Ladies and gentlemen, good day and welcome to Galaxy Surfactants Limited Q2 and H1 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 risk 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 touch-tone phone. Please note that this conference is being recorded. I now hand over the call to Mr. Unnathan Shekhar, Promoter and Managing Director. Thank you, and over to you, sir.
A very good morning, all of you, ladies and gentlemen. Thank you all for joining this conference call on eve of Diwali. It gives me immense pleasure to welcome you all once again for this Q2 and H1 conference call of the year 2023, 2024. On this prosperous occasion of Diwali, I take this opportunity to wish you and your family a very bright, happy, and prosperous Diwali. Ladies and gentlemen, it is said that we do not learn from experience, we learn from reflecting on experience. This simple yet powerful quote by American philosopher John Dewey shows us the value of reflecting and learning from our actions and words. Keeping the same in mind, today's call will be more about reflecting on what had been stated previously, how we have performed, we saw this that, and where do we see ourselves in the quarters going ahead.
In our Q1 FY 2024 con call, we had stated that volume growth remains the key prerogative. We are pleased to share with you that for Q2, the volume growth clocked by your company stood at 9.8%, and for H1, the same stood at 8.6%, exceeding the upper range of 6%-8% band guided at the start of the year. Going ahead, we remain confident of achieving the upper range of our guidance. Reflecting further, the past 24 months for us has been a story of two worlds. One driven by India, where growth, stability, and momentum has only improved quarter on quarter. The other driven by the world excluding India, where decline, volatility, and macro, micro deterioration has been the norm.
But today, after 10 quarters, this is the first quarter where we have seen across the board volume growth for all our segments and regions, not only year on year, but also sequentially. This is a very positive sign. While India continues to remain a bright spot for us, registering double-digit volume growth in Q2 as well as for H1, the overall move from low single digit volume growth seen last year to double digit for this quarter has been due to the improved performance seen in Africa, Middle East, and Turkey, and the rest of the world markets. Understanding the nuances of these geographies and reflecting on our performance will be critical to gauge the performance going ahead. Starting with India, we remain extremely confident on the India growth story. We are on the cusp of something special.
While monsoons, crude, moderation in demand, and inflation may act as temporary blips, over the longer term, we believe the double-digit growth story remains intact. Africa, Middle East, and Turkey made a strong comeback in this quarter, clocking high single digit growth in volumes. This was primarily due to the uptick seen in our Egypt market. While other markets excluding Egypt also grew in Q2, for H1 the same remained flat. With consumers adjusting to the new normal, volatility subsiding, barring any adverse spillover effects of the war or macro headwinds, we do believe the second half will be better than the first. The rest of the world markets, which comprise of Americas, Europe, and Asia Pacific, having a story of the developed versus the developing world.
While the developed markets are being plagued by inflation, slowing growth and consumption, the developing markets of Asia Pacific and Latin America, with easing inflation and improving macros, have made a strong comeback in this quarter, thus enabling the rest of the world in clocking a low single digit volume growth for this quarter. While sequentially, barring for Europe, which remains flat, every region has grown, which is a strong positive for us. H1, the overall rest of the world volume remained flat. Going ahead, we believe given the sequential improvement we are seeing, growth should make a strong comeback in 2024 in these markets. Moving on to the composition of growth, which has a significant bearing on the EBITDA per metric ton. The EBITDA per metric ton, despite clocking 8.6% volume growth for H1, stood at INR 23,357 per metric ton.
For the quarter, the same stood at INR 19,593 per metric ton. Compared to H1 FY 2023, while it shows a decline which will even persist in H2, we believe the band of INR 19,500-INR 20,500 per metric ton should hold for FY 2024. What is important also for you to note is that sequentially from quarter one to quarter two, we have grown on volumes and as well as the EBITDA. While the significant uptick seen in performance surfactant volumes and mass specialties has enabled us to exceed our volume guidance, uptick in premium specialties remains a critical requirement for improving our overall EBITDA per metric ton. We do see the situation improving in 2024, thus driving the EBITDA per metric ton going ahead. To conclude, ladies and gentlemen, businesses need to be viewed with a long-term magnifying glass in hand.
While it is humane to look at the short term with a microscope and magnify it is equally important to keep a tab on the long-term story. The long-term story of your company remains as robust as ever. With all tools of experience, innovation, relationship, and competencies, we remain on course structurally as well as directionally. Thank you once again, ladies and gentlemen. We open now the platform for your questions. Thank you.
Thank you very much. We will now begin the question- and- answer session. Participants present on the audio bridge who wish to ask a question may press star one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead.
Yeah, good morning, sir.
Morning.
Thanks for this opportunity, and Happy Diwali to you and everyone at your team.
Thank you.
First, on the AMET side. On the closer to Egypt, there has been a geopolitical disturbance. I know Egypt is not directly impacted from it, but do you fear Egypt and Turkey, which is the larger geography, can have some sort of disruption or an inflation or anything, any risk to the volume in our AMET region? Do you fear that?
Yeah. Good morning, and Happy Diwali to you. This is Vaijanath here. Frankly speaking, both the economies have absolutely seen the lowest of their country-wise economic inflationary effects already, and they have started to show the signs of recovery. Right from last quarter, we had mentioned this, but it has started to really manifest in numbers from actually this quarter. This situation, which has been unfolding for last about a month or so now, is something which we are very closely watching. We are in touch with our entire segment of customers, T1, T2, T3 in the region. The demand pool is steady. They have not shown any concerns in terms of the current demand pattern. But as you know, there are definitely uncertainties that we need to be watch out. But they have not shown any signals of slowdown, including in the country of Israel.
The dispatches, supply chain, everything is normal. The coming two months will really tell us. We are watching it very closely.
Vaija, hi. Even the transportation logistic, are they also impacted, or they are intact at the—
Yeah.
—Mediterranean region?
Entire Mediterranean region, including Suez Canal, which is connecting east to west, entire logistic, entire supply chain is absolutely normal. No signs of any concern, red alerts by anybody. But still, as we all know, we need to watch out very closely. But as of now, everything going normal.
So the only worry is that the only concern is in case it intensifies further and you have nearby countries getting pulled into the conflict, yes, then the outcomes can be very different, but we are not looking at it that negatively. But as of today, we don't see any challenge the way things are today.
Fair enough. Second, again, continuing with the AMET region, do we think the worst is behind, and can we again go back to the earlier volume, say, by exit of this quarter? Or you think going back to the earlier volumes of 40-odd thousand metric ton, will it take more time, or we will be there?
Yeah. So last time also we mentioned, this is the second time in last five years happening, and we have seen this pattern of recovery, which we had estimated about 6- 12 months as a period, and in last time also it has happened in that period. Exactly now, we have started to see the similar patterns. The new norms have come into existence. Luckily, all the commodity prices also have rightly reasonably normalized. All international logistic costs have normalized. So I think that is also complementing, and we see that now from here on, there should be a steady recovery that we see.
I know China plays some role in AMET region, and China has become slightly more aggressive than what they have been in last three, four years. Have you seen that kind of a scenario for us in the AMET geography or any other geography?
Frankly speaking, China factor has been on and off in last almost seven, eight years. It knocks the door with a bang for some period and again there is a complete disappearance. This we are completely used to. To that extent, it is again visible, but this pattern is very well known to us, and our customers also know this, so we have a very good place and experience to navigate through.
Got it. Second, on the India side, have we seen our specialty ingredients now seeing a lot more traction with the premiumization trend, which has really picked up well in India? How are we seeing our specialty ingredients being adopted, and that way should our specialty see a much more traction with developed markets coming in and India picking up?
Yeah, you're right, Sanjesh. In India also, we are seeing with the positive momentum that is there in India, we are seeing specialty volumes also picking up. But we need to note that it is on a small base. But what is critical for our specialty volumes overall to get the momentum back is what happens with developed market. In India, yes, it's picking up pretty well, and we do clearly see this continuing.
Will India be 10% or lower than that in the specialty?
In terms of volumes? Yeah, around that. It will be lower than. Yeah.
Okay, lower than the double digits. We got it. On the margin side, I think last quarter we spoke of INR 20- INR 24, INR 23.75 precise. Now we have slightly readjusted it or narrowed down the band to INR 19.5- INR 20.5. What makes you this confident? Is AMET coming back is optically diluting this spread or slower picking up of North America is leading to this change?
Yes. In fact, we were very clear. Last time we said we are not guiding on the EBITDA per metric ton because the way things are fluid. We said volume growth is going to be the priority, and we are pretty much delivering well on that. This we are giving because we are now into H1 and we are able to have a good visibility on how we are going to end the year in terms of the momentum in volume growth and the mix that we are able to foresee. If you see the mix is what is contributing to the EBITDA per metric ton not going up in line with the specialties not being what it should be. We do see certain green shoots are coming up in Europe with our specialties. Premium specialties need to really come back.
North America, yeah, probably we need to wait for two more quarters it to come back. We do see the specialty and the premium specialties portion coming back to a growth trajectory in the developed markets in probably early next year. And that should then get the EBITDA per metric ton back on track in the zone that you indicated.
Any more clarity on our Europe subsidiary? Are we going more aggressive? Are we seeing spots? Because we have been operating from AMET. Now we are opening up an office in Europe. What is driving this?
I can say Europe obviously may have a lot of headwinds today and a lot of negative publicity in terms of what's happening. But Europe, as far as the SPC market, is a very significant market. And for us, in terms of our specialties, Europe is going to be a critical portion of our strategy. And the office is going to be only preparing and enabling us to be able to partake in the growth opportunities there in a very significantly better way. That is the answer there.
Europe is equally more fragmented, right? Unlike the world, where surfactant is more a consolidated market, Europe is a completely fragmented market. Is the industry landscape changing in the Europe?
Not exactly. Because it is fragmented, that is why you need to be more closer there and be constantly at it in terms of leveraging on what potential you have there. That answers as to why we want to be there, and this particular Europe setup is going to help us in terms of working the market and consolidating our position there.
Got it. That is it from my side. Thanks for answering all the questions. Natarajan, best of luck for your new role.
Oh, thank you, Sanjesh. Have a good weekend, Sanjesh.
Thank you, sir. Thank you very much.
Thank you. The next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead, sir.
Thank you, sir, for the opportunity. Sir, when you were tracking some of the macroeconomic indicator data like the inflation in Turkey and the inflation in Egypt. Sir, that data is still indicating inflation is still at a record high level. When we look at Turkey inflation that is at 61%. Even Egypt inflation is at around 69%. Also, the private consumption expenditure, that has also came down on quarter-on-quarter basis. Sir, what is that optimism like when we look at the global market? What is that optimism which has led to this volume growth on quarter-on-quarter basis when the indicators globally are negative only yet?
Yeah. Frankly speaking, you are rightly saying that the inflation is at high, and it has been there for quite some time now. The overall macroeconomic situation in the region is not going to change overnight. These realities will be requiring a new norm in terms of the market is concerned. As I rightly said that exactly similar phenomena happened five years back, and we knew how the new norm got established and consumption patterns got restored. Because when it comes to our industry, home and personal care, we have seen that consumers have established a typical pattern of consuming these goods in their daily life, and then it readjusts. We have seen this phenomena happening very closely. It reflects finally through our dialogue with our customers in terms of volume.
We are seeing that, though the inflationary pressures are not going to come so easily various regions in Europe and Middle East. But we feel that now the consumers have reached a new norm enabled by current situation of ease of commodity prices, ease of supply chain and availability. Obviously, we being there with them, we definitely have an edge. We believe that this should now from here lift up.
Okay. So, sir, despite this peaking of inflation, we can take a conclusion like consumers, they can adapt to the new normal. Although we might have to take a cut in realization to push volumes, our volume growth will remain, considering now inflation is at the peak and things are still going good for us.
Yeah. Let me answer that. One is in terms of whenever you have a scenario where things are pretty high in terms of inflation, always it's a question of we need to wait it out till the consumers start adjusting to that. That's what we have been saying, because consumers finally adjust. That has happened. With this sort of equity of relationship that we have with all our customers, we actually are in a very good position in terms of leveraging any growth opportunities that emerge. To your point, as to whether there are going to be any realization compromise or whatever in terms of getting it, I would only like to tell you that our pricing has to be fair and in line with what the markets are and then very competitive, and that's what we will do.
It is not that we are chasing volumes by just taking some very irrational pricing. I'd like to correct that understanding if that is what you're indicating.
Got it. Sir, second question, sir, when we look at the lauryl alcohol prices, sir, on quarter-on-quarter basis, there is a 14% jump. Sir, what has led to this decline? Sir, consequently, our gross spreads have taken a hit because of this rise in lauryl alcohol prices. Generally, sir, we are following the pass on mechanism, so we can think also coming in the subsequent quarter, our gross spread should increase considering lauryl alcohol prices have gone up, and we might not have been able to pass on in this quarter. Is this understanding correct, sir?
No. See, the price, if you look at it, has gone up by 14% in a quarter, but it is a point-to-point comparison. We buy every month, so it is not that you buy only at. It is a question of where it averages out over the month. This is a point-to-point comparison. It is not an average. Okay, that is one. Second is, you are talking about it reflecting in our revenue growth, whether the revenue growth will be higher in the coming quarter. But 14% is too small a distinction for it to be having a major implication in terms of revenue growth. There will be too many other combinations like our specialty volumes getting better, relations getting better, which can impact, okay, the revenue growth. Otherwise, this 14% increase that you are seeing is point to point.
Got it. Any specific reasons, sir, why these prices have gone up?
Yeah, that is because there is a huge amount of speculative interest that is there, and there is also the impact that people are seeing with El Niño on the supply side in terms of the yields of the palm. There will be multiple factors. But if you see here, it keeps oscillating in this particular range. The way we have seen this market, 14% increase is too little volatility for us to be looking at. But we do expect things will be in a stable state within this range moving forward.
Got it. Sir, on to the specialty care volumes. This quarter, there was a very good jump in volumes. Sir, if you can quantify, particularly from which segment we have seen this growth, like from the mild surfactant side or from the protein side or betaines, which segment has contributed to this phenomenal growth?
You see that it is the mass specialties, as we call it, the premium specialties are yet to come back. As I said, that is mainly in the developed markets of Europe and North America. We have been able to do well in specialties with the mass specialties.
Sorry, sir. Pardon, sir, I missed out that part.
Hello?
Hello.
Yeah?
Sir, which segment has shown that growth? I missed that part, sir. Sorry.
Specialties also, you have a certain segment. So you have masstige specialty. That is one between premium, okay, and your mass segment. Okay, so there also you have specialties, but those are all what we call as mass specialties. But the main component in terms of way that you are able to have higher ingredients in specialties with premium specialties, it essentially gets consumed mainly in the evolved markets of Europe, North America. So that needs to come back. So that is what I was indicating in terms of what has led to the growth of specialty in the last quarter.
Got it, sir. Sir, just one last question. Sir, onto the EBITDA spreads. I know that, sir, we are not guiding onto it. But considering now since we are standing at almost a seven to eight quarter low in terms of EBITDA spreads, and considering now we are witnessing a volume growth into specialty and all. So make a case so this could be the bottom, and considering things in the global could revise, so we can again go back to that levels which we had taken over the last few quarters. Just an idea on to this, sir.
Yeah. We firmly believe that is quite possible. Our efforts in this direction are pretty much very intense. But yes, as we said, the external situation should continue to cooperate, and the green shoots that we are seeing in terms of growth in North America and Europe has to continue. So there is no reason why if everything cooperates with the intensity with which we are approaching our business, why it should not happen.
Thank you, sir.
Thank you. The next question is from the line of Arun Prasath from Avendus Spark. Please go ahead.
Thank you for the opportunity. Good morning to everyone. My first question is on the India volume growth. We have kind of delivered double-digit volume growth in India, at least as I can see, in the last three, four quarters consistently. This is something which has not happened in the last five years, as far as I can see. This consistency was missing, but now we can see that. Is something changed in the last five years which is structurally delivering this kind of double-digit volume growth in India consistently?
One is in terms of the way the market now has more participants spread across all the tiers, tier one, tier two, tier three. If you see in the last five years, the share chose what happened between these particular segments. Also in terms of how well we have prepared ourselves over the last about three years in terms of addressing the demand across India. Both these has contributed to you seeing the consistency in terms of volume growth that we have had.
Okay.
Also home care, where home care has been a significant growth contributor in the India market. Our home care product solutions has also been one of the contributors to our participating in the growth in India.
Right. Within your customer base, with the way you categorize MNC and the local and regional players, who is actually contributing to this kind of a growth?
We see all the segments, but it's majorly tilted skewed towards the tier two and tier three customers.
Right. Is it more like a penetration increasing and large MNCs losing, but that is being captured by the tier two, tier three?
I will not say exactly losing. You have the new entrants coming in and then they're creating their own brands, and that's giving an opportunity to be able to participate in that growth. So enabling them to be able to launch products and they are able to have a share. If you see all of them, I've been talking about all the Remember I talk about a flattish or a low single-digit volume growth. Whereas some of them with a low base have been able to even look at high double-digit volume growth. And we participating along with them is enabling us to partake in the growth that they are having.
And for these tier two, tier three customers, our wallet share among within them, that means we can sell more products to the same customer or more formulations we can do as compared to the, say, similar relationship with the large MNCs. Is this the right understanding?
With large MNCs also we have a good basket of ingredients. What happens with the smaller customers is that they start small, but then their ability to keep expanding their portfolio will determine as to how we are able to expand our product portfolio with them. In the large MNCs, you have a bigger pie to participate in, whereas the smaller customers like tier two and tier three, you have a smaller pie, but you need to go through the journey with them in terms of their launching new products and their products basket of ingredients expanding in terms of what they can source with us.
And recently a similar company got listed. Do you see many such companies are also evolving in their growth trajectory and this can potentially benefit us?
Oh, yeah. Yes, certainly. Certainly, because India is going to see a significant growth in terms of the per capita consumption of home and personal care products. Home and personal care product consumption per capita is driven in line with the GDP growth, in fact, ahead of the GDP growth. Obviously, India is going to be a very good story as far as HPC per capita consumption is concerned.
What is very gratifying for all of us to note is the emergence of a whole lot of small players across the various states and geographies in India. This is a very interesting phenomenon, and we all should be encouraged by this.
Right. Understood. My second question is on the sequential reduction in the EBITDA per ton. Is it usually you see when volume growth suddenly accelerates, the low spread products gets first recovery? Does it explain the sequential reduction in the EBITDA pattern, or is it more like an inventory management or a mismatch in the pricing?
No, I would say the first statement that you made, that is what is the right conclusion that you should draw. It is nothing in terms of any higher price inventory or trying to manage the higher price. That is not the case. It is only that the mix has changed because as we said, the bulk of the growth has been driven in terms of volume by performance products and mass specialties. Once if the premium specialties also had kept pace in terms of growth, which obviously is the major contributor is North America and Europe, then yes, we could have even seen the EBITDA per metric ton sustaining at those high levels as corresponding quarter last year.
Right. How you are placed at least in the top five, six products in terms of utilization, do we have enough room to keep up with the pace at which the volume is growing?
We are well prepared on the supply side, okay, and we have geared up in terms of our capabilities and capacities to be able to leverage on the growth opportunities that are there in the market.
Right. Can you just give a little bit granular details on CapEx that we have done in the first half? It seems to be a little bit high as compared to the earlier trajectory.
Oh, yeah. As we said, we typically do about INR 150 crores of CapEx every year. There are some projects that they are commissioning, and that is why you have seen there is now having some incremental stuff in terms of the way the timing happens based on the project schedule that we have. There is nothing else. We will also have this year about INR 150 crores of CapEx.
Right. This is in my suspect any category of products that you are-
No, this will be across. It will be on certain CapEx related to certain improvement plans, certain relating to performance products as well as specialty.
Thank you, sir. Thank you. Happy Diwali to you.
Thank you. Happy Diwali, everybody. Thank you.
Thank you. The next question is from the line of Rohan from Nuvama. Please go ahead.
Yeah, hi, sir. Good morning. Thanks for the opportunity, and sir wish you a very happy Diwali. Also, Mr. Natarajan sir, all the best on your new role, sir.
Oh, thank you.
Sir, first question is on our India market. You mentioned that definitely the volume growth remains very solid. Just wanted to understand, sir, though our India market is more towards performance, and with the strong growth in India market, do we see that the contribution in specialty segment as well, can we expect over next two years can change significantly? I mean, India itself can drive a significant growth in specialty. Do you see that transition happening in the India market?
Yeah. We do. As I said, the per capita consumption going up will also give opportunity for the growth happening across the verticals in mass, prestige, and prestige. And the way we are seeing the development of the growth of specialty happening in India over the last two to three years, I think it gives us good confidence that it will get better and better as we move forward.
Okay. Sir, again, you also mentioned that overall EBITDA growth with a 6%- 8% guidance in volume and more towards EBITDA and furthermore higher than at that level. The first half has been, we understand, because of the multiple growth challenges globally, have seen de-growth on year-on-year. That leads us to slightly higher asking rate in second half. With the current environment, which still will be volatile, you also mentioned that India, because of the monsoon and inflation or rising crude prices, may see some near-term volatility. However, medium-term looks promising. With that, we still are confident about second half performance is strong enough to take care of volume growth of more than 6%- 8% and bottom line and EBITDA more than that.
Oh, yeah. One is, as you said, in the way the market is today, I think we'd be very happy if we are able to chase everything and deliver on the contribution per metric ton and volume. But we said, given the context in which the global macroeconomic situation is, we need to prioritize volume growth in a very meaningful and a profitable manner. And that's what we have done well, and we're extremely happy about what we have done. Moving forward, we do see that except for any new macroeconomic challenge or geopolitical tensions emerging or intensifying, we don't see a challenge on delivering on this volume growth.
With regard to EBITDA per metric ton, we said the composition has to change in terms of more volumes of premium specialties, and that essentially requires that Europe and America continue to build on the green shoots that we saw last quarter. That will be critical for us to be delivering on the EBITDA per metric ton increase as well.
Sir, just last bit, you mentioned that definitely in U.S. and EU, you have started seeing recovery in a mass segment. However, the specialty probably has yet remained lackluster. A recovery in mass, does it an indicator that going forward, sequentially, we will see the recovery in specialty as well? I mean, how the market reacts. Have we started to see recovery coming in in specialty as well? Because what we understand that U.S. and Europe both are still struggling with the high inflation and demand probably has yet not picked up. How do you see that reading, increase in or improvement in mass will play out?
See, obviously, we derive the way the market is going to grow only from the discussions with the customers. What we can say is that, over the last quarter, the customers seem to be more optimistic. Their negative tone has reduced, and that gives us confidence because they see it more closely, and that tells us that, yes, there is a good room for things improving. That is what we would derive from our conversations with customers. We are able to see directionally and how the sentiments are, and that gives us an indication that yes, things should start looking better, say from early next year.
And sir, this slight recovery which we have seen in lauryl alcohol prices on Q-on-Q, is it a gradual and you see the trend sustaining or it was just on the short-term blip and the prices may further come down? I am just asking that, are the prices up on an upward trajectory gradually, which we may see for maybe two to three quarters or going to remain volatile?
It will remain volatile, but in a smaller band. That is the way I see it because there are global demand challenges, say as far as your palm oil and everything is concerned. We also see that the production levels have been not as bad as what it was expected. So inventory levels have recently, reports say, they have gone up in Malaysia by about 5%- 6%. All of those points towards the fact that it will be volatile, but in a very small range. That is the way we put it.
Okay. That is it from my side, and thank you very much. And once again, sir, wish you a very well and a very happy Diwali.
Thank you. Happy Diwali.
Thank you. The next question is from the line of Rohit Nagraj from Centrum Broking. Go ahead, sir.
Yeah. Thanks for the opportunity. First question is again on specialty. We have seen that there has been an increase in terms of volumes, both QoQ as well as year-over-year. Is there any element of restocking which has started or the other way looking at it is probably the per unit realization has also come down. Have we gained any market share in this particular category? Thank you.
First of all, it is a composition. One good thing is that the specialty volumes have grown, which tells us that the restocking is happening in the mass segment. So where is there a mass specialties go. But yes, restocking is still not over as far as the premium specialties are concerned. That is why we have said we expect that to start showing a restocking pattern early next year.
Right. This strong volume growth, again, does it indicate that there has been some fallback from the competition or any other geography, some of the players going out of the system, or is it purely gained based on the characteristics of both the individual segments?
No, it is not. I think we do see that the restocking has happened. So it is nothing in terms of some special situation that happened in the quarter that led to some opportunities. So it is like we are seeing that is a secular trend in terms of volumes picking up. Okay, in terms of restocking on the mass specialties side.
Right. Got it. One last clarification. You also mentioned in terms of specialty, the mass segment has picked up, and that is probably the reason why there is not EBITDA per metric ton increase on a quarter-over-quarter basis despite volumes going up. As the premium segment picks up, probably there is a possibility of further increase in the EBITDA per ton. Is that understanding right?
Yes. Perfect.
Thank you so much, sir, and wish you and your family, your team, a happy Diwali. Congrats to Natarajan and Vaijanath, sir, for the newer roles. Thank you.
Thank you. Thank you, Rohit. Happy Diwali.
Thank you, sir.
Thank you. The next question is from the line of Omkar Kamtekar from Bonanza Portfolio Limited. Please go ahead.
Thank you for taking my question. Sir, the first question is with respect to market share. If you could give some color on with respect to the market share that we have in the AMET, Egypt region specifically or U.S. and Indian markets. The reason why I'm asking this is so that I can understand whether we have pricing power. Because the prices may remain volatile, can we pass on, and do we have that pricing power competitive advantage as such?
This is confidential. We don't reveal market shares. Although we are aware. But it is suffice to say that, yes, with the sort of relationships and the competitive position that we have, you would not say that the pricing power is the wrong word to use. I think we have the ability to ensure that we are able to get our fair returns in all the products that we sell in the markets.
Okay. We can insulate ourselves from any volatility with respect to the prices, so that margins don't become volatile. That would be a good understanding then.
Yeah, correct. We'll not be able to Insulate, again, is not the right word. We'll be able to properly navigate any sort of volatility that will enable us to get fair returns on the products that we sell.
Okay. Just a clarification, the EBITDA per ton that you had mentioned in the opening remarks. It was INR 20,000 what? I just did not get that properly. It was INR 20,000 something.
We had said INR 19,500- INR 20,500 per metric ton.
Okay. There's a band for the Okay.
For a period.
Okay. With respect to the presentation, I see that we have also applied for one more patent, and we have been continuously spending and making sure that we innovate our product. The new products that we are innovating or we are going for, are these more tilted towards the specialty chemicals, or it's as and where you see opportunities?
It's all towards the specialty chemicalss only. It'll be more on the premium specialty side.
Okay, so premium specialty side. The overall product portfolio pipeline, how many more products are we looking to launch, maybe, say, over the next one or two years? Can we have some guidelines or some ballpark number?
Yeah, we do have the pipeline, but I think we may not be able to say right now because it has to pass through certain stages of maturity as far as our product development actions are concerned. I think we will probably say that in every call, once we are clear in terms of any friction, we will be able to give a statement. Right now, we don't want to be giving you any directional stuff because that may not be right.
Okay. No issues. Sir, with respect to gaining wallet share, how are we going about that? Because we have MNC clients and other also local clients, so what is the strategy with respect to gaining more wallet share from them?
The strategy is ensure that you continue delivering value to them, continue delivering superior service, and be close to them. That's the only way, and that's the way we have been doing for the last 43 years. We need to do it more often and more intensively.
Okay. And sir, lastly, just a small suggestion. If you could just add one dedicated slide with respect to the volumes of the specific segments. For example, I think most of us on the call also, we've been targeting the specialty chemical volumes and the EBITDA per ton. If you could just add one dedicated slide with respect to the segments and the volumes and the EBITDA ton, that would just take out most of those questions. That would also help us understand much better the flow and the trajectory of the
Yeah. We will be transparent to the extent that we do not compromise on certain prominent information.
No.
We have got your message. Okay?
Okay. Thank you. That is it from my side, and best wishes for the festivities to the management and also the new role to Natarajan, sir.
Thank you so much.
Thank you. Happy Diwali.
Happy Diwali.
Thank you. The next question is from the line of Krishan Parwani from JM Financial. Please go ahead, sir.
Yeah, hi sir. Thank you for the opportunity. I missed the commentary on EBITDA pattern for this quarter and the last quarter. Can you please highlight again?
See, what we have said is that, the EBITDA per metric ton, despite clocking 8.6% volume growth for H1, it stood at INR 23,357 per metric ton. For the quarter, the same was INR 19,593 per metric ton. Compared to H1 FY 2023, while it shows a decline, which will even persist in H2, we believe the band of INR 19,500 -INR 20,500 per metric ton should hold for the entire financial year 2024.
Understood, sir. The second question I have is, I know that we have stopped giving absolute volume numbers, and I think we have guided some ranges in our presentation. But, if possible, would be helpful if you could give just the specialty volumes in this quarter and the last quarter.
Oh, yeah. I think, specialty, as we said, was a high single-digit growth that we had with mass segments making a comeback. And we also saw that there was a good volume growth and a double-digit volume growth in Q2 FY 2024. Yeah, we would like to keep it there because it's important that we also are able to have some sort of protection on the confidentiality of what we share. Yes, we are hearing all that you said. We'll see as to how we can do something without compromising on our confidentiality.
Yeah. No problem. Thank you. Thank you for answering my questions. And wish you a very happy Diwali.
Thank you.
And all the best on the new role, Natarajan, sir. Thank you.
Thank you.
Happy Diwali.
Happy Diwali.
Thank you. The next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.
Sir, my question was on to the ethylene oxide prices. Sir, from the last quarter, we have seen a sharp uptick into the ethylene oxide prices, despite the specialty volumes or the demand globally not picking up much. Suppose, sir, in the coming quarters, if the specialty demand in the U.S. and Europe makes a comeback, further we could see the rise into the ethylene oxide prices? Because, sir, I believe sir, one of the global plant of Dow that has closed down. So that might have created some sort of a supply pressure globally, which is leading to rising prices. So with specialty demand coming back also and increase in ethylene oxide prices, we could not see that benefit into our EBITDA per metric ton.
No, not that. I think that is not the reason. I think Dow closing down also has not led to any great increase in ethylene oxide prices, even in U.S. and globally. Essentially, I think ethylene oxide prices get determined by certain closures that happen due to turnarounds in, say, Northeast Asia and Southeast Asia, Europe and U.S. So that is more situational and also in terms of the way rupee has been depreciating. So there are two, three factors to this. It has nothing to do with what you're saying in terms of the specialty growth happening and then ethylene oxide prices getting impacted. So there are multiple factors, and I think you can't attribute only one of it to the way the ethylene oxide prices are behaving.
But how much would this ethylene oxide contribute as a raw material on a base of 100%?
No. Ethylene oxide prices, it goes into various purposes, into various products.
In terms of overall portfolio.
Overall portfolio, it can be about, say, in the zone of about 8%-10%.
Also, thank you.
Hello?
Hello, Aditya, are you still there?
Yeah, very much.
No, Aditya, I was asking Aditya [inaudible].
Okay.
I think he dropped off, I guess.
Hello?
Hello, Aditya?
Yes, sir.
Sir, are you done with your question?
Yeah, done.
Okay. Thank you very much.
Thank you.
The next question is from the line of Omkar Kamtekar from Bonanza Portfolio Limited. Please go ahead.
Thank you for follow-up. Sir, with respect to the MNC's contribution, it has been steady around the 50% mark for quite a while. What I wanted to understand, of the customers that we have, how much would be the top three, top five, or top 10 contributing as a percentage of total revenue? Are they more tilted towards the spec chem or the specialty products or the performance products?
No. I think that's too detailed information, so I don't think we share that in terms of what it is. But it's suffice to say that we have growth across all the segments and we are getting a good volume share across all customer categories.
Okay. And sir, with respect to expanding into new geographies, we have now, as per the exchange filing, set up a new office in Europe. We will be able to understand the market more and expand into this geography and go deeper. Although it has been a fragmented market, the demand might be very different. But how do you see the initial phase of growth there? Will it be low single digits or we can see an instant impact of, say, high single digits?
No. It is not that we have not been selling in Europe. Europe, we are currently also selling. The objective is to then get there and be able to leverage more and more the opportunity that is there. It is not going to be something instant, okay? It is something that we need to, it will happen over a period of time and sustain the growth that we do. Nothing will be instant.
Okay. My understanding was, I thought we were not extensively present in European region, so maybe this was more like a—
No, no.
We have been in Europe for the last 20 years.
Okay. Thank you for the clarification, sir. Thank you.
Right.
Sir, with respect to, just a question on the spending on the R&D. As a percentage of sales, do you have a target as such? How much are we spending or how much will we be spending for R&D?
We don't have a target on spending. Typically we do about 1%- 1.5%. We certainly have a very clear vision in terms of how do we ensure that we get the best value for whatever money we spend.
We invest significantly in innovation, and that has been the way Galaxy Surfactants has grown, particularly over the last 30- 40 years.
Yes.
Okay. So 1%- 1.5% is generally a ballpark figure that we can expect almost every year.
Correct.
Okay. Thank you very much.
Thank you.
Thank you. As there are no further questions from the participants, I now hand the conference over to the management for the closing comments. Go ahead.
Thank you all, ladies and gentlemen, for participating in this conference call. We close this meeting wishing you great celebrations for tomorrow and the next two, three days. Have a great time. Thank you.
Thank you, and Happy Diwali to all of you.
Sure, Happy Diwali. Thank you.
Bye-bye.
Thank you. On behalf of Galaxy Surfactants Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.