Release Date: February 11, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Galaxy Surfactants Ltd (NSE:GALAXYSURF, Financial) reported a 9% volume growth for the quarter in the rest of the world, with YTD volume growth at 20%, driven by masstige specialties.
- The company has launched a new premium product, Galseer DermaGreen, which is receiving positive responses and is expected to be a high-margin product.
- Easing of supply chain issues and improved systemic liquidity are expected to positively impact future performance.
- The company remains confident in its growth trajectory, maintaining a volume growth guidance of 6% to 8% for the next two years.
- Galaxy Surfactants Ltd (NSE:GALAXYSURF) is focusing on enhancing its product and customer baskets to ensure consistent growth and profitability.
Negative Points
- The company experienced a weak quarter with a 1% decline in overall volumes, driven by a 7% decline in India.
- Higher raw material prices, particularly a 40% rise in fatty alcohol prices, have negatively impacted sentiment and demand.
- The EBITDA per metric ton guidance for the year has been revised down to INR 19,500 to INR 20,000, below the initial guidance of INR 20,500 to INR 21,500.
- There has been a slower than expected conversion in the specialty ingredient segment, impacting growth.
- Return ratios have deteriorated, with ROCE dropping to 14.5% and ROE to 13%, attributed to investments not yet yielding expected returns.
Q & A Highlights
Q: Can you share the volume growth for the nine months?
A: The volume growth for the nine months is 4%, which is in the mid-single-digit range. (Natarajan Krishnan, Managing Director & CEO)
Q: Could you provide more details about the new product, Galaxy DermaGreen, and its market potential?
A: Galaxy DermaGreen is a premium product for shower oils, primarily targeting developed markets like the US and Europe. It offers superior moisturization with green ingredients, and we expect it to be a high-margin product with significant potential in our portfolio. (Natarajan Krishnan, Managing Director & CEO)
Q: How are rising raw material prices affecting EBITDA spreads, and what is the outlook for lauryl alcohol pricing?
A: Rising raw material prices, particularly lauryl alcohol, have pressured EBITDA spreads. We were caught off guard by lower volumes starting in November. We expect lauryl alcohol prices to stabilize, and we are managing price increases judiciously. (Natarajan Krishnan, Managing Director & CEO)
Q: What is the volume guidance for the next two years, and how do you see the export market performing?
A: We maintain our volume growth guidance of 6% to 8% for the next two years. The export market, particularly AMET and the rest of the world, is expected to continue its positive momentum, barring geopolitical issues. (Natarajan Krishnan, Managing Director & CEO)
Q: Can you elaborate on the factors affecting the return ratios and the company's capital allocation strategy?
A: Return ratios have been impacted by recent investments, which need to achieve higher capacity utilization. We are at 70% capacity utilization and will continue to invest strategically, focusing on debottlenecking and digitalization initiatives. (Natarajan Krishnan, Managing Director & CEO)
Q: How do you plan to improve the structural profitability of the business?
A: We are building a strong revenue pipeline for specialty ingredients and focusing on digitalization and country-specific portfolios. These initiatives are expected to yield results in the coming quarters. (Natarajan Krishnan, Managing Director & CEO)
Q: What is the outlook for fatty alcohol prices, and how do they impact demand?
A: Fatty alcohol prices are expected to stabilize at current levels, but a reduction to $1,500 would be beneficial for demand. The current high prices are driven by palm oil price increases. (Natarajan Krishnan, Managing Director & CEO)
Q: What is the company's approach to inorganic growth and potential acquisitions?
A: We are exploring partnerships and acquisitions that align with our strategic goals. We will only pursue acquisitions that offer the right value and strategic purpose, despite having cash reserves. (Natarajan Krishnan, Managing Director & CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
