GALAXYSURF - Galaxy Surfactants Limited Share Price

In the earnings call for Q4 FY 2024-25, management expressed cautious optimism regarding the outlook for the company. They noted that while the demand environment in India remains flat, characterized by a decrease of about 1% in volume growth, there are signs of stabilization and potential improvement in macroeconomic conditions. They highlighted growth in the rest of the world, reporting a 9% volume growth for the quarter and 17% year-to-date, driven by strong performance in Europe, APAC, North, and Latin America.

Management reported a consolidated EBITDA of INR 135 crores for Q4, marking a 23% sequential growth from Q3, and stated that EBITDA per metric ton improved to INR 21,715, reflecting a 24% quarter-on-quarter increase. On a year-to-date basis, EBITDA stood at INR 510 crores with an EBITDA per metric ton of INR 19,868, consistent with the previous year's performance.

Looking ahead, management set a cautious tone, acknowledging ongoing uncertainties including fluctuating raw material prices, particularly fatty alcohol, and geopolitical developments affecting global demand. They indicated expectations for volume growth of approximately 3.5% for FY 2025-26, aligning with the lower end of the long-term guidance range of 6-8%. Management is focused on capitalizing on international opportunities while managing costs effectively, and they are committed to navigating the supply chain challenges.

They highlighted their recent innovation, Galguard Prebiotic, which received recognition at the in-cosmetics global exhibition, reinforcing the company's commitment to product excellence. The management underscored their proactive measures to enhance market presence and engage in strategic cost management to maintain profitability in a challenging environment.

1. Question: "In this quarter, this rise into your pricing per kilo, have we taken the complete impact of the raw material price or is there still room for further price hikes next quarter?"

Answer: Yes, the pricing dynamics are quite dynamic and we pass costs on with a lag. The sequential increase was around $2,600 per metric ton to about $2,800. While a significant portion has been passed on, there's always some lag depending on raw material prices.

2. Question: "Is there any change in your volume guidance for FY '26 from the earlier 8%?"

Answer: Our long-term guidance remains the same, but given the current conditions, we may deliver closer to the lower end of the 6-8% band. Last year, we achieved 3.5%. We're focusing on leveraging growth in other geographies as the Indian market stabilizes.

3. Question: "What is your outlook on freight costs and how will they impact EBITDA?"

Answer: While freight rates have started to decline, ongoing geopolitical issues and supply chain disruptions are challenging. We believe that heightened freight volatility may persist for the near term, impacting our EBITDA.

4. Question: "Could you share insights on the performance of AMET volumes this year?"

Answer: AMET volumes faced challenges mainly due to supply-side issues rather than demand. While we've seen some improvement, we expect the region to begin growing. The rest of the world is performing well, driving overall optimism.

5. Question: "What measures are you taking to drive higher volume growth moving forward?"

Answer: We're focusing on optimizing our sales strategies and ensuring our sales team captures available demand. The goal is to prioritize volume growth while navigating the current sluggish demand environment effectively.

6. Question: "Are you considering shifting to petro-based surfactants due to high prices of fatty alcohol?"

Answer: Yes, we're observing market shifts towards reformulations. However, while short-term solutions may include petro-based alternatives, our long-term strategy remains focused on oleochemicals, ensuring product effectiveness.

7. Question: "Can you provide clarity on the capacity plans and CAPEX moving forward?"

Answer: We don't plan significant new CAPEX this year as most projects are already in various stages of completion. Any future spending will be need-based, focusing on efficiency and needed replacements instead of new facilities.

8. Question: "Given the geopolitical issues impacting AMET, have you changed your approach to trade credit in the region?"

Answer: We maintain strict credit terms based on customer creditworthiness. Our practices have not changed. We ensure diligence to avoid risks associated with altered economic conditions in these markets.

9. Question: "What is the expected timeline for volume growth in India post-palm oil price stabilization?"

Answer: Typically, we see a lag of 6 to 12 months. As prices stabilize, consumer behavior tends to revert, resulting in enhanced demand. We are optimistic that this will lead to growth as we navigate the current stabilization phase.

10. Question: "Are there any new products being introduced in the international markets?"

Answer: We've had positive feedback on products like Galseer DermaGreen, and we've launched Galguard Prebiotic. Several projects are in the pipeline, but we cannot disclose specific financial sizes at this moment. We expect to introduce one or two new products over the next couple of years.