ASAHISONGNSEQ2FY23November 21, 2022

Asahi Songwon Colors Limited

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Key numbers — 40 extracted

25%

and continues to remain so currently. Raw material prices, which had risen from last year by about 25% to 40%, they are starting to come-off, but the inventory losses that all companies who are owning

40%

ntinues to remain so currently. Raw material prices, which had risen from last year by about 25% to 40%, they are starting to come-off, but the inventory losses that all companies who are owning raw ma

INR 127 crore

hey are in Europe. Now coming to the financial performance. Our quarter, we reported a turnover of INR 127 crores on a consolidated basis. This compares to a INR 94 crore turnoverin the corresponding three months

INR 94 crore

. Our quarter, we reported a turnover of INR 127 crores on a consolidated basis. This compares to a INR 94 crore turnoverin the corresponding three months. And if you look at the performanceon a half yearly basis

INR 291 crore

ng three months. And if you look at the performanceon a half yearly basis, we reported a revenue of INR 291 crores. So this compares to INR 192 crores in the corresponding six months for this financial year. Mode

INR 192 crore

the performanceon a half yearly basis, we reported a revenue of INR 291 crores. So this compares to INR 192 crores in the corresponding six months for this financial year. Moderator: Iamsorry interrupt yousir. M

INR 127 crore

gto the financial performance, I will start again that the quarter we reported a turnovertopline of INR 127 crores. This compares to a topline of INR 95 crores for the corresponding three months on a consolidated

INR 95 crore

ain that the quarter we reported a turnovertopline of INR 127 crores. This compares to a topline of INR 95 crores for the corresponding three months on a consolidated basis. The half yearly performance stands at

INR291 crore

s for the corresponding three months on a consolidated basis. The half yearly performance stands at INR291 crores as comparedto INR 192 crores in the previous six months comparablebasis. So you can see that ther

INR 29 lakh

ry challenging times. On the profit before tax basis, we reported a very dismal performance of only INR 29 lakhs as compared to INR 6.35 crores in the corresponding quarter. And on a six-monthly basis, we made I

INR 6.35 crore

profit before tax basis, we reported a very dismal performance of only INR 29 lakhs as compared to INR 6.35 crores in the corresponding quarter. And on a six-monthly basis, we made INR 5.82 crores on a PBTbasis as

INR 5.82 crore

hs as compared to INR 6.35 crores in the corresponding quarter. And on a six-monthly basis, we made INR 5.82 crores on a PBTbasis as compared to INR 12.82 crores in the previous corresponding quarter. And then com

Guidance — 19 items

Gokul Jaykrishna

opening

“Wewill be starting the call with a brief overview of the financial performance andit will be followed by the Q&A session.”

Gokul Jaykrishna

“I mean, I don't remember in thelast eight quarters when we havemissed the target in the Blue crude business of making 100% productivity.”

Gokul Jaykrishna

“And fromhere, I do expect the improvement.”

Gokul Jaykrishna

“So weshould be bottoming out by end of December and then the first quarter of the -- from, January '23 onwards, we shouldsee green shoots in demand coming back becausebythat time, I do expect that most global companies and evenfor that matter, large Indian companies who are consumers ofthese products would have seen a bottoming out post-Christmas in their inventory levels.”

Gokul Jaykrishna

“So we continue to do utilization of about 35%.This is, of course, not what we expect because the demand scenario is weak.”

Gokul Jaykrishna

“And this is just the beginning because the pharmaceutical business that we have acquired comes with a parcel of land in Chattral, which we are leveraging and putting up an expansion project with AsahiSongwon Se”

Gokul Jaykrishna

“Wewill add about INR 30 crores to INR 40 crores of long-term debt given the Chattral project.”

Gokul Jaykrishna

“So that is an indirect impact that will be making the market a little subdued, but no direct impact on Asahi per se.”

Gokul Jaykrishna

“We would hope to do thatin January, February, March.”

Vipulkumar Shah

“No.Considering the demandsituation, we will be able to doit in January?”

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Risks & concerns — 15 flagged

So as you can see, we have hada vertical quarter, one of the most difficult and challenging quarters in almost a decade, if not a little more than that.

— Gokul Jaykrishna

So Prateek, you are right, there has been a significant decline in our Q-on-Q in our standalone blue business.

— Gokul Jaykrishna

I mean the numberone reason is decline in volumebecause we have losta significant volumedue to the poor demand conditions.

— Gokul Jaykrishna

‘The demandconditions remain quite sluggish and weak and most of our customers have been caught on the same port in termsofinventory, they have a lot ofinventory, and everybody in the world is seeming like they want to destock.

— Gokul Jaykrishna

We wantto destock too.So all our customers andus and our competitors, everybody is ina destocking mode -- and thus, when you club this with a weak demand, you can imagine that there is going to be a huge pressure on how much you canactually produce withoutsignificant increase in inventories.

— Gokul Jaykrishna

And it probably -- itis difficult to give you an exact number, but it would be a decent increase in market share in terms of percentage terms.

— Gokul Jaykrishna

And I -- AsahiSongwon Se it's very difficult to pinpoint as to how longthis will last.

— Gokul Jaykrishna

When this improvement will come through or howlong this -- the bottom phase will last without going any further downis difficult to guess.

— Gokul Jaykrishna

So that has put a lot of pressure, and we have not beenable to get utilization levels because of a poor demand as we would like.

— Gokul Jaykrishna

So we continue to do utilization of about 35%.This is, of course, not what we expect because the demand scenario is weak.

— Gokul Jaykrishna

So very difficult to predict, but coming January, February, March quarter, we should see a reasonable uptick and go definitely beyond the 110, 120 tons per month scenario, whereby we'll be at about 55% utilization.

— Gokul Jaykrishna

So the Chinese lockdown,it is difficult to decode the impact ofthat.

— Gokul Jaykrishna

So we haveno direct impact of the Chinesebusiness in terms of our marketshare per se or our business.

— Gokul Jaykrishna

However, having said that, the impact of that on Asahi in terms of the duties, directly is nothing because we don't export anything to China.

— Gokul Jaykrishna

Q&A — 5 exchanges

So wehave -- I think quarter-on-quarter, there was a significant decline in our revenuesin our standaloneblue business, could you bifurcate the price rate that into volume decline versus realization decline because the growth baskethas fallen materially? So Prateek, you are right, there has been a significant decline in our Q-on-Q in our standalone blue business. So our total production is down by 22%, if you compareit to the previous comparable quarter. And in termsof value, in terms ofsales value,it is down by 32%. So the basic -- both the reasons you mentioned are prevalent. I mean the numb

Prateek Chaudhary

‘And what would your viewbe on change in market share if any among your share of business with our customers? So I think our share of business in percentage to has actually improved. Because we are maintaining a productivity of about 75-oddpercent. We normally in the Blue business, we are talking standaloneright now. So the standalone, we normally do about close to 100%, and we AsahiSongwon Se strive to do 100% all the time. And we managethis over a number of quarters. I mean, I don't remember in thelast eight quarters when we havemissed the target in the Blue crude business of making 100% pro

Sir, my first question is regarding the environmentof the industry. So I understand that the operating environmentin the pigment industry and chemical industry in general also is not very conducive. But by when do you expectto ramp up the Azoplantto,let's say, optimum capacity utilization?

Gokul Jaykrishna

Sorry, I didn't get your name. Can you just her your name again? Krisha Kansara. Please Yes. So thank you for your question. Yes, the general environmentin the chemical industry, the dyes and pigment industry, the colorant industry is very, very sluggish. And I -- AsahiSongwon Se it's very difficult to pinpoint as to how longthis will last. I'll give you mytakeonit. I think we are already seeing a bottoming out. So I don't see it getting worse. We havealready reached that point where we are at the worst point. And fromhere, I do expect the improvement. When this improvement will come through o

So myfirst question is, sir, whatis the value addition we get when we convert CPCinto Alpha and betain percentage terms?

Gokul Jaykrishna

Pratik bhai, can youtake this questionin termsofvalue addition? Yes.Sir. Just a moment. Yes, sir. And can you give the EBITDA of our AZO business subsidiary also, you said the revenue was INR 11 crores,right? Yes, that's right. INR 11 crores. And EBITDA thereis negative. Yes. But can you quantify it, sir? Yes. Pratik, we will do thatalso in numbers. Can you quantify the EBITDA for the AZO business? Yes, Just. It's negative INR 2 crores. 7. AsahiSongwon anne MinusINR 2 crores. For the quarter ended September. ‘Andwhatis the sort of valuation we get for alpha andbeta as compared to CPCblue? Sir,

Gokulbhai, | have a question andthis destocking scenario, which is playing out. Now end consumer demand,the end productdemand, which is paint, inks, plastics, that particular thing you are witnessing slowdownor it's the destocking thing because whatI'm seeing all over is the pains demand, automobile sales are roaring. The textile sales are good andthe ink, the world has opened, the ink demandhas also gone up. So it's the end consumer, end product demandand consumer demand, whichis facing the problemor the intermediaries are actually destocking. Whatis the scenario? I thinkthere is a combinatio

Praveen Sharma

Then about four, five months, three months, four months back, as you know very well, generally, commodities and demandandprices all started to comeoff. As soon as people saw this happening for more than two months, one month was okay, two months was okay, but the third month, then they immediately decided that, okay, now what if the prices are actually going to come down? And this immediately urgently started thepolicy that let us not hold any material. And because they don't wantto hold any material and they are holding a lot, they had to destock. So the destocking effect was major, it wasn't

So I have a couple of questions. So first one is related to the balance sheet -- so in H1, we added some newplant, property and equipment. So if you can give a breakup of a what you...

Gokul Jaykrishna

I could not hear you. Are you on speaker becausethere is echo.I can't hear you. So just wanted the breakup of new plant property and equipmentthat wegotin the H1.So can you provide methe breakupof plant, property and equipmentthen that is added in the first half ofthis year? Pratik bhaican you... Basically, per se, there is no addition. The impact is only coming out of consolidation because ofthe API business getting consolidated for the first half. No.Butlet me compareit to the FY '22 numbers. Theassets have actually grown... So on a stand-alone basis, you mean for Asahi songwan? No. Onthe co

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Speaking time

Gokul Jaykrishna

Vipulkumar Shah

Pratik Shah

Nagesh Jain

Moderator

Prerit Choudhary

Krisha Kansara

Praveen Sharma

Prateek Chaudhary

Management

Opening remarks

Gokul Jaykrishna

Ladies and gentlemen, good day and welcome to the Q2 FY ‘23 Earnings Conference Call for Asahi Songwon Colors Limited. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note thatthis conference is being recorded. I now hand the conference over to Mr. Abhishek Mehra. Thank you. Andoverto you, sir. ‘Thank you Rutuja. Goodafternoon and welcomeeveryone. And thank you for joining this Q2 FY ‘23 Earnings Conference Call of Asahi Songwon Colors Limited. The results and investor updates have been emailed to youandarealso available on all the Stock Exchanges. In case anyone does not have a copyof the same, please do write to us and we'll be happy to send it over to you. To take us through the results of this quarter and answer your questions we haveto

Gokul Jaykrishna

So comingto the financial performance, I will start again that the quarter we reported a turnovertopline of INR 127 crores. This compares to a topline of INR 95 crores for the corresponding three months on a consolidated basis. The half yearly performance stands at INR291 crores as comparedto INR 192 crores in the previous six months comparablebasis. So you can see that there has been significant increase in the turnover. This of course is coming on back of the acquisition of the pharmaceutical business of Atlas that Asahi has acquired. And thatis working out reasonably well even in these very challenging times. On the profit before tax basis, we reported a very dismal performance of only INR 29 lakhs as compared to INR 6.35 crores in the corresponding quarter. And on a six-monthly basis, we made INR 5.82 crores on a PBTbasis as compared to INR 12.82 crores in the previous corresponding quarter. And then coming to the EBITDA performanceonthe consolidated basis, we made an EBITDA. of IN

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