PCBL hosted a conference call on Jan 21,2021. In the conference call the company was represented by Mr Kaushik Roy-Managing Director, Mr Rajat Gupta- CFO and Mr BL Chandak- Executive Director.

Key Highlights of the call

The company reported revenues Rs 1156.1 crore in Q3FY2022. The company reported a strong operating performance during the quarter with highest ever sales volume of 1,16,594 MT which included domestic sales of 76,621 Mt and highest ever export sales of 39,973 MT.

Volumes in Q3FY2022 segment wise stood at 77381MT for carbon black, 35378 MT for performance chemicals and 9835 MT of specialty chemicals. 9835 MT was the highest ever volumes in specialty chemicals.

Ramping up of specialty chemicals will take time but in next year the company can increase its specialty chemicals by 10000 tons pa.

Export sales jumped 18% QoQ and reflected very strong international demand.

The company achieved highest ever Power Generation at 150 MU during the quarter.

Operating margins declined to 15% in the quarter due to increase in export sales volume where container availability shortage was there resulting in lower margin.

Year to date nine months revenue stood at Rs 3228 cr as against Rs 1793 cr during the corresponding period.

PAT stood at Rs 338 cr for nine months ended Dec 31, 2021 as against Rs 186 cr during the corresponding period.

The company remains optimistic about the global supply demand situation. Domestic market witnessed demand softness due to semiconductor shortage resulting in lower production by OEM. The company expects its demand to be healthy on the back of recovery in OEM sales across all segments due to pent up demand and also in replacement demand.

Demand for carbon black is strong in international markets and the company is able to increase its volume however, logistic cost remains a challenge. Gradual improvement in supply chain conditions, semiconductor availability and vaccination drive will lead to good traction in domestic demand. Also, consolidation in Chinese carbon black industry has opened up a large volume multiyear opportunity for the company and the company has to grow rapidly and take advantage of the situation. The company is seeing improvement in demand in domestic market in Q4

Name change: The name of the company has changed from Phillips Carbon Black to PCBL post board and shareholders' approval. The new name reflects the diversification of the product portfolio of the company from a pure play carbon black to Performance chemicals, Specialty blacks and green power.

Capacity Addition: The company is adding 150000 MT capacity of carbon black and 24 MW CPP power plant in Tamil Nadu. It is progressing well, major equipment order is already been placed. It is a green field project.

The company also has taken up for 2 lines of brown field project at Mundra (Gujarat) for specialty chemicals with a capacity of 40,000 MT.

Power Plants: Post completion of CPP power project in Mundra, the company has taken up 7 MW power plants each Palej and Kochi and will be commissioned in Q4FY2022. 14 MW will be used for third party sale.

CAPEX: The total capital outlay for Tamil Nadu and Mundra projects in the next 2 years will be around Rs 1100 cr. Excluding maintenance CAPEX.

Export Sales: The company is currently selling in 45 countries. Of the total export sales 80% is contributed from Asia pacific region, 10% from Western Europe region and the balance from America, Middle East and Africa.

The company in order to de-risk geographical concentration has opened its own office in 6 countries and also tied up with distribution partners in number of other countries so that whenever one market is weak, it can shift to other markets. In the last 2 years when the domestic market was sluggish the company could still mange better capacity utilization due to export sales.

The company in the long run targets 50% of the total revenues coming from exports for which the company will have to add further capacity.

Structurally with China being consolidating, the export market looks promising

Margin:

Freight Cost: Increase in freight cost is partly on account of increase in fuel cost and partly due to shortage in availability in container ships. There has been a massive supply chain disruption. If there is an increase in logistics cost than it will have an impact on company's margin as the company will have to sell at landed price and has to compete with local manufacturers.

One of the other reasons for decline in margins is due to demand supply situation. The demand from OEM players is sluggish in domestic markets. In the current year there is a double-digit dip in passenger vehicle production, 15-16% drop in two-wheeler production, 35% drop in 3 wheeler. MHV segment is one which has performed well this has impacted the Tyre demand and in turn carbon black demand as well.

The company has formula price arrangement with tyre manufacturers who contribute 70% of the company's portfolio where the company can pass on the increase in price and the balance 30 % is extremely price sensitive.

Over a longer period of time, the companies margin profile has improved due to spread of the geography; cost initiatives and efficiencies improvement initiatives and due to improvement in product profile as the company is moving into specialty value products.

Inventory gain: The company did not have inventory gain Q3FY2022, but had a gain in Q3FY2021 to the tune of Rs 30 -35 cr due to volatility in crude prices.

Impact of increase in raw material price at gross margin levels were Rs 3000 per ton however at EBITDA level the company could restrict to Rs 1100 per ton due to cost initiatives.

Raw material cost has increased from Rs 60000 per ton to Rs 70000 per ton. With increase in crude by US$8-9 the company expects the raw material prices to go up.

Pricing: 70% contribution comes from large customers where there is arrangement as such margins are protected, while the rest 30% which the company sells in spot market is dependent on demand supply dynamics prevailing at that point of time.

Debt: Gross debt stood at around Rs 550 cr and the company expects the debt to be around similar levels in FY2024. Down the line 4-5 years the company intends to be debt free.

Dividend: The Board has declared an interim dividend of @ 500% (Rs 10 per equity share)

Outlook: The company expects to grow in lower double digits volume growth n next 4-5 years.