U Shekhar, Managing Director, Galaxy Surfactants, talks about Q4FY21 numbers, price hike, margin outlook, specialty care segment, product launch and expansion capacity among others during an interview with Swati Khandelwal, Zee Business. Edited Excerpts:
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Q: Galaxy Surfactants has reported numbers in the March quarter. Run us through the key highlight of the quarter and tell us about what worked for you and where do you see challenges? And, you think that this performance will continue in the coming quarters as well?
A: The full credit of this successful performance that we have seen goes to the members of the company for the work that they have done. Because there has been a massive disruption on the logistics front in the last one year and the skills that are required to manage it has been shown by the members and employees of the Galaxy. This successful result is an outcome of the work that they have done. So, first of all, I would like to thank the members of Galaxy. Secondly, as I have said that the demand is quite robust in the market and the challenges that we faced in the last one year and it going to be there in place and this is my prediction. At the same time, we are seeing a lot of issues related to import and export because the second wave or the third wave that is happening is hitting different countries at different times. For instance, the first two months of the new financial year – April and May – has had an impact on people attendance across all of our factories, either the member faced the disease or someone in their family had the ailment. Now, we have made arrangements for the vaccination from all the sides at all of our factories and that to not only for the employees but also for their family members. I expect that 100% vaccination will be done by the end of this month. One thing is sure with this and it is that a lot of predictability will be seen in the attendance of our employees. On the other hand, we are not seeing any shortage of demand in the market s well as within the customers. So, the only challenge that lies ahead is how we are able to navigate our entire supply chain.
Q: There was a rise in your profitability as well as income but the margins remained flat around 15%. Why is it so? Also, the raw material prices are going up, so, will you pass on it to the consumers to protect your margins? What is an outlook on the margin?
A: Volume growth is the first measurement of performance for us. And, on the volume growth front, we have seen a growth of 5.2% this year. In India, the volume growth stood at 11.2% and in the AMEA region about 8.2%. The performance pattern has grown by 8.8% for the full year. Specialty ingredients, where we saw a huge decline in the first half, has seen good growth in the second half compared to the first half. Compared to the first half, the growth in specialty ingredients was 15.2% due to which the full-year decline in the segment stood only at 1%. So, we have grown on volumes and we have always said that our EBITDA percent will be higher than the volume growth. So, we want you to measure our performance in terms of EBITDA growth and in this entire year, our EBITDA per ton has been approximately Rs 19,500 per ton. We have always given guidance that our EBITDA per ton will be Rs 16,000-18,000 per ton and we have certainly performed much better than that. So, as far as the margin is concerned, margin percentage is the function of margins divided by the sales turnover. And sales turnover has increased just because our raw material prices have increased a lot. Particularly in the last three months, the raw material prices have shot up significantly and we have been able to certainly pass on all these raw material increases to our customers. Of course, there will be a small delay but we know that we will be able to pass on all the raw material increases to our customers. As I said, demand is very very robust as far as our industry is concerned. Going forward the only guidance I would say is of the EBITDA per ton.
Q: You have said that robust growth has been seen in the specialty care segment. Can we expect a higher revenue share to come from this space in the coming quarters? Also, a good upswing has been seen in hygiene products due to the COVID. What kind of trends is visible there? And what is the outlook in these two segments?
A: Rightly said, the hygiene segment has a secular trend and a structural change has happened across the world because all the consumers are washing their hands on a large scale, whether it is fabric wash or hand wash or personal hygiene. Strength on all these segments has significantly increased because of the COVID and this strength shall remain. Now, specialty ingredients are mostly focused on beauty. The consumers were not really focusing on beauty because they have been required to remain at home. Also, the new product introduction got a little delayed. So, while we have been very very optimistic and buoyant about the specialty ingredients over the next 3-4 years horizon. We had a small break as far as this year is concerned because the consumers were more concerned about safety and wellness rather than beauty. So, hygiene was primary and important. This is why we saw the performance of surfactants growing pretty well but this trend will continue over a period of time because of the innovations that we have come up with mild-surfactants and non-toxic preservatives. As far as the beauty care segment is concerned, these products will drive our growth in specialty ingredients in the coming years. So, we are optimistic and buoyant about the specialty ingredients growth in the coming years. And, as you know, specialty ingredients market is largely for us in the developed markets like the US and Europe. India is also doing well but India will grow slowly on specialty ingredients compared to the basic surfactant requirement as far as our country is concerned. There is still a huge amount of headroom available in India in terms of the growth of shampoo, hand washes and household cleaners.
Q: Any new products that you plan to launch in the year ahead or you are seeing some diversification, if yes, please share the timelines about the product plans? Also, what are the capacity expansion plans for FY22?
A: As far as expansion plans are concerned, especially on the specialty ingredients, we initiated the process almost two years back. We were very optimistic and hopeful to complete it in June last year but it has been nearly pushed off. And, when we were very optimistic even this year in the month of March, the second wave of the COVID again created a problem in project implementation. Due to this, our expansion projects have been delayed by at least 5-6 months. So, we are very optimistic that we will be able to start production on these expanded or the new capacities by the fourth quarter of the coming year, i.e. in January, February or so. But these are very important CapEx for us because this is aligned with our ambition to make a significant difference in the preservative market. And as we know that Galaxy is the frontrunner or the pioneer or the innovator as far as non-toxic preservation is concerned for the personal and home care industry. Similarly, a number of mild-surfactants and variants of mild-surfactants for which we have initiated a CapEx have got delayed and we are certainly keen that they come on stream in the coming months. This has resulted in a delay in new product introductions and we are very very eager to do it as quickly as possible. So, we are very very eager and optimistic as far as these products are concerned.