Environmental constraints have led to Chinese players reducing the production of vinyl sulphone, which has given Indian manufacturers a reason to cheer as the prices of the product have surged to a life time high.
In a discussion on CNBC-TV18, Manish Kiri, MD of Kiri Industries and Ankit Patel, ED of Bodal Chemicals discussed the price trend of vinyl sulphone in the Indian market and how it has impacted their company's revenue.Below is the verbatim transcript of Manish Kiri and Ankit Patel's interview to Nigel D'Souza on CNBC-TV18. Q: Could you tell us what exactly have been the price trends of Vinyl Sulphone? I remember it at around Rs 150-250 as well, I believe it has gone up northwards of Rs 500 per kilogram (kg)? Patel:
The price has been constantly going up since last few months due to some of the capacity problems in China. Current market price is around Rs 425 per kg. Q: How much of your revenues come in from selling this dye intermediate, vinyl sulphone? Patel:
It depends on the price but it is in the range of 25-30 percent of total revenues. Q: I remember talking to you a few months ago, the prices have doubled from there. Could you tell us, for you how much of your revenues have come in from selling vinyl sulphone and how much of that is exported as well? Kiri:
The percentage for Kiri is in the range of 15-20 percent coming from vinyl sulphone and export portion out of that would be again 25 percent approximately.
One good point, which you should note here is that vinyl sulphone has started exporting from India to China. This was not the story before. This has reversed the trend, usually India used to import from China but because of the Chinese shortages, because of continuing of closure of the biggest plant there the products have started going to China to consume their requirement rates. Q: Last year you did around Rs 1,000 crore, you said you will be able to do Rs 1,200-1,250 crore for FY17. With these prices moving up, you are seeing maybe more offtake as well in China, do you look to up your revenue guidance for FY17? Also, in terms of margins what can you do to it given that prices have been on absolute tear, Rs 450-500 per kg is what it is currently going at? Kiri:
We would keep the same target because we do not know how the price would fluctuate in the next quarter and onwards because price may also come down a little bit if further capacities come in China so I would try to keep the same numbers, Rs 1,200-1,300 crore as a topline. With improvement of margins, we may able to reach close to 18-20 percent in terms of EBITDA level compared to the earlier ones. Q: Earlier was less than 12 percent? Kiri:
12-13 percent. So the improvements of vinyl sulphone will impact the overall EBITDA and earnings and margins for this year. I think that would help us in improving our bottomline. Q: Since dye intermediate prices are moving higher, what kind of impact can it have on the final product, that is dye stuff? Could you tell us in terms of numbers, how does it change things for you? Last year you did around Rs 900 crore, there was a bit of a de-growth, this year what kind of numbers are you expecting and do you believe that margins can expand as well? Patel:
As far as the topline goes, we are targeting more than Rs 1,100 crore. For the first five months of this financial year, we have already crossed Rs 500 crore. So it depends on the intermediate prices but looking at coming few months, it looks like we should be able to cross Rs 1,100 crore and in recent quarters, our EBITDA levels have been around 20-21 percent. We also look forward to continue in that range. Q: What kind of debt numbers -- I believe you were looking to be debt free by the end of this year, is that on the cards as well? Patel:
We have already cleared all the term debt. So we do not have any term-debt left on our books. We are only using the short-term debt that is in the range of around Rs 150 crore.