Ladies and gentlemen, good day and welcome to the NOCIL Limited Q1 FY 2025 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. V.S. Anand, Managing Director of NOCIL Limited. Thank you, and over to you, sir.
Thank you. Good morning. Good morning, everyone. I want to begin by extending my gratitude to all of you for joining us today. Your continued support and confidence in our company are invaluable as we navigate the dynamic market environment. Along with me, I have Mr. P. Srinivasan, our Chief Financial Officer, and SGA, our investor relations advisor. Hope you all have received our investor presentation by now. Those of you who have not, you can view them on the stock exchanges and the company website. To start with, let me provide an overview of the company's performance for quarter one financial year 2025. During this period, revenue from operations amounted to INR 371 crore, representing a 4% growth sequentially. Also, we witnessed a similar 4% volume growth in quarter one financial year 2025 compared to the preceding quarter.
While there has been an increase in key raw material prices, combined with influx of low-cost imports from various countries, we are maintaining a balanced approach by judiciously managing both price and volume to navigate these pressures. The domestic market continues to face challenges from aggressive dumping by China and other markets, which is exerting downward pressure on pricing. Despite this challenging environment, our long-term engagement with tire players and well-penetrated position at non-tire customers enabled us to grow our volumes by 5%. Our export business continues to show an upward trend. Despite facing significant challenges such as geopolitical issues, container shortages, and rising freight costs, we have successfully managed to improve our volumes in the export market. This growth is a testament to our strategic efforts and commitment to expanding our presence in international markets.
Our focus on innovation, customer centricity, and sustainability continues to drive our business, enabling us to maintain our leadership position in the rubber chemicals industry. In addition to our financial performance, I am proud to highlight our ongoing commitment to sustainability. We have implemented several initiatives aimed at reducing our environmental footprint, enhancing energy efficiency, and promoting circular economy practices. We continue to enhance green energy sources at both our Dahej and Navi Mumbai sites. Apart from solar and wind energy sources, we have also enhanced our cogeneration capabilities during quarter one. This provides us with the twin benefit of sustainability and economics. Sustainability is at the core of NOCIL's values, and we believe that our efforts in this area not only contribute to a better planet, but also create long-term value for our stakeholders.
We have initiated various initiatives to reduce our Scope 1, 2, and 3 carbon emissions and committed ourselves to various sustainability frameworks, namely the Carbon Disclosure Project, CDP, Science Based Targets initiative, SBTi, and the UN Global Compact Network. I am quite positive that sustainability at NOCIL will be a competitive advantage. During this quarter, we have also made good progress on our capacity expansion project at Dahej. These timely expansions are critical to our long-term growth strategy, ensuring that we are well-positioned to capitalize on emerging opportunities and cater to the growing demand from our customers. A bit of comment on the industry going forward. The domestic tire volume is expected to have a moderate growth of around the mid-single digits in financial year 2025. The replacement market, which contributes significantly to the tire industry volumes, is also anticipated to remain healthy.
The continued investment in infrastructure augurs well for replacement tires, especially in the commercial vehicle sector. Currently, the tire industry is grappling with high natural rubber prices. The natural rubber prices have seen a significant increase due to a combination of lower domestic output and supply chain challenges in imports. However, the long-term outlook of the tire industry is positive. Tire manufacturers are very optimistic about the future and investing in capacity expansion, technology upgrades, and research and development to enhance product quality and sustainability. Looking ahead, we remain optimistic. While we can anticipate continued volatility in the global markets, we remain positive to stay on the growth trajectory. That is it from my side for now. I now invite Mr. P. Srinivasan to provide an overview of our financial performance.
Thank you, Mr. Anand, and good morning to everyone on the call. Now let us run through the consolidated financial highlights. On the sales volume front, the volumes for Q1 FY 2025 is at 144, taking a base of Q1 FY 2020 at 100. On the revenue front, the net revenue from operations for Q1 FY 2025 stood at INR 372 crore, as against INR 356 crore in Q4 FY 2024, a growth of 4%. We managed to maintain our selling price for the quarter. Volumes for Q1 FY 2025 showed a growth of 4% on a QoQ basis as against 8% as compared to the corresponding period of the previous year. Operating EBITDA parameters, the operating EBITDA for Q1 FY 2025 stood at INR 41 crore as against INR 45 crore in Q4 FY 2024. EBITDA margins for Q1 FY 2025 stood at 11% as compared to 12.5% in Q4 FY 2024.
There is one item called employee expenses. These have increased sequentially vastly due to the annual revision in salaries, along with the retirement provisions. This is the front-loading and which is a similar trend which was observed in Q1 FY 2024, if you compare the results of the corresponding period of the previous year. Coming to operating PBT parameters, the operating PBT for Q1 FY 2025 stood at INR 37 crore as compared to INR 38 crore for Q4 FY 2024, after excluding the profit on sale of real estates in the last quarter, March 2024. Profit after tax for Q1 FY 2025 stood at INR 27 crore as compared to INR 42 crore in Q4 FY 2024. With this, we would like to open the floor for question and answers.
Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nirav Jimudia from Anvil Research. Please go ahead.
Good morning, team, and congratulations on the good show. I have two, three questions to ask. First is, can the volumes what you have reported in Q1 of FY 2025 can be considered as the base volumes which we should work with, and volume should start picking up from here in the subsequent quarters? Along with it, if you can also share your thoughts on the EBITDA margins per kg, which has shown a dip this quarter. Was there any specific reasons for the same and how one should read into this going forward?
Sir, thank you. Thanks, Nirav. I would say definitely the volumes that we achieved in quarter one can be taken as a base that we are looking forward to build on further, and I am quite positive we should build from here on. That is on the volumes.
On the EBITDA margin, Nirav, on the EBITDA margins, what we see is, yes, we have faced the pressure because the market conditions are not really conducive to operate because of the challenges which we mentioned earlier in the call. However, what we see is the benefits will start accruing post the ramp-up of our capacity utilization. Those benefits will start kicking in, and we hope to improve the EBITDA margins.
Correct. Was the pressure on the EBITDA more because of the realization part, or were there some cost increases on the raw material side also, because of which the benefits of operating leverage couldn't be achieved in this quarter, despite us reading, working an 8% volume growth?
So if you ask me one other thing which is there in this quarter, is that you had a front loading of employee cost expenses and some element of other administrative expenses which get loaded on the first quarter, which gets tapered off in the second and third and fourth quarter as we go along. That is number one. Number two, on the market condition side, yes, we maintained our pricing. We did not yield to the pressure on pricing. There were some small aberrations in the input cost.
Got it. The second question is on the mix of export volumes this quarter out of the total volumes, what we have seen in Q1. If you can share your thoughts on that and any specific geography where we are seeing the export traction in the export market based on the customer interactions and the exercises what we have done over the last few quarters.
Yeah. So the spread export is around 34%. I think if I recall, earlier it was 32%, it is about 34% now. And from a market development point, this growth is coming not only from Asia but also from Europe also to a certain extent. And we continue to keep our presence in the U.S. Yeah.
Correct. So, let us say before two, three quarters, how was the Europe? Because Europe had its own problems in terms of energy costs and everything. So, have we seen some improvement in volumes vis-à-vis last two, three quarters or that has not been the case and we will be slowly and steadily increasing the volumes in the European market despite of the slowdown there?
Yeah, the market per se in Europe continues to be, well, I'd say I put it in a very cautious note. While at least the secondary data indicates that while the OEM sector is not doing that well in Europe, the replacement seems to be slightly on a better footing. At the same time, it's a combination of the fact that we've also been able to, as we have been describing in the past calls about approvals and going ahead with trial supplies and commercial quantities, that's also been making positive progress.
Got it. So actually the intensity of this volume placement into the European and the other geographies should pick up based on the exercises what we have done over the past couple of quarters. This is right to assume, sir?
Absolutely.
Perfect. Sir, last bit from my side is, yesterday in our AGM, which everyone talked a lot about the power cost and everything. So one of the stuff what you mentioned was the commissioning of a turbine in last two, three months. So if you can share your thoughts on the turbine and the initiatives and the green power, what we have taken, which is also written in the annual report. So, if you can share your thoughts here that now how much of a dependence on captive power is currently, this is two years back. And let's say, when we would achieve full utilization of our capacity, how this mix should look like?
Currently it's a combination, like you referred to, of both green energy, which is solar and wind, and we also have a bit of solar captive. At the same time now, cogeneration, which is active, which we have further enhanced, what we produce to cogeneration. So if you put both together, we should be in the range of 60%-70% in the Dahej, and this should go up with full utilization. As the utilization ramps up, I would expect this to go to at least 75% and more.
Got it, sir. Thank you so much, sir, and wish the entire team of NOCIL very best.
Thank you. Thank you, Nirav.
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 opportunity. Sir, my question is on to the gross and EBITDA spreads. Sir, as you had mentioned in your initial commentary that because of higher competitive intensity and weaker demand in domestic markets, we are witnessing some pressure. Alongside, you had also mentioned that the raw material prices have now started to move up. So, sir, in this case, considering weaker demand and all, is it possible to pass on the incremental RM prices to the end, or this quarter per kilo numbers what we have given for gross and EBITDA, this could be for the full year, for full fiscal, or there can be some improvement also?
So, like I mentioned, the pressure on prices continue, and this is also largely driven by the fact that the Chinese domestic economy demand is quite low, and we see this not only in our sector but across. That I expect will continue to play a pressure on prices of the selling products. But raw materials, I expect there should be some relief as we go into the quarter, and we should see some benefits. That's why we keep playing this judicious mix as to wherever we can retain the prices or move it up with increasing costs, we are able to do that and balance it with volumes where required. So I would expect that at least the raw material cost should give some relief going into at least the second half of the quarter.
Okay. So deterioration we cannot expect at least from here, like in terms of growth and EBITDA spreads. So this could be the bottom, and there are chances if RM prices improve, you can also pass it on, so there could be some improvement in margins. That's the case, sir?
Yes. Yes, Aditya. Yeah.
Okay. Sir, my second question was on to the exports market. Sir, you had mentioned that this quarter, so domestic market was weak, but exports volumes have picked up. But sir, when we talk to other chemical companies, they are witnessing because of shortage of containers and weaker export market. So sir, how is it that we have shown that growth in volumes in export when the containers are not available?
Yeah. When I actually refer to the export market— Sorry, the domestic market first, I didn't say that the demand was really weak. I mentioned that there is a pressure on prices. The domestic market continues to be robust. That's clearly our view. The export market, as I mentioned, while the market per se, there has not been that significant improvement. There are the challenges like you mentioned, but this has also been an outcome of the approvals that we've been getting in the last quarters and months. Yeah.
Okay. Sir, any sort of improvement in product mix, like our value added mix also is now at 15%. So any sort of improvement in mix or higher yield can lead to some better per kilo spread. Is that the case, or it would be generalized like higher RM only could drive the per kilo spread number?
Yeah. Aditya, the way to look at it is that we are building up alternative plans to improve our value added portfolio. We are working on growth plans on that also. That work is going on. The results will not be seen immediately, but in the medium term, you can see those results being felt in the operations, getting reflected in the operations.
Okay. Sir, apart from our existing product basket of 2023, sir, is there any new addition of products which we have commercialized?
Yeah. We did, like we had mentioned, in the accelerator phase, we have done that. It was a localization. This product was majorly imported, but we have localized that, and that's kind of also going to the tire sector. But the volumes are not very large in that. There are further products in the pipeline that we're working on.
Okay. Sir, just one last question. Sir, onto the capacity expansion. Sir, at what stage are we currently into the expansion phase in terms of percentage, like how much portion has been completed?
We got the approval from the board in March, and I think if I were to put a percentage, probably 10%-15%. Yeah.
Okay. Thank you, sir. Thank you.
Thank you. The next question is from the line of Nitesh Dhoot from Dolat Capital. Please go ahead.
Yeah. Hi. Good afternoon, team, and thank you for the opportunity. My first question is on the employee. I am audible, right?
Yes, Nitesh, please go ahead.
Yeah. Okay. So sir, on employee expenses, if you could give some color on the front loading that you just mentioned, and what can be the reduction? As you know, if you see last year's numbers, we saw a reduction only in Q4.
I think we have to look at two things. One is there is this actuarial valuation which we do for the retirement provisions, which is on a particular date. So whenever we get the valuation done, on that day the liability gets recognized and reflected in the books of accounts. The difference is the change in the liability provisions gets reflected as an expense to the profit loss account. If you see last year and the last two years, if you see, 65% gets uploaded and loaded in the first quarter, then you have 30% or 32% gets distributed over the next three quarters. It could be in the region of 20%, 10% and 3% or 15%, 10% and 5%, something like that. It is a periodical valuation which we do with an actuary, and that is the requirement as per the Indian accounting standards.
All right. Okay. That helps. Sir, second question is on the status on anti-dumping duties. If we are pressured in terms of margins and these may be below sustainable margins, any anti-dumping investigations that might be on or something that you might be planning to file?
Study is going on. At this moment we are evaluating various options and at an appropriate time, if we feel there is a material case in this, there is a valid case in this as per the merits, we may explore that option. But today the study is going on. Nothing concrete has been finalized.
All right. Okay. One last question is on the airless tire technology introduced by Michelin. Thoughts on the same, and is it likely to have any change on the rubber chemicals consumption over a period?
It is still at a very nascent stage, Nitesh, and we do not expect any significant impact on account of that. It is still very nascent.
All right. Okay. Thank you so much, and all the best.
Thank you.
Thank you. The next question is from the line of Harshil Parekh from Acuitas Capital. Please go ahead.
Hi sir, thanks for the opportunity. Sir, my first question is regarding China Sunsine's commentary. They continue to stick to their flexible pricing strategy in order to support their capacity utilization, and which is indirectly impacting our utilizations as well. Sir, what are your views on the same and how long can this sustain as per your views?
Yeah. I think all of us are also playing around with words, right? When we say flexible pricing policy or judicious approach to pricing and volume. At the end of the day, we work towards ensuring that we don't destroy value, but create value in the process. We are also playing a similar game, to ensure that we improve our utilization and that utilization is while creating value. It's a balance that you pay product to product, customer to customer.
Sir, I understand that, but my point was that how long can we sustain from a China Sunsine perspective? Because if it sustains for another, say, two to three years, then our EBITDA per ton may be depressed for that time frame.
I think my view is also that as demand picks up in the domestic market in China, also then we should see this alleviating to a certain extent. But that's a certain perspective. Yeah.
Understood, sir. My second question is with respect to our capacity addition. We are putting up 20% additional capacity, right? But our existing utilization is around 70%. By when do we expect our existing capacities to be utilized fully?
What happens is when you say a 70% utilization, we are talking about the overall numbers put together. But when you take at a product level, they could be at different. You would understand they could be at higher utilization, 90%- 95%, and some could be also below 70%. That is why these investments are for the products which are already at 90%- 95%, and that range. We expect that gradually this utilization will increase, and as we have seen, it will keep moving up positively from quarter to quarter.
Understood, sir. But the products in which our capacities are not fully utilized, like you mentioned, there are different products and these products have different capacities. What is our expectation on those products' capacity utilization?
Yeah. Those are the ones, Harshil, I was referring to, that they will all move up, and that is where the effort is. They will continuously move up in utilization.
Understood, sir. And one question on the power cost also. Historically, our power cost has been in the range of 8%-10% of revenues. With these new power capacities which you have put in, how much cost savings are you expecting in terms of percentage of revenues?
If you may ask, I think you are saying 8%-10% of revenue. Revenue, again, it's a mix of the pricing at which it is being calculated. If you have a higher revenue base, then the power cost is even sometimes less than 7%, probably. What we have seen is an absolute number. If you look at 2023- 2024 versus 2022- 2023, there is a 20% or 18%- 19% reduction in the power and fuel cost. We have made a significant achievement in that year. Going forward, we are still working on to improve the efficiency parameters. We are also making an effort to put in the other source of energy, like turbine or the clean green access energy, et cetera.
In all in all, we see if your number is X, probably we may try to target to 0.9 x, then we may go to 0.8 x. That's the endeavor. But that's something which we will be constantly working on. Only at the peak level, I think you will see the real substantial benefits. But today, on a periodical basis, you will see some incremental benefits coming in.
Understood, sir. Thanks. That's all from my side.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Muskan from B&K Group. Please go ahead. Ma'am, your line has been unmuted.
Hi, sir.
Please go ahead.
Yeah. I might be repeating a question. I wanted to ask, are you witnessing any signs of improvement in the Europe market? Also, is Chinese domestic market demand picking up, or has it been stagnant?
Muskan, your voice was not very clear. Can you just repeat? I didn't get your question.
Yeah, sure, sir. Sir, I'm asking, are you witnessing any signs of improvement in the Europe market? Also, is Chinese domestic market demand picking up, or has it been stagnant?
The Chinese market, we don't see any significant improvement. More or less stable is what we see. European market, there has been a slight improvement, but really not something significant I'd say. But there is a slight improvement.
Got it, sir. Okay. Sir, my next question is the INR 250 crore CapEx in Dahej plant. Can you know about what capacity are we planning and for intermediate products and finished goods products? What's the individual capacity that we're planning to add?
Muskan, the point there is we announced that it's about 20% of the current existing capacity. The split between the intermediates and the finished goods and the name of the finished goods will be disclosed at an appropriate time, not today. It's a little sensitive. Yeah.
Sure, sir. All right. That's my question. Thank you.
Thank you. The next question is from the line of Dhimant Shah from ITI Mutual Fund. Please go ahead.
Hello?
Yes, sir. Please go ahead.
Yeah. Thanks for the opportunity. Coming to some of the earlier questions which have been alluded, could you enumerate? Because if we see last couple of years in a summarized fashion, it still appears that there is some pricing pressure. Could you just allude to, does the normal grade still form an overbearing portion as against the specialty grade that we were to kind of ramp up over the years? That is question number one. Question number two, between the vulcanizers and accelerators, do you think we have more proficiency or rather capability to extract a higher value add in one of the categories?
If you look at our spread, and we are one of the few players into both these categories of products that you said.
Right.
Accelerators and antioxidants. We are one of the very few players who still make both the upstream intermediates in-house. That is quite a competitive advantage. We see that our proficiency, to answer your question, is equal across the product segments.
No. So vis-à-vis, let us say, China Sunsine and the others, do we have a slight advantage in terms of capability to both produce and have a cost advantage in one of these categories, particularly the accelerator?
What we have seen is we are quite comparable as far as if you do a comparison with China Sunsine across the product category, it is largely the delta on the export subsidy that tends to kind of give them that additional pricing power. From a manufacturing point of view, largely comparable.
Going by the current expansion that lot of domestic tire manufacturers have taken, could you allude that, does their breakup still carry an equal market share for us, which means logically the domestic offtake should meaningfully rise? Do you have some study as to do we have some advantage in terms of the landed cost at their doorstep? Do we stand at an advantageous position vis-à-vis imports, or do you think there is no difference or whatsoever?
Definitely for domestic and quite a few of the international players also, there are advantages largely on the domestic market also. From a product portfolio point of view, to answer the question, whatever the plan is expansion, there is an equal opportunity for rubber chemicals in that. We don't see ourselves, and we have clearly an edge in terms of supply reliability and turnaround times, we are far more quicker compared to any of the imports and competition coming in.
Perfect. One last, if you could answer. In the current year, as you expand, but in the existing plant, do you think any meaningful big approval that was pending from the customer side would come through and kind of lead to further enhancement of our sales?
Yeah. It is not a start of a stop to the approvals. There are still more approvals coming in, and they will continue to accrue to the volume buildup that we are speaking about.
My question was whether some meaningfully large approval which was pending from the customer side, do you see fruition of that in the ensuing year?
Yes, we do expect that.
Great. Thank you.
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, what is the current capacity utilization? Sir, any guidance can be provided, like through current capacity, by when can it reach the peak utilization level?
About 70% utilization. Peak utilization, I am not putting a finger, Aditya, on a specific quarter or a month, but we are quite positive this will keep getting ramped up from quarter to quarter.
Okay. But sir, in the next one to 1.5 years, can we assume that to reach at peak levels?
We should be there, around that time.
Okay. And sir, apart from the existing CapEx, what we had announced for expanding the rubber chemicals facility, any other source of new businesses? Like earlier also, we used to allude to the fact that we are also looking some green chemicals and on. Apart from the existing CapEx, is there anything new which the company is looking at?
Yeah. There are quite a few greener, more lower energy-intensive products that we are continuously working on, quite a few in the pipeline. But they take their time, and they are in different stages of testing and approvals.
Okay. Thank you, sir.
Thank you. A reminder to all the participants that you may press star and one to ask a question. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of [Ravi Mehta] from [OneUp]. Please go ahead.
Yeah, hi. Thanks for the opportunity. Just taking that last question ahead, there's a few green chemicals what you said is in different stage of testing approval. These are related to rubber chemicals, or these are non-rubber chemicals?
These are related to rubber.
Okay. And the application is similar?
It goes into rubber application, but there are kind of multiple applications. They serve different purposes.
One thing on the power side. If the cogen turbine has come up, has it started contributing? Because we are not seeing any savings. Is it yet to flow through the numbers or on the cost-saving side?
It will start flowing in from the quarter two.
Okay. It got commissioned recently, you said?
Yeah. It got commissioned in June.
Okay. Yeah. Thanks. All the best.
Thank you. A reminder to all the participants that you may press star and one to ask a question. The next question is from the line of Harshil Parekh from Acuitas Capital. Please go ahead.
Sir, what will be the revenue mix between exports and domestic for this quarter?
For the quarter gone by, about 34% is export.
No, I am talking about the revenue mix. 34%, I think, is the volume mix, right?
Yeah, it is volume mix. Yeah.
Can you share the sales mix also?
33% volume mix, 34% is revenue mix.
O kay. Thank you.
Thank you. A reminder to all the participants that you may press star and one to ask a question. A reminder to all the participants that you may press star and one to ask a question. Ladies and gentlemen, as there are no further questions, we have reached the end of question and answer session. I would now like to hand the conference over to Mr. V.S. Anand for closing comments.
Thank you. I take this opportunity to thank everyone for joining the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with me or Strategic Growth Advisors, our investor relations advisers. Thank you once again, and have a nice day.
Thank you. On behalf of NOCIL Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.