Balaji Amines

Balaji Amines reported a challenging Q2 FY24 with significant declines across key financial metrics. Revenue from operations fell to INR 387 crores from INR 469 crores in Q1 FY24, representing a 17.5% sequential decline. EBITDA dropped sharply to INR 61 crores from INR 104 crores, with the EBITDA margin contracting to 16% from 22%. Consequently, PAT decreased to INR 36 crores from INR 68 crores, and diluted EPS stood at INR 10.71, down from INR 16.28 in the previous quarter. Despite these declines, total volumes saw a slight sequential increase of 3.0% to 27,613 MT from 26,820 MT in Q1 FY24.

The management attributed the subdued performance to unprecedented^🌐 challenges in the specialty chemical industry, including rapid and unexpected shifts in input costs, widespread destocking among global industry players, and headwinds in the global pharmaceutical API and agrochemical sectors. Realization pressures were a primary driver of revenue decline, with European operations running at 40-50% below previous levels and API market customers experiencing 30-40% lower activity. The company noted that raw material volatility impacted revenue by 40-50% and margins by 30%.

Balaji Amines is progressing with its strategic capex projects. The n-Butylamine expansion is on track for commissioning in Q4 FY24 (January-March). The Methylamine project is expected to be commissioned around Q2 FY25, and the Dimethyl ether (DME) plant in Unit IV is slated for commissioning in H1 FY25. Additionally, the company is proposing new products at Unit IV, including N-Methyl Morpholine (3000 TPA), N-(n-butyl) Thiophosphoric triamide (2500 TPA), and Pharmapure Povidone (4000 TPA), all of which would be first-time productions in India. A solar power plant of 1,600 KW, costing approximately INR 7.5 crores, is also being initiated at Unit IV for captive consumption.

The company faces direct competition from China in 2-3 products, specifically EDA in Specialty Chemicals and Morpholine and NMP in Balaji Amines. Management stated that Chinese and European competitors are dumping products due to heavy destocking, selling at significant losses. While this impacts realizations, management believes such continuous losses are unsustainable. For DMF, despite applying for anti-dumping duties, the government has not provided support, leading the company to explore export markets, successfully exporting 60-70 tons to Saudi Arabia last month at much better prices.

Management expressed a positive outlook for the medium to long term, anticipating market stabilization over the next two quarters. They expect FY24-25 to be marked by growth as market conditions improve, with a target to achieve pre-COVID type of prices within two quarters after the current one. The company aims to increase its export mix from the current 15-17% of total turnover to 25-30% in the next 1-2 years to hedge against import costs. Raw material prices, which were volatile, are now expected to stabilize from January onwards.

In Balaji Specialty Unit I, debottlenecking and maintenance work is ongoing, with half completed in Q2 and the rest in Q3. This is expected to result in a minimum 5-7% capacity increase and enable the production of value-added products. For Dimethyl Carbonate (DMC), capacity utilization is currently 30-40%, with sales at INR 50-60 per unit. However, with an associated product, the net realization is expected to be around INR 90. The company is also working on converting EDA into Piperazine to enhance product mix and profitability.