Alkyl amine concall may 2022
1…Challenging year
(raw materials and energy input costs)
=.This was a very challenging year for Alkyl Amines and our results are
showing that. Most of our raw materials and energy input costs went up by a large percentage. We managed to pass some of the increases in our price to our customers,
but that was not enough. Things have started looking better with many of the raw materials prices coming down to some reasonable levels.
=We have grown on the top line by about 25%, as you have seen, year-to-year and most of
that growth has come from price rises. But the price rises have not been sufficient to keep our margins intact because the raw material prices or rather, input prices including
the energy costs like coal and ammonia and all the other raw materials have gone up
considerably especially in the last six months. Fortunately, they have stabilized now
and slowly we are able to pass on some of these increases onto our customers. Looking forward we are a little optimistic that the worst is over.
=However, it is difficult to say
because there is a lot of volatility in the market due to the Chinese issues and Ukraine war and all the logistical issues people are facing.
2…Capex
A= We have put more capacity on ground for one of our products, that is, Acetonitrile.
B= We are also in the process of establishing a new large amines plant at Kurkumbh, which would come on-stream in the next nine months.
C=Dahej plant
I think we will have to look for some more land because along with methylamines we will put up some derivatives there is other plants also. So definitely we already
looking for some land. So maybe in a next six months or a year’s time we will have a lot of land which will be suitable for us.
3…Operating margin
Q=When do we anticipate our EBITDA margin to go back to the net 20’s the range that you guided earlier?
Ans=In fact, I hope to have that as soon as possible but if the cost of raw materials come down a little bit and do not go up further plus the cost of energy that is coal comes down significantly then we are very confident we can bring up the EBITDA to a very decent level.
Q=But we are not passing it on to the customers over the last two quarters I think we are taking a hit ourselves but when do we expect that to pass to the customers at least partially.
Ans=We are trying to do that but we cannot just increase otherwise they will get into issues and then we have competition from imports also. So we have to be very careful how much we can pass it on.
=Margins as you see are stabilizing and probably will improve
as we pass on some of the increases in our costs on to customers. The process has begun towards the end of last year and continues. Looking forward we are not able to say how much the raw material prices will go up or down, but at the moment we are optimistic that the margins will improve as we go along.
4…Acetonitrile
Q=INEOS has recently announced Acetonitrile capacity
expansion by around 15000 tons and also we have seen your domestic competitor also increasing their Acetonitrile capacity by another 15000 tons. So to what extent do you
foresee this could possibly impact the realizations for the product?
=Yogesh Kothari: Well I can tell you one thing that Acetonitrile is a growing product and I do not foresee
any issues in capacity because a lot of material is imported now and it is going to be
challenging, but we are very confident that the quality and the service which we have will definitely give us an edge. So we have already established a market and we will continue to do better in Acetonitrile.
=Acetonitrile: Most of the 25% growth rate on the top line has been largely due to price almost 2/3rds to 70% has been price and the rest has been volume.
= As far as Acetonitrile is
concerned, we have begun the plant in the last quarter of the last year January to March and slowly it is being ramped up. Looking forward we think between the two plants we
will probably hit 60% to 70% of utilization of our capacity and we are hoping to push it
to even further because there is a market out there, but as you can appreciate that
introducing a new plant, new market it takes a little time. So we hope to get to the 60%-70% capacity utilization both plants put together.
Q=Three, four years back the price used to be 120 a kg and then there was a demand for it,
it shot up to 300 to 400 a kg. So with Balaji also adding a new plant and so do you see
that the price of ACN going down below 200 kg.
Ans=Well it is always possible if there is more supply than the demand it could happen and
also there are imports also. So there is always a possibility to it. Then you have to see at what rate you can operate at and what is your cost of production and how you manage your plant.
=We manufacture from acetic acid and ammonia which is a much, greener route. You can call it green because really speaking there are no side products. It is all getting recirculated within the system hardly anything goes out. So this is something which h is very positive for our plant, our company and many of the international players also
prefer our type of production and since now we have two locations where we make acetonitrile, it gives more confidence to the customers that they can get their material
from two different locations. So that is why we are very positive on acetonitrile.
5…Kurkumbh plant
=Kurkumbh Capex so we are doing almost 300 Crores of Capex for around 35000 tons of ethylamine capacity.
=We are putting up a very large plant at Kurkumbh for making ethyl amines and our capacity will be quite high compared to whatever capacities are there and for our existing plants also we have technologies to change them over to other amines.
6…
Other expenses
=Other expenses” includes our power, water, fuel. As you all know, that
energy costs have substantially increased over the last six months and in fact the last three months much more. Coal, which we use for heating, has almost tripled from what
it used to be a year ago. So that is to a large extent where the other expenses have gone up. The rest of it has not really changed that much. Power, water, fuel which you see
has significantly changed the other expenses.
7…DMF
Q=. You had said our competitor produces DMF. So I would like
to ask do we have capabilities to produce DMF.
Ans=Currently we do not have the capability but we have the process and at some stage we
may do it. Before that we will be adding some more methylamine capacity because
dimethylamine is needed for making DMF and that is what is going to be needed in
future. So at the same time we will be planning a new methylamine plant maybe two
years down the line.
8…Intermediates
Q=As we see that there are a lot of companies which are going under very specialized chemicals wherein they can actually drive the margins and direct the prices. So are you
looking for something on those lines or you are looking only for those products which
are right now in your portfolio.
Ans=We are largely in the business of what we call intermediates, which means we are not
commodities and we are not what you might call performance or specialty chemicals
which are sold on performance or formulations. But we have a few products which are
unique and where we are able to set prices, of course within limits which are comfortable. But, by and large, we would define our company as an intermediates
company rather than a performance chemicals company.
9…Over capacity and commonality of products
Q=Because so the fear is that the commonality between both is now sort of meaning
earlier the commonality was not that high now the commonality is sort of rising by the
day and if both the companies are looking at selling this much in the domestic market
then is there a fear that there could be some price wars in order to get your capacity
utilized or you do not envisage that kind of a scenario.
Ans=It is always a possibility there have been periods of time when there has been an
overhang of capacity and there have been periods of time when both of us have been
behind the curve and there has been a shortage but this is part of the business and itisa
cycle sometimes you are ahead, sometimes you are behind and do not forget there is a
third player also: RCF.
10…Capacity utilization in 2022
=Because acetonitrile we have just
expanded the capacity, so obviously there is a lot of headroom
=. In methylamines we
have expanded a year and a half ago in Dahej and that is likely to be used up.
=Next year or so we will be probably using some part of the Patalganga plant. If you remember we
have a plant in Patalganga which is a swing plant between ethyl and methyl and we will probably be using the methyl plant and maybe as Mr. Kothari just mentioned two
years, three years down the line we will need another methylamines plant.
=That leaves us with the ethylamines which we have just now mentioned that we are expanding that
capacity because we feel we are reaching the limits of capacity of existing plants by the
end of this year. So we will be expanding the capacity at the end of this year which
hopefully will last us for another five years at least.
11…New products
Q= We have also seen your competitors significantly expand
capacities across newer product lines which could be a DNC or a DMF or a
butylamines as well now to diversify away from some key products now what is Alkyl thinking about in terms of either focusing on the key products where you have competency or are you also looking to go beyond them.
Ans=
A…acetonitrile was a new product which has made a sizable part of our revenue that was introduced about four, five years ago significantly. For it was the trial runs were
about seven, eight years ago but significantly we expanded capacity about four years
ago.
B… we have a product called diethylhydroxylamine which is also a significant product.
C…then there is dimethylaminopropylamine which is also a significant product.
D…Then we have products like DIPEA and there are some speciality products which are not that larger volume maybe a 500 tons but they contribute significantly.
Q=Apart from acetonitrile are there any other products which have a capacity of over say
15000 tons per annum
Ans=Ethylamines, DMAHCL methylamine, acetonitrile all over 10000, 15000 tons.
Q=Sir any new products that we are looking to introduce now, so any significant new
products which we have completed R&D and kind of trial runs and looking to introduce in F¥2023.
Ans=We have several products in pipeline but we will be only sort of talking about it only
once they become commercial at this stage we would not try to disclose that.
12…Growth
Q= we can safely see a volume growth of around 15% to 17% percent coming on for Alkyl Amines for next four to five years depending on some of the years where the volumes could be lesser some of the years where the volumes would be higher
based on the demand supply
dynamics.
Ans=I agree with you there we have always managed that 10% to 15% increase and | think looking forward I do not see things changing
13…Competitiors
Q=My only question is about the market share. Is there any market share loss because our
other competitor, the domestic competitor has done the volume of about 34% up and
we have only done 10%-11%.
Ans=I think it is one of the products which we do not manufacture is what has really aided
our sort of co-producer we do not make Dimethylformamide which is what has to a
large extent helped our co-producer.
Disc…invested from lower level and may add on dip
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