Apcotex Industries Limited — Q4 FY25 earnings call

See, historically we have seen, in the short term it's not so beneficial because when prices fall so sharply, we are left with some inventory push, finished goods and raw material. And that's going to be the challenge really this quarter in Q1, because as you have seen that compared to March end to now crude oil has really fallen around.

Clarifies that falling crude prices can negatively impact margins in the short term due to inventory effects, contrary to common assumptions.

Asked by Dikshant Gupta

Yes, I think that Rs. 600 crores, from what I recall, was at 80,000 tons, at 50,000 tons we would be closer to sort of Rs. 400 crores, Rs. 450 crores. So what's the investment done so far, we have left a small investment for later, which you would only do if the margins improve.

Management revised down the expected revenue contribution from the nitrile latex business for FY25, linking it to lower volume assumptions and margin considerations for future investment.

Asked by Aditya Khetan

So one is of course we are growing volumes, that will obviously, as you said, expand margins. There are a few other plans as well to kind of reduce cost, which are ongoing. But however, yes, the external factors, especially in the nitrile latex business which has pulled down the margin overall for the year and for the quarter as well, although there's been an improvement in Q4, there is the external factor.

Addresses the interplay between external market factors and internal strategies for margin improvement, highlighting the impact of industry overcapacity in nitrile latex.

Asked by Sani Vishe

Obviously the duties, except for China, the duties worldwide is now 10% into the US. But given the uncertainty, that could change again in July, right, after 90 days. So, I think there is a lot of uncertainty, so there is, in Q1 at least, in Q2 perhaps this US situation may create a lot of uncertainty in the world and for some of our customers.

Highlights the significant impact of changing US tariffs on Chinese products, creating uncertainty for Apcotex's customers and potentially affecting future business.

Asked by Rudraksh Raheja

Yes, we will run out of. So we expect that, again, as I said, we will wait and watch. Of course, we are making multiple plans for further expansion of our current product range, which is NBR, butadiene latexes, styrene acrylic latexes, and nitrile latex we will not be expanding immediately, we will probably wait a year or two depending on how the margins play out.

Provides insight into the company's strategic approach to capacity expansion, indicating a cautious, margin-dependent decision-making process for certain segments.

Asked by Rudraksh Raheja

Some of it is term loan. So, again, we have debtors as well. Sorry, some of it is working capital loan. So the working capital loan is probably more than half of this. And the term loan is probably a little less than half now. So, in fact, on the contrary, I think our balance sheet is extremely healthy and we also have cash in the books of about Rs. 100 crores that we have kept for future sort of opportunities or immediate opportunities.

Clarifies the composition of the company's borrowings, distinguishing between term loans and working capital, and emphasizes the healthy balance sheet supported by cash reserves.

Asked by TK Pandya

It's not fair to compare 10, 12 years because the company was very different 10, 12 years ago, we were probably a Rs. 400 crores company, now we are Rs. 1,400 crores company. So one is, we are achieving scale slowly but surely, right. We are going closer and closer to global scale. ... So therefore when that normalizes, we expect margins of those products to go back to normal. Nitrile latex, because it's used in medical gloves mostly, even more capacity than normal was added.

Explains the rationale behind the expectation for 14-15% normalized margins, citing increased scale and the anticipated normalization of industry capacity utilization post-COVID.

Asked by Rohit

Difficulty year in the sense that we have been used to 18%, 20% or maybe more growth earlier. This year the growth is in single digits. I just mean from that point of view it was not such a great year. Because the previous sort of many years, six, seven, eight years we have had good growth. We have just seen the Indian sort of construction chemical space is crowded, the growth hasn't been there.

Provides specific context for the underperformance of the APCOBuild segment, attributing it to a crowded market and slower growth compared to historical trends.

Asked by Ankit Kanodia