Ladies and gentlemen, good day, and welcome to the Galaxy Surfactants Limited Q4 FY 2024 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees 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, 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 Mr. K. Natarajan, Managing Director and CEO from Galaxy Surfactants Limited. Thank you, and over to you, sir.
Thank you. Good afternoon, ladies and gentlemen. I welcome you all to our Final Investor Conference Call for FY 2023-2024. Before we get into the call, since this is the first time I am presenting over the call, for members and participants who do not know me and my team, I will start with a short introduction. I am K. Natarajan, Managing Director and CEO. I have been associated with the company for the past 30 years, and I have handled multiple roles across processes. I was inducted into the board of Galaxy Surfactants Limited in 2016. Mr. Vaijanath Kulkarni , our Executive Director, has taken over from me as the new Chief Operating Officer of the company. He has been associated with the company for the past 28 years, having established and led our Galaxy Chemicals (Egypt) operations right since inception. Welcome, Vaiju.
I also have with me Mr. Abhijit Damle , our CFO, who has been associated with the company for the past 15 years. He took over from Mr. K. Ganesh Kamath, our earlier Executive Director and CFO in October 2022. Welcome, Abhijit. The opening remarks of mine is divided into three parts. In part one, I will cover the long-term picture. In part two, I will explain the medium-term picture, the cycle of demand vis-a-vis supply-led inflation and supply restoration. In part three, I shall cover the performance for FY 2024 and provide a brief guidance for FY 2025. Ladies and gentlemen, the long-term picture remains extremely positive. Since FY 2016, Galaxy has grown in terms of volumes by 1.5 x, in terms of EBITDA by 2 x, and in terms of net profits by almost 3 x.
Thus, tripling our earnings and doubling our operations just over the last eight years. In short, we have created nearly two Galaxies in the last eight years in terms of earnings. This is certainly a significant achievement. Galaxy as an organization has always believed and focused on the long-term picture, and over the long term, we reiterate that the structural story remains intact. In fact, extremely positive and extremely vibrant. With improvement in accessibility via quick and e-commerce, innovation-led premiumization, rising value and quality-based consumption, the headroom for growth is significant as far as the home and personal care industry is concerned. Galaxy's positioning via its basket of products and strong relationships built across stakeholders will enable it surely to capitalize on the emerging opportunities.
Having said that, as Marshall Goldsmith has commented, "What got you here, won't get you there." We are not in any way resting on our past laurels. In fact, drawing inspiration from it will be critical for us to remain agile, stay focused, and ensure the significant acclaim of the customer as well as innovation value added to build on this momentum. Moving on to the medium-term picture, it is important for us to understand the demand cycle vis-a-vis the supply scenario. While a lot of this has already been spelt out over the conference calls we have had since 2020, connecting the same is critical to gauge and understand the future projections. The period between FY 2020 to FY 2023 saw low single-digit volume growth for Galaxy.
While EBITDA per metric ton significantly improved from INR 16,700 per metric ton to close to INR 25,000 per metric ton, thus resulting in a profit growing by 1.6 x. As spelt out at the start of FY 2024, we did realize that this wasn't a sustainable model with negligible volume growth backed by a profitability growth. It was critical for us to get the volume growth back. While the profitability has declined in FY 2023-2024, we personally believe restoration of the demand and supply cycles is the biggest positive for this year. Restoration lays a foundation for improvement in volumes, followed by improvement in margins going ahead.
The reason I say this is because since 2020, there has been significant volatility across both demand and supply sides, which has adversely impacted the results. The period between 2020 to 2022 March was marked by moderate inflation, strong demand, and stocking of the consumers due to various issues like container availability, rising freight costs, and supply gaps. While demand was robust, we could not completely capitalize on the same due to supply gaps in terms of our volume growth. Despite the constraints, specialty volumes had clocked their strongest quarter in quarter four FY 2022. Just as the momentum was building up in the developed markets, the Russia-Ukraine war halted the momentum. The war saw a sudden uptick in inflation to record highs.
While suppliers and customers got an opportunity to pass on and maximize profitability in FY 2022, 2023, the shortage of supplies declined conventionally to high prices left an inventory glut. Rising prices and deteriorating macros eventually led to deterioration in demand, impacting mass demand in emerging markets and premium consumption in developed markets. Thus, FY 2023, 2024 began with an inventory glut in developed markets and uncertainty with respect to demand revival in developing markets. While inflation has begun to cool off in H2 of calendar year 2022, demand revival only began around H2 of calendar year 2023. Now, why is this important? It is because H2 calendar year 2023 marked the first time when both demand and supply cycles stabilized post the pandemic.
It started with mass consumption making a comeback first, followed by the end of the de-stocking cycle at the end of 2023 in the developed markets, which eventually translated to strong pickup in masstige products in the start of 2024. While the Red Sea escalation did disrupt the supply chains briefly in Q4 FY 2024, it did not impact the demand. Unless there is any further escalation, we believe the same should not cause any further disruption. Drawing insights from the 2020 to 2024 demand and supply cycles, we believe the de-stocking cycle is over. H1 FY 2025 will see stabilization, and the next restocking cycle will commence from the beginning of H2 2025. This will certainly help our demand for premium specialties. Momentum of mass and masstige products will sustain barring for any macro-driven deterioration.
Accelerated approvals will ensure new launches and sustained traction for our new products going ahead. Finally, moving on to our performance for FY 2024, 2025. Let me start with a big highlight of this quarter. We are pleased to share that your company, Galaxy Surfactants, won the Silver Award at the prestigious in-cosmetics Global in Paris in the category of the Best Functional Ingredient. We are the only Indian as well as Asian company to have won this award, and this puts us amongst the list of elite innovative specialty companies. After four years of flat volumes, this year, your company registered 7.7% volume growth, meeting the 6% to 8% guidance stated at the start of the year.
The EBITDA per metric ton at INR 20,019 per metric ton has come in within the guided range of INR 19,500 to INR 20,500 per metric ton, with quarter-on-quarter improvement starting from Q2 FY 2024. The change in product mix, reversal of one-time benefits realized in FY 2023, saw the EBITDA per metric ton decline to INR 20,019 per metric ton from INR 25,051 per metric ton. While this may appear significant, it needs to be understood factoring in the 7.7% volume growth as well as close to 6% export incentives that was not realized in our Egypt business this year. Moving on to the individual markets, starting with India. India continues to remain a bright spot for us, registering 11% growth in FY 2024. While the momentum remains strong, rural recovery remains the key going ahead. Below average rainfall or slower remuneration remain the key risks.
Easing inflation, stabilizing macros did help in recovery of mass segments in AMET market. While volume growth did decline by 1.5% for FY 2024, this was primarily due to the adverse volume degrowth we faced in January on account of the Red Sea escalation. Having said that, February and March were stronger than normal, therefore, barring any further escalations, AMET should see double-digit volume growth in the coming year. Rest of the world made a strong comeback in H2 FY 2024, registering a healthy 29% volume growth. Q4 FY 2024 saw your company recording its highest quarterly volumes driven by masstige products. This is a very positive sign as it implies the end of de-stocking cycle and stabilization of demand. Going ahead, as demand stability returns, an uptick in premium specialties and restocking will be the next big triggers.
Accelerated approvals for new products along with uptick in premium specialties will ensure improvement in EBITDA per metric ton going ahead. While volume growth stood at 13.3% for FY 2024, going ahead FY 2025, we expect the mix to gravitate towards premium specialties leading to better profitability. To summarize, as recovery returns, volume growth will precede profitability growth. Therefore, the key this year will be to ensure our volume momentum. Volume growth of 6% to 8% for FY 2025 will be the first target. An uptick in premium specialties and improvement in overall mix should further help in strengthening the EBITDA per metric ton. For FY 2025, the range we are working with stands at INR 20,500 to INR 21,500 per metric ton, with H2 gravitating towards the upper range of demand and H1 being closer to the lower range.
More importantly, we plan to get back to the 22% to 23% ROCE band from existing 18% clocked in FY 2024, thus complying with the terminal principles of PAT growth being higher than EBITDA growth and EBITDA growth being higher than the volume growth. To conclude, ladies and gentlemen, with ethos and relationships built over decades, at Galaxy, we remain fully committed towards ensuring we not only sustain but build on this momentum for the coming decades. Thank you, and wishing you all the very best.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask 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 handsets while asking the question. Ladies and gentlemen, we will wait for the moment while the question queue assembles. The first question is from the line of Nirav Jimudia from Anvil Research . Please go ahead.
Yeah. Thanks for the opportunity, sir. Sir, I have a few questions to ask.
Yeah.
Sir, of the guided volume growth of 6% to 8% for FY 2025 and EBITDA of around INR 20.5 to INR 21.5 per kg range, what you just mentioned on-
Yeah.
For this sort of volume growth, what assumptions we have taken for each of the categories of performance as well as the specialty? If I heard it clearly, we clocked something around 13% to 14% volume growth for specialty in FY 2024. If you can just help us with the assumptions being taken by you for the volume growth of FY 2025 between these two broad categories.
No, these two, because that is obviously a matter of details. What is important is that we are looking at the growth momentum continuing in the rest of the world. That essentially means that specialty chemicals should grow better, and more importantly, the mix in the specialty care ingredients will be much better. Whereas performance surfactants will be majorly driven by what happens in India and Africa, Middle East, Turkey. We do see as far as Africa, Middle East, Turkey is reversed, is behind us in terms of the Red Sea issues and the demand stabilizing. As regards to India, the growth momentum needs to continue. This would essentially ensure that we are able to deliver any of this mix in the 6% to 8% band.
But sir, safe to assume that this year would be more towards the growth in the specialty volumes like what we have seen in FY 2024. So the momentum should again be built up over the specialty volumes and like you mentioned that, this would be more towards the premium categories rather than the masstige products, which should happen from H2 of FY 2025.
Yeah. That's what is the expectation. If that really materializes and sustains, that should be good. What is important for us is to ensure that we are able to grow across geographies and customer segments, because we also know that each of the geographies has their own challenges. How do we ensure that we are able to be ahead of the game and ensure that we are able to capitalize on every opportunity. That's the approach.
Got it, sir. Sir, second question is for India. We have seen a double-digit volume growth for FY 2024. Is it possible to bifurcate these growth numbers between how much it has come from the new product launches or the new customers being acquired or the newer applications of our products, or was there a market share gain in India because of which we have seen this double-digit volume growth?
One is in terms of, I may not be able to give the exact breakup, but I can tell you that this particular volume growth is driven by essentially acquiring new customers, okay, as what we call as hunting for new customers, and also getting a bigger volume share from the existing customers. There are certain new products that we launched, but that obviously in India market has not been significant, but that also has contributed in enabling us to get to that double-digit volume growth.
Okay. Last question from my side-
I am sorry. I am sorry to interrupt, sir. I request you to return to the question queue for follow-up questions.
Sure.
Thank you.
Thank you.
Thank you.
Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference, please limit the question to two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.
Yeah. Thank you sir for the opportunity. Sir, my first question is, last quarter you did highlight that because of this Red Sea crisis, there has been a deferment of volumes. This quarter also, sir, we are witnessing because of Red Sea crisis, again, your sequential volume growth is a bit lower. Again, we would be witnessing some deferment of volumes in Q1?
See, if you look at in Q3, when we spoke, there was essentially a situation when only now were the whole blockade happened and the rerouting of the shipments started happening, okay, by the shipping companies. When we spoke to you in the call sometime in February, we had said the worst is behind us and things would start improving. But then, it started improving, but not at the pace that we would wanted to be able to recoup whatever volumes we had lost. We are into this situation where things have improved, but they have not come back to what it was before the Red Sea blockade happened. We do see that the whole thing would start getting better, okay, fully to the pre-Red Sea blockade levels in the coming month or so.
Okay. Last quarter you did also mention that the one-off volumes was almost 2,000 tons. Similar figure can you give for the current quarter, how much because of the Red Sea crisis impact on the volumes?
Essentially, you look at that, we are talking about something like something in the range of about 2,500 metric tons.
Okay. So these volumes will be recouped in the coming quarter?
Yeah. That is what we would want to, because we do see that the demand side seems to be healthy. We also have a situation where we have to keep informing customers about certain delays that we see. We have also reset our supply chain. We have now started building in inventories, given the higher transit times for the incoming material. We do see that we have a good probability of it getting recouped. But we will keep our fingers crossed, in the sense that we would like things to work out the way that we anticipate. But things are looking much better than what it was during the previous investor call.
Got it. Sir, my second question is onto the competition. Sir, we knew that one of our competitor is doing a huge investment into the oleochemicals business. How you see, sir, for the next two to three years, the competitive intensity into the export market from India will go up, and which companies might gain some market share going ahead?
We are not into Oleochemicals, first of all. So we are actually into oleochemical derivatives. In Oleochemicals, obviously, I would wish them the very best. But if you look at our product categories, our competition export market is not only from India, we compete with all our major competition from all over Europe and Asia Pacific and Americas. So our ability to engage with competition is of a much higher order, and we do welcome good competition because that gets the best out of us.
Thank you, sir. Thank you.
Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking Limited. Please go ahead.
Yeah. Thanks for the opportunity. Sir, first question is, during last phone call, we also had mentioned that next year we are expecting a volume growth of 8% to 9%, which was above our normal band of 6% to 8%. So what has changed in the last couple of months in terms of a broader picture that we have again resorted to 6% to 8% volume growth guidance for the next year?
We have said very clearly that we want to be looking at exceeding our 6% to 8% volume growth, but we are keeping the guidance at the same range given that there are a lot of moving parts. But yes, as we said last time, we want to be looking at breaching the higher end of the band in terms of volume growth. It is only that the guidance we are keeping it at 6% to 8%. But our intention and intensity to do beyond that is very high. But you only want the external environment to be cooperative, correct? Which is what we said last time as well.
Sure. Got it. The second question is, we had also mentioned that in the developed markets, we have started seeing green shoots in terms of restocking. How is the progress now, given that you mentioned that restocking probably will happen in H2 of this financial year?
There are two things. One is what happened was, given the way the demand really tanked vis-à-vis what they had anticipated, and with high inventory they had built foreseeing a tight supply chain situation. When all of this got resolved and all the customers were saddled with excess inventory, you had a situation where the destocking was happening across the value chain, at my customer's end, at the consumer end, and even at, say, the ingredient manufacturer's end. What we are seeing is that people have started ordering for material, as we said last time. That means that they have exhausted whatever inventory was there earlier, and they have started being cautious in terms of building the pipeline. Once the consumer demand momentum is very clearly established, we see them coming to increasing the stocking in the channel, which is very important.
Because the channel stocking has actually got depleted significantly. That restocking, as we call it, we expect it happen in H2. Although the orders have started coming in, because we had a situation where for six months, none of them were ordering any material. That from January, we saw people coming back in terms of ordering, but restocking, we see happening from H2, wherein they will start rebuilding the inventory pipeline significantly higher.
Sure. Just I can squeeze last one. In terms of AMET market, what are we currently seeing in terms of the historical issues and the latest issue in terms of the Israel-Hamas war? Have the people got acclimatized in terms of the ongoing issues and the normalcy in terms of consumption is returning? An allied question to that in terms of the incremental cost because of the higher freight rates, whether that is also being absorbed by the market. Thank you.
Yeah. Vaijanath Kulkarni will respond to this. Yeah, Vaiju?
Yeah. The situation geopolitically has not fully normalized. We are very clearly seeing a good normalization of rhythm in terms of business with our customers and in the consumption market.
There are still a little bit of stress because of Red Sea supply chain issues, because there are longer lead times and supply chain times are elongated. To that extent, we have not yet reached the full equilibrium, as Mr. Natarajan said, which should be fully in place in coming few weeks. Then we see that are able to service effectively the demand, which we are clearly seeing a signs of a good normalization as far as AMET market is concerned. The issues are not really impacting. Also related to the currency in Egypt has completely normalized. It is gone to free float. The availability of foreign exchange is extremely normal there. The rest of the trade also has quite eased out, and that will also should have a positive impact on the establishing of equilibrium that we talked about.
Thank you so much, and best of luck. Thank you.
Thank you.
Thank you. Ladies and gentlemen, please limit your questions to two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Yeah, good afternoon, sir.
Good afternoon.
I got two questions. First, on this quarter, can you help us with the growth rates across the region and category? That's number one. Number two is-
Sir, can you speak a little louder, sir?
Is it fine now?
Yeah.
Can you repeat the question, Sanjesh? I could not hear it properly.
First one is more a bookkeeping question, sir. In the presentation, we have shared the growth rates only for the full year. Can you give us growth rates for this quarter, Q4, which is for Performance Specialty, AMET, India and ROW? That is number one.
Number two is on the EBITDA per kg for this quarter, excluding other income. We were at INR 16.90, while sequentially, there is an increase in the gross profit. But I think there is significant inflation per kg, which is driving down the EBITDA. What is driving sharp inflation in operating cost per kg in this quarter?
Yeah. First, you want the volume growth rates for the quarter?
For the quarter, yeah. For Q4 year-over-year.
Yeah. If you look at the total volume, it grew by almost 5.5%, but majorly led by a good 25% growth rate in our specialty care ingredients.
Okay.
Whereas Performance surfactants, because of the Egypt issue that we had, because Galaxy Chemicals (Egypt) S.A.E. majorly does Performance Surfactants, we actually de-grew by 5%.
Okay.
India grew by about 4%. AMET actually de-grew by 12.5%, which is what I told you.
Okay.
Whereas rest of the world, led by our specialty ingredients, grew by almost 32%.
Wow!
Now, coming to your other question in terms of what has been the impact in terms of costs relating to. What has happened is, as we said, the Red Sea blockade resulted in significant increase in freight costs.
Okay.
Many of those freight costs, we were not able to pass it on in the January-March quarter. Whereas the previous corresponding period, that was not the case. We had to actually absorb a good amount of the increase, which obviously we have started passing on the new ones only from this financial year. That has been one major impact.
That's the only impact.
Yes, sir.
Okay. One last bit. India suddenly appears to have decelerated from mid-teens kind of a growth to low single digit growth. Why? Because I don't think India is hurt by the externalities, because it's largely a local market for us. What has led to a sudden?
If you see, India, we have overall grown by 11%, which is much ahead of the market growth rate. So it is only in terms of the, what you call quarter on quarter stuff. So that's the only thing. There's nothing significantly to look into that. Because we have grown 11%. The question of there are always this quarter on quarter, some customers start buying lower in one quarter, higher in one quarter, those sort of adjustments.
Because we grew very sharply this year versus what industry has grown.
Correct.
How sustainable is this kind of a growth? Because it appears that it is decelerating, right? By the numbers?
No. If you look at only last quarter,
Okay, mm-hmm.
It gives you that impression. But what I can say is that it is more in terms of the way customers adjusted their buying. We don't see anything significant as far as decelerating in terms of our business in terms of growing ahead of the market. Even this 3.5% is ahead of the market, because all of them have reported negative volume growth rates.
Oh, okay.
If you look at it, all our customers have reported negative volume growth in the January-March quarter. Previously, they were reporting at least 2% or 3% growth, but in January-March quarter, all of them have reported negative volume growth. So that also has to be considered.
Just this-
Thank you. The next question is from the line of Arun Prasath from Avendus Spark. Please go ahead.
Thanks for the opportunity. Good afternoon.
Hi, Arun.
Good afternoon. Hello, sir. My first question is again on the guidance front, that 6% to 8% volume growth. I am just curious to understand how much of this is dependent on the macro sustenance, and then how much of this is dependent upon, say, other new molecules or new capacities or a new unit coming on stream. Because it seems like we have done around INR 450 crores of CapEx in the last three years. At some point of time, this should result in a couple of molecules scaling up and gaining traction. So how much of this volume growth depends upon the CapEx that we have done in the recent times? That's my first concern, sir.
Yes. If you look at it, my major capacity additions that happened over the last three years has been on the specialty ingredients. If you see that we have started seeing good traction there. The only thing that we want to look at is how does the mix change more towards the premium specialties that we have, which is what is depending on U.S. and Europe coming back from what they have been into in terms of destocking. Plus, also they have been, last about one year, because of the high influence situation and the demand coming down, many of the customers, the projects in pipeline got pushed. So we're seeing that getting revived in terms of their work, recommencing work on that.
We see that it's going to be something where we have to drive what is there on performance surfactants where we have capacity both in India and Egypt. Specialties we see and how do we start our whatever investments we have done, it started to see good amount of results in terms of the way the volumes are growing there.
Sir, if I have to understand, the specialty is where you have done a lot of CapEx, and when that recovers, you are saying that we should see a lot more growth than what we are.
Yes.
In terms of volumes, actual volumes, we are at around 80,000 to 85,000 tons roughly is our volume in specialty. What is the max potential it can go up to before we start investing once again in specialty?
See, it can go almost up to 100,000 to 110,000 tons, clearly. We also need to know that in terms of what capacities we have currently. We also look at, there are certain super specialties for which we are in the process of even setting up capacities. Some of you already set up. Those will start getting, once the projects in pipeline starts getting mature, we'll see those results as well coming in. We are well positioned to be able to start catering to any spike in demand that we see on the specialty front. We are fully prepared.
And sir, your 100,000 and 105,000 tons is based on 75% utilization or that is peak utilization? Because usually-
We are talking about something like 80% .
Hello.
Hello, sir. Hello, K. Natarajan, sir. Management line got disconnected. Let me reconnect them. We have connected with the management line. Over to you, sir.
Yeah.
Yes, sir. You were talking about the 85%, the specialty volumes reaching up to 105,000.
Correct.
My clarification on that is that we usually put CapEx on tweaking certain utilization. This volume is based on that utilization or is the peak 100% utilization?
No, no. Typically, it will be at about 80% to 85% capacity utilization.
Okay. So 105,000 will be equivalent to the 83% utilization.
Correct.
Right. Sir, you also attributed in your opening remarks that the demand for the masstige categories are going up. Is that the behavioral change on the consumers in the rest of the world, especially in the developed market portfolio? If that is the case, this specialty care products going up, isn't it there is a disconnect between this if the masstige continues to do very well?
Yeah. That's why. It's important that if you look at world over, I think all the consumers have become very aspirational. Depending on what their per capita income is, you would see that there are some economies that are still majorly onto just the mass products. Whereas some, like India, typically is moving majorly into a masstige. It's straddling all the three segments very properly. Both mass, we see a good momentum happening into masstige, and we also see equally good space available for prestige and premium products. We are also seeing those trends in, say, the other developing economies as well. That's why you see that with specialty ingredients, we need to have the entire basket available, both what is required for the masstige and what is required for the high-end premium specialties, which we call as prestige.
Okay. Any new molecules you are hopeful will break and become significant and can start contributing much more than in the past, sir? Any such molecules in pipeline which can be?
We have molecules in the pipeline which we are working on. Some of them are, we are at probably the last stage of establishing capability. Some of them are where we should be looking at how do we set up commercial capacity. That's an ongoing process. Like, where we introduced mild surfactants, various categories on isethionate and on glycinates, sarcosinates, glutamates and taurates. Similarly, we did on non-paraben preservatives. We constantly keep rejigging the portfolio of new specialty and specialties given the clear understanding what we are the consumer trends.
Right. Finally, once again on this Red Sea escalation, sir. It seems like the consumption is not impacted in those geographies, just that our ability to place volumes is impacted because of the longer route. Essentially what we understand is that we have lost market share temporarily. How we are hoping that, we will gain back those, especially if the local suppliers are active and they're competitive?
Given that the suppliers are constrained in terms of the incoming feedstock, because we need Africa, Middle East, Turkey is majorly an import- intensive market. Many of the ingredients get imported, many of the feedstocks get imported. What we are saying is that how well you are able to manage your incoming supply chain and outgoing supply chain and have the ability to be able to have headroom in capacities to cater to what demand does not get served. Because if we are not able to serve, every person is in the same boat. Because all of them are exposed to the same supply chain constraint in terms of incoming raw material.
How well we are able to manage the incoming raw material and how well our supply chain is geared to be able to quickly get in the material produced and send it out is what is going to determine. And we are pretty well positioned as far as that is concerned.
That means essentially you are saying in these markets there is a destocking at that end because everyone could not supply?
Yeah, because that was a forced destocking you may say, because people want material, but they do not have material. They are not able to get it. So it is not a question of losing share, it is a question of the market is not being served because of the supply chain issues.
And the restocking that we are at, we are-
I am sorry to interrupt, sir. I just request you to return to the question queue.
Sure. Thank you.
Yeah. Thank you. The next question is from the line of Abhishek Navalgund from Nirmal Bang Equities. Please go ahead.
Hi, sir. Thanks for the opportunity. My first question is on the operating cash flow generation. We have almost generated more than INR 500 crores. Assuming this run rate continues, how are you planning to deploy the excess cash going forward? I mean, there can be acceleration in CapEx or are we considering any M&A going forward?
No, as we have said, we have a CapEx of close to INR 100 to INR 200 crores. That's also there. We have a very clear visibility on the CapEx. We also know that we have a good position in terms of looking at certain very viable inorganic growth opportunities in line with our strategic intent. That's also something we keep scanning. What is clear is that we are in a good position to be able to capitalize on opportunities to grow our capabilities pretty well. We are also going to be investing on certain digitalization agendas that's very critical on some early infrastructure, on some people infrastructure. That's something the good cash position enables us to be able to really plan and equip ourselves for the long term.
Sure. My next question is on TRI-K. Is it possible to share the full year EBITDA and PAT number for FY 2024?
No, we don't share the numbers. I think that probably will come during the annual report that we turn out. Right now, we don't have that.
Okay. That's it from my side. Thank you.
Thank you, Abhishek.
Thank you. Ladies and gentlemen, please limit your questions to two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from the line of Karan Gupta from Varanium Capital . Please go ahead.
Yeah, hi. Good afternoon.
Sure.
Yeah. I would like to ask a question on a broader perspective. You also said in your opening remarks that you are very much optimistic about the long-term picture. Our financials always be dependent on this fluctuation of this raw material kind of thing and how we are positioning ourselves in the global market, right?
And this demand side and supply side, how the supply side is coming into the industry.
Overall globally and also in India. And what is the demand scenario you are seeing for the next four to five years? I know the product significance is very much high as we are moving into the premiumization of the products in all the categories, right? Whether it is healthcare, your oral care, home care kind of thing. How are you seeing the demand scenario and the supply side?
Yeah. As we said, when I said I am extremely positive and extremely, what do you say, equivalent as far as future is concerned, because we know this industry is a very exciting industry. All that we see in terms of certain de-stocking or whatever happened, and then certain consumer trends in terms of looking at it, things coming down or a supply side issue is only temporary. Now every time something like this happens, we end up getting equipped further in terms of tackling these sort of challenges, and enables us to be one step ahead of others to be able to capitalize on the opportunity. That is what gives us the confidence in terms of, structurally, this industry is in a fantastic position. Coming to the ability to be able to manage our business because it is subject to huge raw material volatility.
That's something we have demonstrated over the last 10 years, the way that we have managed significant volatilities, both in terms of frequency and intensity. That's enabled by the very robust risk management system that we have in place. With regard to the third, what do we see as the growth rates in the coming four to five years? Our guessing is to grow at 6% to 8%. The global growth rates, we don't know because that will be what we are aiming is in terms of with the combination of how well we are able to grow our footprint for our performance surfactants and specialty care ingredients, and how well we equip ourselves internally in terms of our operations capability and people capability will determine as to how well we are able to exceed this target number of 6% to 8%.
Okay. Every year we are increasing our number of patents. How these patents are competitive in terms of price and quality that you are delivering?
All my patents have patents which are on process patents, we have patents on products, patents on application.
What is clear is that there are patents which have their own, what do you say, advantages. There are some of the patents which essentially enable us to be able to cater to products in line with the consumer trend. Some of it will be work in process in terms of commercialization. So it's good that we have so many patents and so many product possibilities that we can get to the market.
Okay. Thank you.
Thank you. The next question is from the line of Gokul Maheshwari from Awriga Capital Advisors. Please go ahead.
Yeah. My question is on the AMET business. Over the last few years, your volumes peaked in 2021, where you were close to 95,000 tons. This year you are close to around 70,000 tons. So that is like close 25% or so lower than that number. There have been external macro issues with that region. Could you just give a perspective for the next two to three years for this region, that once your volumes are down because of this, is that an opportunity lost or you can recoup that ground and achieve those peak volumes in the near future?
So see, AMET, obviously, as all of us know, it has been at the epicenter of a lot of geopolitical tensions, and that has its own challenges in terms of both impacting demand and supply.
As of now, we see that post the Israel-Hamas conflict, we did see that things settling down. From here on, if you look at it, we did, but for the Red Sea blockade and everything, we had actually gathered a good momentum to be able to exceed our last year number of 71,000 tons. So we were actually looking at close to 74,000 metric tons this year. But the supply side issues actually prevented us from catering to that, to reaching that number. Still see that the demand received impact and our preparation in terms of meeting that demand in terms of both capacities and our supply chain capabilities is very much intact. We do see things getting significantly better in terms of the approaching, the higher numbers of the previous years of all close to 80,000 tons to 85,000 tons.
In that context, you can go back to your peak volumes in the next couple of years?
Next couple of years, if you look at the peak volume, which was in 2021 of 95,000 tons, I would not want to hazard any guess there, because that looks steep. But then we will be into a proper trajectory to get there in the next five years. The way I see it.
Lastly, on your working capital, there has been some improvement in your working capital mid-tier-
I am sorry to interrupt, sir. I just request you to return to the question queue for follow-up questions. Thank you. The next question is from the line of Shalini Gupta from East India Securities Ltd. Please go ahead.
Yeah, good afternoon, sir. Sir, first question is on the revenue. If you could just please keep the volume growth for the quarter as well as the realization increase, because lauryl alcohol prices have been flat during the quarter. I mean, YoY flat?
Correct. But then, the pricing does not impact immediately. There are a lot of things in terms of the mix that will be there, plus also in terms of certain contracts of products that we pitched earlier and much earlier. So the flow is not exactly in line with how the prices correlate. It all depends on how the contracts flowing, what we have done previously. So it will typically correlate quarter on quarter in terms of with the pitch stock price.
Okay. But what was the volume growth during the quarter?
We grew by about 5.5%.
Okay. My second question, when I just look at my sheet, the quarterly growth for Performance Surfactants is a 6% decline. The same for Specialty Chemicals is a 10% increase. Am I in range or am I out of range? If you could give the growth figure of performance and specialty chemicals.
Shalini, I guess I think I answered to Sanjesh Jain that particular question. I think in the quarter-on-quarter, I think we grew our specialty ingredients above 28%, whereas Performance Surfactants we grew by about 5%, giving us an overall growth rate of the quarter-on-quarter of 5.5%.
Performance surfactants was 5%. I think he himself had asked you-
I'm sorry to interrupt, ma'am. I just
Yeah, but this was a question asked earlier, so I'm just asking that again. What was the EBITDA per kg for the quarter?
EBITDA per kg for the quarter? Yeah, we said it's about
EBITDA per ton.
INR 20,600 per metric ton.
All right. Okay. Thank you. Thank you. Bye. Thanks.
Thank you. The next question is from the line of Nilesh Ghuge from HDFC Securities. Please go ahead.
Yeah. Good afternoon, sir. My question is on customer split. If I look at this quarter number within the T1 and T2 customers, the contribution from T1 and T2 customers has gone down over the last four quarters, while the T3 local and niche player, the contribution has gone up significantly, year-over-year also and the quarter-on-quarter also. But at the same time, we are mentioning that the specialty care business is going up. Are the local and niche player moving towards specialty care? It is my understanding.
No. That may not be the right understanding because if you looked at it also in terms of how is our customer acquisition plan, how do our business teams acquire new customers, how do we broad base our customer profile and portfolio? Because that is a very critical that how do we grow our volume share with existing customers and how do we also get new customers on board, right? So if you see this particular improvement in T2, T3 that you're seeing in these in terms of the actions we initiate almost for the last three years, which is sustaining in terms of that particular category of customers growing. There's nothing in terms of looking at saying that whether T2, T3 are more looking into specialty. That's not a good correlation to have. That is not the case at all.
Okay. Thanks, sir.
Thank you. The next question is from the line of Sudhanshu Nahta from Marcellus Investment Managers. Please go ahead.
Hi. Thank you for the opportunity. Just two quick questions. This quarter we are seeing significant increase in other income. Can you help me understand what drove that? Secondly, what is the sustainable tax rate? Because every quarter we are seeing the tax rate come down for the company. Going forward, what should we assume as sustainable tax rate for the company?
Yeah. Abhijit Damle will explain. Abhijit.
Yeah. Other income basically will comprise of certain treasury income and also some foreign exchange benefit that we are having. The tax rate, what you are saying, will basically be impacted by some permanent differences leading to a lower average tax rate.
This quarter's tax rate should be assumed that to be sustainable or it could fall further?
It will be sustainable. The only thing is, it will certainly be impacted by the composition of different subsidiaries because one of the subsidiaries which is Egypt, it has a zero-nil tax rate. To that extent, the tax rate will also impact on the contribution that is given by the subsidiary in the overall consolidated numbers.
Understood. Just on this other income piece, you mentioned that it is treasury income and FX gain. In treasury income, would it be primarily because of treasury income or primarily because FX gain largely have been consistent for last fair few quarters. What should we attribute it to?
You are saying for the quarter?
Yeah.
What is the major reason?
Yeah. For the quarter it will majorly be the foreign exchange income.
Okay. All right. Thank you. Thank you very much.
Thank you. Ladies and gentlemen, please limit your questions to one question per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from the line of Rohit Nagraj from Centrum Broking Limited. Please go ahead.
Yeah, thanks for the follow-up. Just one clarification on EBITDA per metric ton. So during FY 2024, the EBITDA per metric ton is close to about INR 20,000, including the other income.
Correct. Yeah.
If we knock off the other income of about INR 1,500 per metric ton, the EBITDA per metric ton comes to around INR 18,500. Next year, we have guided for INR 20,500 to INR 21,500. Does that also include the other income part, which is closer to INR 1,500 during FY 2024?
No. See, what needs to be understood is that when we got this other income in the last quarter, we also had the excess extra freight impact cost that was there, correct? What we are saying is that now the freight cost, which we have started passing on, we would expect that now normalcy will get restored, so we are not looking at other income being significantly higher or whatever. We are looking at things in a very normal way, getting us to close to INR 20,500 ton or INR 21,500 ton per metric ton.
Got you. Very helpful. Thanks a lot.
Thank you. The next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.
Yeah. Thank you, sir, for the follow-up. Sir, in FY 2024, we have granted six new patents, and five are in India. These five new patents, will they be converted into products, and when will we be supplying to our final customers on this? What are these patents on?
Those molecules which are just into the patent process, generally, they have a time to scale it up and go to the market. It depends on the type of the patent. But typically, in a timeframe of about one to three years, they will blossom into the market opportunities.
Okay. How many patents are in the pipeline right now for the next two years?
In fact, we are working on that, there is nothing in pipeline because we constantly keep evaluating whatever we work on in our innovation lab, whether it is worth patenting. Sometimes we have molecules where we have a good intellectual property, but we decide not to patent. We have in the pipeline, evaluation being done as to whether at all we need to patent and whether it is patentable. That is an ongoing process. Yeah.
Sir, surfactants volume.
Hello. I lost you. I think your voice was breaking.
Sir, for the domestic surfactants industry volume for FY 2024.
We said India grew by, in fact, about 3.5% in the quarter. Hello?
3.5% for full fiscal, FY 2024?
No, full fiscal was 11%.
Okay.
Thank you.
Thank you. The last question is from the line of Arun Prasath from Avendus Spark. Please go ahead.
Thanks for the opportunity, sir. Again, once again on the freight rate that you couldn't pass it on during this Q4 because of the Red Sea. When you are recovering it from the customers in this fiscal, that will also, you will recover the retrospective cost that you couldn't pass it on, or only from going forward you will be doing that?
No, no. First thing is to ensure that we are able to pass on the new freight rates. Okay. So typically, this is essentially telling customers about the situation and then prevail, appeal to them to see whether some part can be recovered of what we incurred, okay, in the previous contract. So that's ongoing. Somewhere it happens, somewhere it doesn't happen. But the most priority, sir, is to pass on this thing from the new contract, which we have already done.
Most of the contracts are on a landed basis, not on the FOB basis. Is that the reason why you-
Yeah. I think 90% of what we do is all either DDP or CIF.
Is there any way to move away from this and go into, say, FOB-based contracts so that in future this kind of issues will be sorted out?
One of our-
Is it clients are not warming up for that?
No. One of the key value delivery that has to be done to customers is how do we manage and give them as good as a local supply chain. The more I try to get into FOB, I may end up solving one problem because this doesn't happen every time, but then you will become not that relevant to your customers, right? Because if everything they have to do, then what is our value delivery to them?
Right. This new guidance that we are talking about, INR 20,500 per metric tons to INR 21,500 per metric tons, how much of this is based on this additional freight that you assume to pass down? If not for that, what it will look like, sir?
There is no new additional freight. I am only saying whatever freight rates increase I couldn't pass, I am passing on the actual rates that are applicable from April. That's what I am saying. It is not in terms of trying to recover more or earlier. That is not going to be possible. It's only in terms of earlier I couldn't pass on increased rates because the contract was already in place, so there was a hit to the P&L. Now I am saying from April onwards, I am able to pass on what the freight rates, actual freight rates are.
For some reason, if the freight rate goes down, still we will be able to command the same price at which we went into contract, or immediately we will have to pass it on?
No. There again, it depends on what is the contractual structure. It's more to do with how the contract was structured with the customer. But in most cases, it will be the freight rates are fixed. Typically, we don't do anything beyond three months or six months at max.
All right. Okay. Understood. Thank you very much, sir. Thanks for the opportunity.
Thank you.
Thank you. That was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.
Thanks to all of you, and appreciate the interest that each one of you have shown in our business and our performance. Look forward to meeting you all and engaging with you in the conference call in the month of July, August, that we will have for our Q1 FY 2025 results. Thank you, and all the best.
Thank you.
Thank you. On behalf of Galaxy Surfactants Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.