Capitaline

Analyst Meet / AGM 01-Aug-20

Conference Call

Apcotex Industries

Expects volumes to be back to pre COVID levels by the end of Q2 or early Q3 of Fy21

Apcotex Industries held a conference call to discuss the results for the quarter ended June20and way forward.Mr. AbhirajChoksey- Managing Director and Mr. Anand V Kumashi- Company Secretaryof the company addressed the call.
Highlights of the Concall

Sales were lower by 59% due to the lockdown in India but volume sales were lower by only 45%. Lower volume sales coupled with high cost inventory resulted in loss before tax of 7 crore during Q1FY21.

As oil prices fell drastically between March and June, as a result of which petrochemical prices fell drastically as a result of which finished goods prices were also lower. The company reduced prices by as much as 30 to 35% in some of its products to do volume.

Both plants were closed during the last week of March, 2020 as per lockdown orders but the company obtained the necessary permissions to re-start toward the end of April. It started ramping up slowly from end of April. In June 2020 operating at 80-85% of pre-COVID monthly volume levels.

Total 3 years capex spend plan of around Rs 100 crore (FY18, FY19 and FY20) was completed. All projects completed as planned by June 30, 2020 (3 month delay due to COVID-19). Capacity enhancement in Valia and reasonable savings expected from Q2FY21. The company expects to get margins better with couple of percentage points.

New Project focus for FY21 is on XNBR Latex for Gloves to diversify product range, industries and geographies. Investment estimated is around Rs100 crore with a capacity of 45000 tonne. The company is in the design phase now and hopes to obtain environmental consents by October 2020 to start construction in Q3FY21. It is expects to generate revenue of about Rs 300-320 crore at current prices

The XNBR capacity that the company is putting up is less than 3% of the total demand for these products as on today. This market is growing by about 13 to 14% per year pre COVID. Post Covid the demand is even higher. This investment is more for export market.

As demand from a few industries was slow, the company modified a few assets to manufacture more XNBR Latex for Gloves where demand is robust. Marginal investments to make the assets more flexible will be completed in Q2 FY21.

Dumping of NBR into India continues since last financial year. Sunset review initiated by the Designated Authority in Q4FY20 against South Korea which accounts for 50% of the NBR imports into India. Fresh Antidumping petition filed in Q4FY20 against Russia, China, Japan and EU. The case was initiated by the Designated Authority in Q1FY21

Several cost-cutting measures and innovative ideas are being implemented or considered in order for the company to successfully withstand the impact of COVID.

The company expects volumes to be back to pre COVID levels by the end of Q2 or early Q3 of Fy21

The company has put on hold the NBR expansion of about Rs 180-200 crore.

The company has decided to repurpose some of the reactors in both plants- Taloja and Valia to produce XNBR latex and is manufacturing XNBR almost more than twice of what it was manufacturing in Mar'20. By Q3 the company would be manufacturing four times of that of it was manufacturing in Mar'20. The demand looks robust for next one year.

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