, amounting to INR 22.8 crore. Since this does not form part of operations and being material, it has been appropriately disclosed as an exceptional item. It is a one-time impact on the financial statements. However, we see no impairment on the investment in CFS Europe in this quarter on the basis of the circumstances we are at present. Operating costs other than foreign exchange loss have remained stable, as can be seen from the results. So consequent operational EBITDA stood at INR 4.47 crore only in Q4.
But if this EBITDA is adjusted the provision of inventory of catechol, it would be 10.8% of the revenue. Considering all the one-time impact, including that of foreign exchange loss, the adjusted PAT would have been positive 5.6% of the revenue. Coming down to CFS Wanglong. Our JV partner in CFS Wanglong has reached a settlement with the litigant in the IP infringement case. This has finally paved way to produce by repurposing the existing plant to manufacture a new aromatic product, heliotropin, which is also a catechol derivative. As an abundant caution, we have recognized an impairment provision of INR 24-25 crore on the exposure of CFS Wanglong. At present, we contemplate to refurbish and recharge the plant for manufacture of heliotropin in next financial year.
A bit of future scenario, we would reiterate that our business remains, the fundamentals of our business remain solid, and our resilience is more steadfast. With an effective addressing of legacy issues, we are in driver's position to focus on the levers which are within our control by striving to protect margins, regularly calibrate costs and optimize our product mix. We are hoping that the microeconomic indicators will ease out and will help us in our growth. The name of the game is to be resilient, remain relevant, and be ready for the growth thereafter. I will now transfer back to the conductor to open the floor for questions. Thank you.
Thank you very much. Begin the question and answer. Anyone who wants to ask question may press star then one on their touchtone telephone. From question may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. The first question is from the line of Abhishek Navalgund from Nirmal Bang Equities. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. So, my first question is on vanillin. So you indicated that we are eyeing for almost like 40%-50% utilization in FY25, and you also mentioned upon the validation of the client approvals which are underway. So, I mean, could you please help us in terms of the current pricing of vanillin? Is it like $8 per kg or even lower than that, the current pricing, let's say, post-March?
Yeah. So the current pricing of vanillin in some of the markets, so it's different in different markets. In some of the markets we look at, some we see pricing of $8, we see pricing of $9, we see pricing of $15, depending on end use application in the market that we're in. I think average price, as we see it, going forward in this year, should be in the range of between $9-$9.5.
Sure. So I mean, broadly, we are talking about some INR 150 crore of revenue if we go by, let's say, around-
Yeah. So I think if you estimate about 2,500 tons at $9.
Okay, INR 2,500. Okay, sure.
Yeah. Yeah. So 2,500 into $9 would give you a little more than-
That's almost close.
Sorry?
Yeah. Yeah, that's almost close to INR 190 crores if you go by 50%. Yeah.
Correct. Correct. Correct.
And what proportion of, let's say, this INR 190 crore, you can say, you have visibility? I mean, over the next two to three months, I mean, or there will be an element of spot orders also. Because I know that we have enough capacity and pricing also, we have made the assumption, but from demand visibility standpoint, how confident are we in this?
For the 2,500 tons?
Yeah. Yeah.
Yeah. So this we are, pretty very confident to get to this 2,500 tons. Not only production, but also of selling in this year.
Sure. Sure, sure. Next question on margins. So if I remember correctly, earlier, we used to say that if the pricing of vanillin is, let's say, below $10, then it is difficult in terms of clocking that 15%-20% margin. So what sort of margins one should be aiming at, considering the realization we just talked about?
Yeah. So currently, if you look at what we are doing with catechol, we have a negative of almost INR 100 per kilo on catechol. Okay? When we convert it to vanillin and we typically end up at a $9 price, selling price, at 50%, I mean, 45% capacity utilization, the cost should be around $7.5-$8. So we have a 10% margin there. It's about a $1 there. And and a INR 100 negative turns into this one. You know, into a INR 80 positive there. So the delta is about INR 180 for us, even if we were to sell the vanillin at $9.
Sure. Okay, and, my next question is, Santosh Sir, if you could, highlight the subsidy-wise, EBITDA margins for full year, FY24, if that's possible? EBITDA margin, we generally don't, share, but you can find the, revenues in our,
Yeah, revenues. Yeah. Correct. Sure, sir. That's it from my side. All the best.
EBITDA margin, it gets knocked out because it's an elimination. The companies are interconnected, so it becomes difficult because it can show a wrong EBITDA margin.
But, to add to that, Abhishek, is that our subsidiaries in America, that is U.S., Mexico, and Brazil, all three are, which are in the blends business, are positive and strongly, you know, in the high teens in the total EBITDA margin between all the subsidiaries. The drag really is from Italy, where we have the large negatives that have come, and partly these write-downs in India on the inventories. But other than that, if you look at our blends business, we are in high teens margins.
Okay. So even in Brazil and U.S., you're saying we are in high teens, for twenty-
Yeah. I mean, totally, totally. I mean, not in Brazil, it will not be in high teens, but, When you add up all of it, they'll be in the high teens.
Got it. Got it. Yeah, yeah. Perfect. Thank you. Thank you.
Thank you. Ladies and gentlemen, if you wish to ask a question, you may please press star and one. The next question is from the line of Surya Patra from PhillipCapital. Please go ahead.
Yeah, thanks for the opportunity, sir. So my first question is on the European unit as well as the China unit, where we are thinking about repurposing the plant. So what is the likely investment in these two projects separately, sir?
So in Europe, it's probably in the region of between $2-$3 million.
Okay.
In China, it would be in the region of about INR 25 crores or so. Another $3 million.
Okay. And this is in-
Sorry to interrupt, sir. This is just to inform you that you have a disturbance on your line.
Okay. Just a second. Hello?
Much better. Please go ahead.
Yeah. Okay. So this is what is the nature of this investment, sir? There is no official CapEx. It is just some adjustment CapEx or something like that?
Yeah, it's just some balance equipment and piping and, you know, repurposing some equipment.
Okay. And if we have decided that way, any inventory that is still lying in European unit, sir?
No, the inventory is all, more or less, been sold out.
Okay. Okay. Second question is about the vanillin. See, if we are anticipating about 2,250 ton kind of this thing, around 40% kind of utilization we are anticipating. So is it driven by the long-term contract or here we are also considering the spot business, sir?
It's a combination of both, Surya. So the long-term contracts will probably start kicking in now, some of these, and... But it's, it's a mix of both.
Okay. Okay. So if vanillin would be around 40% utilization level, so will that restrict our utilization of the diphenol plant at certain level, or should not be any restriction that way?
No, I mean, you're right, that there would be. We can't run it at 100% capacity because there would be a pileup of catechol.
Yes.
We will calibrate it to a level where effectively, we don't carry too much stock of catechol.
Okay.
So based on how much we can sell in terms of catechol, but ideally, we don't, you know, we want to convert as much as we can into value-added products. But, of course, we'll have to sell some surplus catechol till we go up to 100% in vanillin.
Mm-hmm.
So, I think operating levels will be between 80%-85%, again, subject to vanillin. If vanillin takes off and gives, you know, higher utilization, this can go up.
Okay. And given the pricing situation remaining suppressed only because of the Chinese factors, at least in the catechol and the HQ, those kind of pricing scenarios. So, what means, how long this suppressed pricing situation can sustain? And, there could be a possibility of we taking further M-to-M on our inventory.
No, there's-
Or that situation is over?
There's no further M-to-M. I think this, whatever inventory we are holding today, currently is at market price.
Mm-hmm.
How long will the market price be subdued is a very, very good question. Difficult to answer, but the sense we are getting is that towards the end of this year, I think demand situation also should improve. The destocking that has happened or is happening currently in some of the markets would be done by then. And I mean, whatever commentary we are seeing from other companies and from other markets as well is that towards the end of the year, there should be some improvement in demand, and then obviously, consequently, improvement in pricing.
Okay. Another question about the blends business, sir. See, in fact, for the full year, if I see, it is a more than INR 700 crore kind of blends revenue that we are seeing. And if I just, for the calculation sake, if I just consider it is a 20% kind of a margin business, then the core EBITDA, what we have seen this year, is around INR 150 odd crore.... So that is what is coming from, let's say, if it is the blends. Then is it fair to believe that this year, all the antioxidant operations, including the diphenols of India, Europe, all put together, have seen kind of a no EBITDA contribution?
Yeah. So I mean, of course, Italy was negative. India also was very little contribution. It all the contribution did come from the blends business.
Okay. So then I think, the delta from 24- 25, so do we see a kind of meaningful delta, sir, with some normalization coming in the antioxidant space, and the blends maintaining its growth momentum and the one-off charges and the M&A losses that we have factored this year. So considering all these negatives, so should FY 25 look really meaningfully different than the 24?
So, yes, in a way you're right, it would. Of course, catechol and its downstreams will yet, this catechol on its own is a loss-making business, and we will yet be selling catechol in the market, so there would be a bit of a drag coming from the catechol business. However, the big drag which was there for us last year was, of course, the inventories which we cleared. So the drag will be very limited to maybe 3,000, about between 2.5-3,000 tons of catechol that we sell. There'll be a drag on our, you know, -INR 25 crores roughly would be the drag.
It really is to be seen as what happens in Italy, because that is where the big losses were in this year, right? In FY 2024.
Mm-hmm.
So in Italy, our sense is that even if, towards the end of the year, we can start producing MEHQ and guaiacol. And, I mean, reaching a breakeven in this year may be a little tough, but even if it's a minus of two-three million EUR, we should be in a much better position in FY25.
Okay. And, is it fair to believe, sir, this Heliotropin and this guaiacol and the MEHQ may not contribute entirely this FY25 or-
Yeah. FY25, our assumption is that it'll start only towards the end of FY25. So it'll, you know, we'll be in the validation phase, and so it'll be in FY26.
Okay. Okay. Sure, sir. Yeah. And since it is a full year performance, so can you give some sense about what is the growth outlook that you are building, sir, for the full year? Because there are so many moving parts, and it is really difficult to really build a number for 25.
Yeah. So, look at the blends business. We closed the blends business at about INR 780 crore odd, which, this year, we expect it to grow to at least about INR 1,000 crore plus. Then vanillin should contribute about INR 200 crore. And, our other businesses, HQ and, you know, the other downstreams, and, you know, our sense is should contribute another INR 600-700 crore. So INR 1,800-1,900 crore is, is what we are saying conservatively we should be making.
Okay. At least 10% kind of a growth visibility that we are seeing.
Yes. Yes, yes, yes. At least, yes.
Before seeing a kind of improved performance in the following year.
Yes. This is, of course, considering today's price. Yeah.
Ah, yes. Okay. Do you really see, sir, a price improvement? Generally, commodities price swings also.
Mm-hmm.
So, can we think about some price upswing in the current financial year?
I think towards the end of the year... I don't think in the next two quarters we are seeing any significant price improvements. But what we are hearing from the market is that, you know, like, say, for example, agrochemicals of where, of course, hydroquinone also plays a role a big role. You know, there seems to be now a turnaround, and, you know, the companies have kind of got rid of their old stocks, and now they're building new stocks, and so all that activity is expected to start in the next month. So, you know, like these are some green shoots that may come, and I think, I mean, it's too early in the day, but I think towards the end of the year, we should see some improvement there.
Sure, sir. Okay. Yeah. Thank you, sir.
Because you've had, like, literally almost 12 months of this kind of price change.
Correct. Yeah.
And maybe another two, three quarters, but I think more than that, unlikely. I mean, you will see some players then, exiting the market or there would be some capacity, downsizing then.
Sir, even if the price recovery to happen, then which are the segment or which are the product areas you think that, okay, that can see the price recovery, first, then other products? Whether it is vanillin or it is TBHQ, BHA or, price should not be a problem for the blends, I believe.
Yeah. No, the blends is fine. I mean, that is okay. My sense is that hydroquinone and its derivatives will probably take price increases faster than catechol and its downstream. So vanillin maybe, you know, at this range, but TBHQ, BHA, going forward, if HQ prices do firm up, which-
Okay.
The first one to firm up should be that, then that, that would possibly give us some uptick there.
Sure, sir. Okay.
... participants to ask a question, you may please press star and one. The next question is from the line of Jatin Sangwan from Burman Capital. Please go ahead.
Thanks for taking my question. Sir, in FY24, we planned to do a revenue of INR 730 crores, and you mentioned that the EBITDA margin on the product is around 20%, so that gives us an EBITDA of INR 146 crores. And now if I look at the full year, EBITDA would be like INR 70-75 crores. And of course, if I would have to include the losses for Europe and China and one-time inventory, could you just specify the amount for each one? I mean, I could look at blends, it's like INR 140-150 crores, but the resulting EBITDA comes out to INR 70-75 crores. So what led to losses? So are antioxidant, meaning shelf life extension, also like 0% EBITDA levels?
No. The negative has come from Italy, and from India it is the catechol downstream. It is not the antioxidant business. That's where the two big hits have come.
Sir, can you please provide some breakup? I know pre-EBITDA loss of Europe is around INR 100 crore, but with the EBITDA loss due to Europe.
EBITDA loss in Europe is around INR 63 crore.
And up to due to India, mainly catechol, and how much would that be?
This is because it's catechol and mainly mark-to-market in India.
And now, sir, for the next year, we're guiding for a revenue for blends of INR 1,000 crores. That means alone from blends we would do INR 200+ crores of EBITDA. Vanillin is like INR 200 crores. That would give us INR 50 crores of EBITDA, so that would be like INR 250 crores of EBITDA. How much EBITDA loss would still come from Europe and China?
Loss from Europe and China would probably be about INR three million or so.
This would be at EBITDA level?
Yeah.
Yeah. Okay.
Of course, in this year, we also had a hit in Argentina, currency hit of almost INR 15 crore. So this was one time, which going forward will not be there. So those minuses will come out or reduce.
Sir, are my assumptions correct that blends would be like 200+ EBITDA level going forward in FY25?
I think it'll be in the high teens, like I've mentioned earlier. So if we are at INR 1,000 crores-INR 1,100 crores, then we'll be at INR 180 crores-INR 190 crores.
Also, are my assumptions around vanillin, if vanillin does INR 200+ crores kind of revenue, the EBITDA could be INR 45 crores, counting catechol and margin on vanillin?
Yeah. About, the negative of catechol is 100, which becomes positive. So delta on EBITDA would be, yes, you're right, roughly about INR 40 crore.
Okay. So if I just combine these two, that gives me INR 220 crore of EBITDA, and loss from Europe and China would be INR 25 crore. So are we expecting INR 180-200 crore of EBITDA for FY25?
Yes.
Or would there be still one-off?
It would be in that region. Yes. Yes. Correct. 10%-12% would be a fair estimate.
Got it. And, sir, any update on electrolyte? We had a contract with Lockheed Martin, and there were talks that they could ask us to build a larger plant.
Yes. So that talks are yet going on. We've supplied them large commercial lot, which goes into their first battery. That has been done, shipped in this quarter. That will get installed in Q2 of this financial year, by July, August. Thereafter, discussions will start on looking at a bigger facility.
And, sir, the facility that will come on board by Q2 FY25, how much ton will it be?
No, we'll start the discussion of what tonnage and, you know, what is the capacity requirements are, will be... The discussion will begin in Q2.
Okay, got it. And, sir, just one last question around vanillin. So why are we not selling in India? Is it because our plant is in SEZ, so by regulations we are not allowed to sell in India, or are there some other challenges? Because India alone is like 2,000 tons of market annually.
Correct. No. So, yes, I mean, that is also a point that from the SEZ there are some restrictions, but we've kind of overcome that. We have enough exports to show out of there. Of course, we have to pay import duty on the goods that we sell from the SEZ. So we are addressing the Indian market, and in this year we will take decent market share in India.
Any kind of ballpark number you are targeting?
We're targeting about 400-500 tons at least.
From India only?
Yes.
This will be in addition to 2,500 tons of orders that you are-
It's including that.
Including.
That's part of it.
Okay, sure. Thank you.
Thank you. Ladies and gentlemen, you may press star and one if you wish to ask a question. The next question comes from the line of Rohit Sinha from Sunidhi Securities. Please go ahead.
Yeah. Hi, sir. Thank you for taking my question. So, one question from my side is that, at what level we are currently operating at Dahej for our HQ? And what is the market outlook we will be seeing for hydroquinone, considering the Europe is shut for some time?
... Yeah. So right now we are working at about 80% capacity. It's not driven by hydroquinone market, it's more driven by the catechol market because since the joint product, we have to contain the production. hydroquinone, we, we can consume more of the hydroquinone if we produce more, but that leaves us with a problem with catechol. So that's the reason why we are working at 80%. The outlook for hydroquinone seems to be positive. The market, like I explained earlier on the agrochemical side, again, should start picking up. So I think there would be some uptick in HQ consumption as well as towards the end of the year, even in pricing. Our European plant has shut. One of our competitors, American plant, is also much more right now.
So there is capacity which is being, you know, taken out of the market, so I think it's a matter of time.
Okay. Okay. And, if I heard correctly, I think, you said that, Europe, we have ultimately sold out all the inventories that we have in Europe. So practically from next quarter, maybe, there would be no sales. Is that correct?
No, hydroquinone inventory has already been liquidated from Europe. There could be small, very small inventories, up to 100 tons. But mainly all the hydroquinone category inventory has been liquidated by this date.
Okay. I mean, if we look at the numbers, so we have done kind of flattish sales or top-line, despite the significant price correction in last year. So can you help us with what kind of volume increase there was? And roughly how much prices are down on Y and Y basis?
So as far as TBHQ and BHT are concerned, our volumes have grown. The same volumes have grown by around 10%-15%, this year. But if you see the sales prices in 2023, the average selling prices were in the range of $13+, which have come down to, average realization in FY24 was $9-$9.5. But at the tail end of the year, the TBHQ prices were as down as $8.5. Because we started the year at high, we were $9.37-$9.5. BHT was also the same story, it was $13-$13.5 in 2023, which it started coming down. We realized around $10-$10.8 in 2023.
And here also, in FY 2024, we did 10.5, 10.8, and here also, the tail end of the year, the prices were falling. At present, we are at somewhere in the range of $9. So we did lose on, we did gain on volumes, but we did lose heavily on the, on the pricing front, because the prices there went down by 20%-25%, but the volume increased by 10%. So we did hold on to our share in these two, two big, big markets. As far as hydroquinone is concerned, in 2024 we had hardly any production from Europe. And as Nirmal was saying, that entire hydroquinone is manufactured in there, is internally consumed. So in market, we had almost the entire year's production of hydroquinone last year.
This year, we only had 3 years, so those numbers are not comparable. And in any case, hydroquinone prices have come down from $9-$10 in 2023 to average $7 last year, and now the prices are at $4.5, $4.5-$5. So overall, the catechol is the only thing where the pricing, where also the price went down. It came from $2 to sub-$1 in 2023, and this further down now. So the prices have been down, but we did get some hold on to our share, and in some of the products we did increase our share.
Okay. Okay, that's good. Lastly, on the Brazil and North America side, and there we have been gaining decent revenue. And so, for especially for North America, are we at EBITDA positive level this quarter?
Yes.
Okay. Okay. And these price increase or whatever contract we have gained in Brazil and North America, should I think gonna continue also going forward, as the prices would slightly improve as we are expecting in the second half, there would be a decent growth, should be a decent growth, in these subsidiaries as well. Am I right?
Yes, you are quite right. In North America, as you have seen in the presentation, we have almost grown the turnover by 200%. Maybe by turnover has grown to INR 55 crores. So there is a growth, and we keep good... We will be holding on to this sale, and we'll be adding further more in Brazil. And in Brazil also the growth theme will remain viable. So in Brazil, also last year we did around INR 102 crores, and we are almost more than INR 150 crores this year. And here also the growth will remain with interesting markets of biodiesel and other things. So this growth is going to sustain, and on this growth, Mexico is also growing, India is also growing with that.
All this growth will ultimately result into INR 1,000-odd crore, which we are saying for blends in the next year.
... Okay, okay, okay. Thank you. Thank you, sir. Best of luck to you. That's it from my side.
Thank you.
Thank you. Participants, to ask a question, you may press star and one on your touchtone keypads. The next question is from the line of Nitya from KamayaKya. Please go ahead.
Hi, sir. What are the names of the products which will be manufactured in Italy now in place of the earlier products?
We are contemplating production of MEHQ in guaiacol.
It's still not started yet?
As we also said in our presentation and in the results, we are on the verge of financial closure. We have already done the basic engineering thing. So when the financial closure is done, we'll start the project. And as Nirmal said some time back, the stabilization and commercialization of this plant will be sometime in the back end of this year. So we'll really see the sale and everything in the next financial year, in 2026.
Okay, understood. Understood. That's it from me.
Thank you. The next question is from the line of Pradeep Rawat from Yogya Capital. Please go ahead.
Hi, good afternoon, sir, and thank you for the opportunity. I would like to know why were our Performance Chemicals revenue was significantly down from INR 688 crore to INR 400 crore. Can you explain a bit about it?
So as you know, last year our European operation was running, and it was selling hydroquinone category, which are termed as performance chemicals. We closed down the European plant in for because of the economic reasons in the tenth of August. There was significantly lower production, which we sold outside. So the main data on performance chemical is lack of production of hydroquinone category in Europe.
Okay. So that's all from my side. Thank you, and all the best.
Thank you. Ladies and gentlemen, to ask a question, you may please press star and one. The next question is from the line of Amit Chheda, an individual investor. Please go ahead.
So hi, everybody. I just wanted to know, as an investor, what should I expect from this? What will be the positive numbers from the, like, profit making and all that? Hello?
Yeah. Uh-
Like, we are investors and-
I understand. We can give you a guidance. We cannot,
I want the guidance only, like, it's like we have seen INR 81 crore loss, and the prices are, like, going haywire. So as an investor, see, I'm not a analyst or anybody, but as an investor, I just wanted to know, what is your guidance like? Any positive come out would be there in the company. Is there any?
Any guidance? So the guidance is that we just said that we will be growing by 10%-15% in next financial year, and we are targeting an EBITDA of 10%-12%.
Including all the losses, what other chemicals are making that will be discounted in that, right?
So this is a net impact of whatever, initiatives are there and these negatives and everything.
Okay, thank you.
This, of course, is as of today, because the president, the economic, economic something happens, which you are going to war in Iran, then you can't do anything. So what is in the future, this is on the current prices.
Current prices, it means it's positive, like there will be no any, like, you know, hidden losses which will surface in future, like any unknown factors. See, war and all is a different thing, but-
There is no hidden losses. So these are-
Like chemicals and all, whatever the setbacks we had to take it, like one-time hit and all. So now they won't be there for next quarter. That's what I wanted to know.
So we have taken the legacy issues out, and at the base of current basis, these are, these are all our numbers. We cannot expand anything above it. 10%-15% of revenue, 10%-12% of EBITDA.
Okay, thank you.
Thank you. The next question is from the line of Jatin Sangwan from Burman Capital. Please go ahead.
My first question is around the debt. Now we mentioned that we'll be doing INR 180-200 crores of EBITDA, and add to that, we'll be doing, like, INR 30-40 crores of CapEx only, and interest payment would be INR 60 crores. So should we see some reduction in debt levels? Are you expecting that?
We don't expect a significant reduction in debt level, but on a year-over-year basis, on long-term borrowing, we will be repaying around INR 25 crore of loan. So if at all the reduction will be that, we are not planning any fresh loans at this stage. Of course, some growth in the turnover may require some working capital, but I don't think we'll increase any debt by the end of next year.
Okay, got it. And you mentioned that TBHQ prices have decreased from $13+ to like $8.5-$9, and also the prices of BHA have also decreased from $13+ to, like, $9. So what are the sustainable level of prices for TBHQ and BHA? And by sustainable level, what were the prices, let's say, that of TBHQ and BHA that were in 2019 or maybe 2018?
Yes, they were on similar levels in the past, and anything below this would mean that hydroquinone prices would have to go down further, which would mean that the diphenol business is not viable. I don't think producers will continue to produce it. That is the situation. So our sense is it will be in this quarter.
Okay. So these are the sustainable prices or are these the bottom of prices?
Yes. I would say, yeah, close to bottom. I mean, maybe some few percent here or there, but yeah.
Got it. And are you expecting any further write-offs in Q1 or Q2?
On what? On which part?
Yeah, for this quarter, you take a write-down of, let's say, INR 49 crores that was related to your subsidiaries in China and Europe, and then there was a write-down of inventory in this quarter. So are you expecting such similar write-off going forward in maybe in Q1 FY25 or Q2 FY25?
Well, as of now, whatever the legacy issues are related to FY24, we have accounted for. And, whatever we have given you the numbers of, the future thing, we are not anticipating any further, write-offs or unaccounted losses are not there in the books. Of course, the write-offs are generally because of the economic conditions or uncontrollable factors. If there are any uncontrollable factors which come into the picture, that would be event at that time. But as of now, we have provided what is required by the law and by the current economic situation.
Got it. Just one follow-up. You mentioned that X of these write-offs, that would have been 5.6% of revenue. So should we expect similar profitability in Q1 or Q2 also?
No, I didn't... Can you repeat the question? I missed the first part.
Yeah. You mentioned in the earnings call that adjusted PAT would have been 5.6% of the revenue. Now, since there would be no more write-offs and, of course, you would be selling vanillin, so should we expect the similar profitability to continue, 5.6% or 6% type?
So if vanillin, as Nirmal said, if vanillin is sold, we will be recouping the loss we sustained in catechol, because it will get value added. So if the guidance which we are giving should be happy to do a 40%-45% capacity utilization of vanillin plant and 80%-85% of diphenol, I think we will not be having losses.
What kind of capacity utilization are you expecting, specifically less than Q1 and Q2? For the full year, I know it's 40%-50%.
With the same capacity utilization, only thing is vanillin, sale of vanillin is skewed more toward the last two quarters.
Okay, got it. Any idea how, between the mix, like H1 could be 30%-40%, H2 more, or it's like entire sale could come in H2, FY25?
Can you repeat the question because we missed, not clear, the message. We missed the first part.
Yeah, sure. You mentioned that the sale, sale would be skewed towards H2 of FY25. So I wanted to understand what will be the mix between H1 and H2 of vanillin sales?
So, traditionally, our sale has been 40-60. Usually, first part does 40%-45%, and the next part does 60%-65%. But as far as vanillin is concerned, it looks like we'll be doing 75% of the sale in the next half.
Okay, got it. In the first part.
25-30 in the first and 75-70 in the next.
Sure. Got it. Thank you.
Thank you. The next question is from the line of Amit Chadha from Banyan Capital. Please go ahead.
Just one question from my side. What will be the consolidated tax rate, going forward, especially, this year?
So, see, the tax rate remains, looks very skewed because, the uncertainty of, adjusting of tax losses in Europe, we have not made any deferred tax assets, so that's why it looks skewed. But if you see on a tax rate basis, generally, the tax rate across the, wherever we are operating are between 25%-31%. If everybody makes profit, the tax rate should not be more than 25%-27%.
Okay. But, like, we know that, you know, Italy is not going to be profitable, right, this year. So, you would have made some internal estimates for the profitability this year, right? So based on that, if you could just guide on the tax rate.
I don't understand your question because we have already said that we'll be doing a $3-$3.5 million loss of EBITDA, basically, EBITDA in Italy and another $3.5 million in China. So the figure as to... It cannot be told on a basic thing. I can only say there are losses, tax losses, which will not be adjusted up to $7 million, and then we can calculate an average 7%-21% rate.
Okay, got it. Thank you so much.
Thank you. Ladies and gentlemen, that brings us to the end of the question and answer session. I would now like to hand the conference over to the management for closing comments. Over to you, sirs.
Ladies and gentlemen, thank you very much for being present and giving your valuable time to us. We hope we have answered your questions satisfactorily, and we look forward to interacting with you again at the next call. Thank you.
Thank you. On behalf of Camlin Fine Sciences Limited, that concludes this conference.