Commodity prices moderation to help profits: India Glycols

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Rakesh Bhartia, CEO of India Glycols , in an interview with CNBC-TV18's Latha Venkatesh and Gautam Broker, gave his perspective of the fourth quarter performance and their divulged future plans.

Below is the verbatim transcript of the interview. Also watch the accompanying video.

Q: Why are you at a loss on a consolidated level?

A: We are at a loss because of our sugar subsidiary. The sugar business hasn't done well over the last financial year. Bulk of the losses at a consolidated level is largely because of the sugar subsidiary.

Q: Minus that, wouldn't you be at Rs 25 crore in terms of profit vis-à-vis Rs 20 crore?

A: Yes, that is right. It has been a satisfying quarter.

Q: How has the margin picture been? How will FY12 show up?

A: The last quarter in particular has been reasonably satisfied in terms of margins. We are looking at EBITDA margins of about 15%. In terms of our prospects for the year 2012, I am deeply encouraged with what we have seen so far in terms of market developments and market penetration on one of our principal products which is bio-MEG.

We are the largest manufacturer of bio-MEG in the world. Because of the CSR initiatives, some of the largest global beverage companies have launched products which use our bio-MEG. I see significant traction there.

In addition, the recent moderation in commodity prices would help our bottomline on our specialty chemical portfolio. In some of our ancillary business like gasses and guar are doing extremely well.

Q: What are the realisations this time for MEG? What did they average at as they have moved up significantly from USD 1000-1250? What was its average for Q4? What do you see the average realisation going forward in to FY12?

A: The average realisation for MEG for Q4 was about USD 1250. Going forward, since we are increasing our supplies more in the export market for our bio-MEG, I see realisations being in the region of USD 1350-1400.

Q: What do you make of this controversy surrounding the ethanol blending programme? There have been some talks that the food ministry might oppose it. How are you reading into that because that might affect your material costs?

A: It is a step in right direction. We have always been maintaining that there is not adequate ethanol available for fuel blending in India. That being the case, it doesn't make sense for the government to have a half hearted programme which not only deprives the existing users of their raw material, but also unnecessarily increases costs and passes on to the consumers.

Q: Do you mean that your raw material costs should not increase in FY12? If this programme were not to happen, would your raw material costs be largely stable?

A: I would think so.

Q: What are the sectorial contributions? You have a lot of chemicals which wouldn't be understood by a lay investor like Glycols, Ethoxylates and specialty chemicals.

Could you group them in the best possible way and tell us about their contribution? How much is coming from sugar? If we look at your EPS, the difference between the consolidated entity and the standalone entity is considerable.

Last year, you did Rs 2 by way of EPS for the consolidated. Your standalone entity was Rs 7 plus. This time consolidated is a loss, but the standalone is Rs 9. What is the contribution of the various sectors consolidated and unconsolidated?

A: As far as specialty chemicals are concerned, it's about 50% of our topline. MEG is about 30% odd. Alcohol would be about 11-12%. We have contributions coming in from industrial gasses and guar gum which is the standalone entity. Consolidated entity doesn't add much to the topline and is just about Rs 125 odd crore.

Q: Is it only sugar?

A: That is right. It's only sugar.