Galaxy Surfactants Limited
8,834words
118turns
12analyst exchanges
3executives
Management on call
Unnathan Shekhar
PROMOTER & MANAGING
Natarajan K. Krishnan
EXECUTIVE DIRECTOR
Abhijit Damle
CHIEF FINANCIAL OFFICER – GALAXY SURFACTANTS LIMITED
Key numbers — 40 extracted
rs,
this opportunity and acknowledge and thank them for the same. While numbers are the lag indicators, one of the lead indicators is the equation we share with our customers. It gives me immense pleasu
12%
tors influencing it. India continues to remain a bright spot for us, while the volumes have grown 12% in Q3 and 7.7% for the nine months till December the bigger picture is what places us. Today we a
7.7%
ng it. India continues to remain a bright spot for us, while the volumes have grown 12% in Q3 and 7.7% for the nine months till December the bigger picture is what places us. Today we are on course to
8%
0 metric ton sales number for India. The same stood at 69 metric tons in FY2018 thus growing at 8% CAGR over the past five years. Basis this performance we can safely conclude that the structural
14.8%
Africa, Middle East, and Turkey region have been a point of concern while volumes have declined 14.8% till December and 6% for the quarter it is the macroeconomic volatility that is a point of concer
6%
nd Turkey region have been a point of concern while volumes have declined 14.8% till December and 6% for the quarter it is the macroeconomic volatility that is a point of concern. This year has seen
100%
onomic volatility that is a point of concern. This year has seen the Egyptian Pound depreciate by 100% compared to December 2021 and the Turkish lira by 71%. While the lira seems to have stabilized th
71%
has seen the Egyptian Pound depreciate by 100% compared to December 2021 and the Turkish lira by 71%. While the lira seems to have stabilized that Egyptian Pound in the last month has further deprec
25%
he lira seems to have stabilized that Egyptian Pound in the last month has further depreciated by 25%. As our performance in India shows a stable macroeconomic environment is a precursor to growth. S
10%
or the past three years our volumes have remained flat mainly due to the slowdown in AMET. Nearly 10% of the volume decline on an aggregate level has been contributed by the AMET markets which have i
11%
ike it is said there is always light at the end of the tunnel. This quarter has seen AMET grow at 11% sequentially with the bulk of the growth coming from the local Egypt market. While it would be
9%
and developed markets warding of recession. This in turn will aid our specialties which declined 9% in this quarter and 5.6% YTD. Before we move on to the outlook it is important to understand the
Guidance — 20 items
“The same stood at 69 metric tons in FY2018 thus growing at 8% CAGR over the past five years.”
“Basis this performance we can safely conclude that the structural growth witnessed during COVID has not only sustained but as inflationary pressures ease we can expect further build up in momentum.”
“While some of these efficiencies will continue in the coming year, but for ensuring sustainable growth volumes will be the key.”
“Therefore while we specifically would refrain from giving out an EBITDA per metric tons guidance for FY2024 it is safe to assume that your company will aspire to grow in terms of volumes as well as EBITDA for the coming year.”
“At Galaxy we have done that for the past four decades and ensuing decade will be no different.”
“My second question is volume growth I do appreciate that you have a 6% to 8% volume growth but considering a sequential 11% growth in the AMET region and from next quarter onwards we will be on a much more favorable base.”
“Do you think next year could be an exceptional year where we are normalizing for the last two to three years decline in the AMET that is number one.”
“So it will be too early for us to comment on that.”
“They do expect that things should start getting better.”
“Shekhar sir, if I heard you right that you tell that EBITDA margins per ton this year nine months have been phenomenally high benefiting from the multiple factors and product mix and also the export benefit, but I see that you are still through you did not give any guidance on margins per ton but if I heard you rightly said that we are still looking at absolute EBITDA growth next year.”
Risks & concerns — 15 flagged
This had come on the back of another weak quarter which had seen your company report its first volume decline.
— Unnathan Shekhar
Truly a remarkable turnaround when compared to our performance 12 months ago given the highly volatile macro backdrop.
— Unnathan Shekhar
Africa, Middle East, and Turkey region have been a point of concern while volumes have declined 14.8% till December and 6% for the quarter it is the macroeconomic volatility that is a point of concern.
— Unnathan Shekhar
On an aggregate level as well as for the past three years our volumes have remained flat mainly due to the slowdown in AMET.
— Unnathan Shekhar
Nearly 10% of the volume decline on an aggregate level has been contributed by the AMET markets which have in turn been recouped by the growing India market thus ensuring we remain flat on an aggregate level, but like it is said there is always light at the end of the tunnel.
— Unnathan Shekhar
While multiple initiatives are being carried out in terms of product mix, operational improvements or judicious price calls to capitalize on emerging opportunities, we need to acknowledge that the decline in volumes as well as reversal of multiple supply led factors have also contributed towards this performance.
— Unnathan Shekhar
While inflationary pressures have impacted the Mass and the Mass-tige segments thus impacting our performance products easing inflationary pressure will ensure volume growth which will eventually result in correction of our EBITDA per metric ton as and when the same happens.
— Unnathan Shekhar
Do you think next year could be an exceptional year where we are normalizing for the last two to three years decline in the AMET that is number one.
— Sanjesh Jain
Number two can Turkey become an incremental challenge for us something given the situation in Turkey remains very fragile.
— Sanjesh Jain
Just thinking again FY2024 be a year where we normalize all the last two years of decline where we can recoup and the market is also coming back whatever our customers telling in terms of their market share because I think they have lost a significant market share in the local market.
— Sanjesh Jain
Also, we will see the price led decline in terms because of the softening of raw material prices.
— Rohan Gupta
With that topline growth I am just concerned that if we are not able to protect our EBITDA margins per ton and with a certain weakness probably we should be seeing a decline in EBITDA absolute EBITDA should be declining in FY2024 that is what our number suggest so but on the contrary you still look at growing EBITDA so that is something which we not able to comprehend.
— Rohan Gupta
Now when my volumes degrow how do I deliver a better EBITDA growth is what we looked at.
— Rohan Gupta
But do you think there is a significant risk to this business or maybe in FY2024 or too early to… Natarajan K.
— Bhargav Buddhadev
No, normally we have seen that all customers in their risk matrix do not like to have only one supplier in their procurement they always have one more supplier, to ensure that they fulfill their risk criteria as far as their organization concerned.
— Unnathan Shekhar
Q&A — 12 exchanges
Q
Good morning, good afternoon, sir. Thank you, thanks for taking my question. I got a couple of them. One on your cardinal rule of 6% to 8% volume growth followed by higher EBITDA and then even better PAT growth. Now considering that we are at an EBITDA per kg of close to Rs.26-Rs.27 and volume growth of 6%-8%. So, if you want to comply with this growth where EBITDA normalizes the volume growth requires to be significantly higher and the contraction in the EBITDA requires to be significantly lower. How should one see this in a very near-term I can agree with you on a longer-term that this may b
Unnathan Shekhar
In any case as far as the last nine months are concerned. We need to understand that some of this EBITDA per metric ton contribution has come from certain export benefits incentives, which we received, which were accumulated for a previous period in Egypt, it was quite significant as far as the last year they know these nine months were concerned because they were on the order of approximately maybe Rs 20 Crores or so. So that has been very important info. We have also had a sudden sourcing games, which came particularly because of a steep reversal in terms of raw materials during this particu
Q
Hi! Sir, good afternoon. Thanks for the opportunity, once again congratulations on such a strong set of numbers. The question may be a little bit extension of the previous answer which you give the previous participant. Shekhar sir, if I heard you right that you tell that EBITDA margins per ton this year nine months have been phenomenally high benefiting from the multiple factors and product mix and also the export benefit, but I see that you are still through you did not give any guidance on margins per ton but if I heard you rightly said that we are still looking at absolute EBITDA growth ne
Unnathan Shekhar
No, the EBITDA per ton certainly as our cardinal principle says it would be ahead of a volume growth that is what is our striving will. If I extrapolate that it means that we are still looking at EBITDA margins per ton next year will be much above what you used to be earlier guidance of Rs.16000 to Rs.18000 per ton. What I would like you to note is that this particular EBITDA per ton is in terms of a certain proportion of performance on specialty. So when the performance and specialty percentages normalize then we would again see but in the individual categories our striving will be to grow th
Q
Good afternoon, sir and thanks for the opportunity and again congrats on a good set of numbers. First question is last time we had alluded that the inventory that customer end was higher what is this scenario that we are experiencing now across our operating geographies. Thank you. Natarajan K. Krishnan: Yes, so we do see that I think the inventory reductions in many of the markets other than US. US typically I think there is still some amount of correction that is expected that is what our customers tell us. Otherwise, I think in most of the other geographies I think there are no inventory co
Rohit Nagraj
Sorry I got lost. Natarajan K. Krishnan: What I am telling was except for US where we have informed our customers that there is still some amount of inventory corrections to be done in the trade whereas in all the other geographies they say things have got the inventory corrections have been done. Sir second question is again, I mean, apologies for harping on again on the EBITDA per metric ton figure. So you alluded that there were a Rs 20 Crores one time in getting back from Egypt. Now a couple of questions about this. Is this recurring in the future as well that is one part and second part i
Q
Thank you so much. Sir the question is again coming back to the EBITDA per ton or per KG, you mentioned part of the reason is that the product mix of some of the products, so this depending up on the product mix, but if I look at the gap between the performance the growth in the performance products and the specialty products. The share of performance products has an increase in the last quarter and the last nine months. So is it fair to then conclude that the EBITDA per KG that you earn on the performance product is probably higher than the specialty products? Natarajan K. Krishnan No. see wh
Dhruv Muchhal
Otherwise this is going to give a clear picture because if we share of performances increased and EBITDA per ton has increased. On an overall basis, it seems a bit up a ton on EBITDA per kg on the performance product is better based on what your commentary is that it is the product mix that is partly driving this EBITDA per kg increase. Natarajan K. Krishnan: Product mix within performance, product mix even within specialty I guess even within specialty there are certain products where we have been able to get they have been positioned well in terms of better realizations so it is a combinatio
Q
Good afternoon, sir. just one thing whether your nine months EBITDA per metric ton is sustainable in FY2024 you mentioned it is around Rs 23 Cr because of export incentives. So, if we exclude that impact then also it is around 23700 per ton. So can we achieve this 23700 number in FY2024. Natarajan K. Krishnan: No that is what we said this EBITDA per metric ton is only final result of the way that we conduct our business. So that is what I explained. Now whenever the first priority business priority is to ensure that we grow our volumes ahead of the market. If the market does not allow you to g
CA Garvit Goyal
That is all from my side.
Q
The year-on-year volume growth for this quarter was flat so how did you achieve your revenue growth given a following RM environment.
Unnathan Shekhar
See the revenue growth is it as a correspondence to the raw material prices. Natarajan K. Krishnan: Yes our raw material prices start correcting, but then we also need to know that they will be it is always correct with a lag of three to five months. So there will still be some pricing that has been done based on the raw material price that was three to five months back. So you would not see an immediate correction correlation between raw material price coming down on the revenue growth getting impacted. So you will see the Jan, Feb, and March revenue growth will be much lower than the previou
Q
Good afternoon team and congrats on a good performance. I have a couple of questions one is what would be the contribution of Turkey in terms of our overall revenue.
Unnathan Shekhar
Turkey will be approximately 9% to 10% of our overall. And that you mentioned you will come to know the exact assessment only in the next 15 to 20 days. Natarajan K. Krishnan: Yes, because what is happening is that right now when we are assessing whether first is whether any of our shipments have got into trouble so we have realized it that is not an issue there, and then the second is we are now only talking to all the customers and asking about their well-being now the impact on business is we will probably wait it is not the right time to ask them. So, we will assess that probably in the co
Q
Thanks a lot for the opportunity. A couple of questions. One is on you have commented on the benefit arising out of sourcing games due to a reversal in raw material prices. So when you mentioned that do you mean to say that you could get some better deals in getting some of the input prices which is otherwise in the normal course of operation we do not do is that the case?
Unnathan Shekhar
It is a combination of many things, it is also the way we manage our procurement, which we have said is an area, which we are very, very particular about and careful about. Given that the raw materials are highly subject to ups and downs. Is there a way you can quantify this benefit that happened this quarter which otherwise is not a normal course of operation. Natarajan K. Krishnan: No that we will not be able to comment upon. You did mention the channel inventory and I think the inventory customer at the US operation probably it is on the higher side. I had a question regarding our position
Q
Sir, you have been sharing with us that the EBITDA margin will lead the volume growth we can say the EBITDA in absolute term will grow much more than the volumes and on the other side you are sharing with us that you will sacrifice the pricing for the volume growth so on these two statements on a trajectory. Natarajan K. Krishnan: We did not say any of those things. I will tell you what we said was volume growth is a priority and then if the market affords us which tells us clearly that there is a volume growth possible with the judicious pricing approach we will do that because that is what i
Malay Sameer
So if you were to take a scenario where the volume does not grow hypothetically in FY2024 then your EBITDA in FY2024 will be lower than FY2023 because the volume is the priority and the pricing. Natarajan K. Krishnan: So I did tell you that finally the EBITDA permitting is a derivative of how the micro economic situation is and how we ensure that we are able to grow volumes what we are telling is we do not know what the situation in terms of demand is going to be 6-9 months from now. If it is going to grow by 10% we better ensure that we grow a 10% minimum, if that requires us to do judicious
Q
Hi! Good afternoon, Sir. Thank you for taking my question. I wanted to understand a little bit more about the statement that you made that in terms of performance surfactants we are able to manage better realization because of the product mix. So one I would like to understand which are the geographies where we are able to get a better product mix and second are these trends stainable. Natarajan K. Krishnan: First question we cannot answer with geographies is very clear. Second question we would not be environment to enable us to sustain that, but as I said earlier we are not going to be, if i
Divyata Dalal
No my question was more pertaining to see we have seen that the Indian market is also growing well. So are you seeing a structural change where in the product mix where the mass or lower realization products are lesser as compared to people moving towards premium products. Kindly note that the policies when we talk about are always what has happened we are only telling you what has happened, but our effort is always to grow in all categories and all segments. Now what has happened is that in the last year because of highly inflationary pressures the market going got say chooses to certain prod
Q
Sir, what is your market share in the covered category and the geographies maybe you can take one-by-one like India…
Unnathan Shekhar
We would largely talk about these numbers we do not talk about market share. No so what I want to understand is that you said that we will grow volume ahead of the market, but market like from my understanding there would be various markets where we are not present in that are you like nurturing new markets can you talk a little bit about that. We are already present in about 76 to 80 countries what we are saying is that in terms of the products that we operate in those particular countries or geographies and with respect to those particular products we grow ahead of the market. When you said
Q
Thank you very much. Thank you, ladies and gentlemen. Thank you for your presence. Have a good day and see you in the next quarter. Thank you all.
Opening remarks
Unnathan Shekhar
Thank you. A very good afternoon, ladies and gentlemen. It gives me immense pleasure to welcome you all once again for our quarter three FY2023 Conference Call. Before we get into details, it is important for all of us to understand the journey. The story has played out over the last 18 months. It was exactly a year back when we had reported one of our weakest quarters. This had come on the back of another weak quarter which had seen your company report its first volume decline. Questions were asked on the inherent strength of our business model and though we remained confident we knew only our actions and performance could reinforce and reassure our investors. As American Authors Robert Collier once said, “Success is the sum of small efforts, repeated day in and day out.” At Galaxy we have practiced and demonstrated the same over a decades now. It has been the small and consistent efforts put in by our team day in and day out, that has ensured that we report our best quarter till date