Oriental Caron & Chemicals held conference call on February 03, 2022 to discuss the performance for the quarter ended December'21. Mr. Akshat Goenka – Promoter & Jt. Managing Director and Mr. Anurag Jain – Chief Financial Officer of the company addressed the call.

Highlights of the Concall

• The company saw steady recovery in economic activities post the second wave of Covid-19 in Q1 FY22, on the back of large vaccination drive in India with 1.5 billion shots by Jan 2022.

• Q3FY22 was a challenging quarter with a slowdown in demand in the domestic market as well as international markets of Europe and Southeast Asia due to the impact of third wave of covid.

• Demand for sulphuric acid has remained fairly stable during the third quarter.

• The prices of our key raw materials and fuel have increased sharply due to inflationary trend and steep increase in commodity prices across the globe, and many other companies across sectors are facing the same issue

• Supply chain issues have led to increased expenses in terms of freight costs

• High freight costs and raw material prices have contracted the gross profit and EBITDA margins impacting the overall profitability of the company. Freight cost for the quarter has increased by 125% over the September quarter of the year.

• The company is taking necessary steps towards controlling costs and shall strive to price hikes for covering higher cost depending on the market environment

• Total income for Q3FY'22 stood at Rs 95.8 crore as compared to Rs 109 crore in Q3FY '21 and Rs 109 crore in Q2FY'22. Revenues were impacted due to slowdown in demand in both domestic and international markets. Revenue decline was primarily on account of volumes

• EBITDA for Q3FY'22 stood at Rs 19.7 crore as compared to Rs 42.8 crore in Q3FY '21 and Rs 24.3 crore in Q2FY'22. EBITDA margins for Q3FY'22 stood at 20.5%. Margins have been impacted due to a sharp increase in raw material, fuel prices and freight costs.

• The company mentioned that sustainable Ebitda margins would be around 30% in the long term.

• Capacity utilization for 9MFY22 was around 80%.

• The company has commissioned its first phase of 5,500 tonne per annum capacity of insoluble sulphur at Dharuhera plant at Haryana from 21st December, 2021. Sulphuric acid plant commissioning is getting delayed due to supplier issues and is expected to be commissioned by March 2022.

• Revenue potential from phase 1 of insoluble sulphur is around Rs 70 crore and for sulphuric acid is around Rs 25-35 crore.

• The company shall plan for the second phase of Insoluble Sulphur depending on the visibility of demand and market scenario going forward.

• The company has started a warehousing facility in the U.S. to be near to the market and prospective customers. This will enable the company to increase its market share in North America going forward. It intends to capture around 10% plus of market share in North America in the coming years.

• The tyre industry looks favorable with many tyre manufacturers looking at capacity expansions over the next couple of years. Tyre demand from the commercial vehicle industry has remained strong over the past few months on account of improved fleet utilization.

• The company is working closely with customers to develop specialized products and widening its product range and strengthening its share of revenues derived from premium products

• The company is optimistic of gaining new orders in the quarters to come. Outlook for the tyre industry appears stable to moderately optimistic in light of the shift towards personal mobility and increased vehicle utilization.

• The company possesses a deep proprietary insight into the manufacturing technology of insoluble sulfur that makes the company free from any kind of external dependence.

• The company is focused on its efforts to deliver sustainable and profitable long-term growth with its dominant position in the industry and also proprietary manufacturing technology that the company possesses. It is focused on increasing its penetration into high potential geographies like North America.