See margins at 5-7% for FY13: Thirumalai Chemicals

R Parthasarathy, managing director, Thirumalai Chemicals told CNBC-TV18 that the commodity chemicals business is cyclical and volatile, but he is hopeful of boosting volumes going ahead. "We have improved our costs and costs are very important in a commodity chemical business."

However, he pointed that maintaining margins in double digit would be difficult going ahead.  "We will try for respectable margins. Margin in double digit is not common in the commodity chemical business. It will be more like 5-6-7%, around 5-8% is more reasonable."

Below is the edited transcript of Parthasarathy’s interview with CNBC-TV18.

Q: This is quite an eye-popping performance in terms of doubling your sales as well improving your margins considerably from 9.5% to 14%. That’s a sizeable improvement in both margins and volume. Can you take us through what went so right in the first quarter?

A: What went right is the work that we had put in over the last one year and the various changes that we made internally in terms of efficiency improvement, cost cutting programs and responsiveness to market in reorganizing the company and training. All these things finally worked out well.

I must confess that the market also looked up; sizes looked up during the tail end of last year and the first three or four months of the first quarter. So, it is a combination of these environment factors and the results of the work that we had been putting.

Q: There was no capital expansion, no expansion of capacity that contributed?

A: No, not at all. There was no expansion of capacity.

Q: This is a maintainable performance you would say? You would be able to dish out Rs 300 crore in sales?

A: Ours is a commodity chemicals business which is about 80%. 75% of our business is very cyclical and it is definitely volatile. Prices go up and price come down like all other commodities.

We were at peak during the last five months, prices have started coming down. Our effort is not just to look at prices or the top-line, but it has been to protect our margins and improve them.

I would say reproducing these results quarter after quarter is not the way we run our business. We try to run it over a medium term. Over the medium term we will do well, but I do not think one quarter can be taken to represent a whole year.