Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- GRP Ltd (BOM:509152, Financial) reported a 27% increase in revenues, rising from INR999 million to INR1.267 billion year-over-year.
- EBITDA for the quarter saw a significant improvement, increasing by 88% to INR132 million compared to the same period last year.
- The company achieved a 13% year-on-year growth in export volume of reclaim rubber despite global market constraints.
- GRP Ltd (BOM:509152) recorded an EPR income of INR6 crores during the quarter, reflecting proactive engagement in environmental regulations.
- The company is making strides in renewable energy, achieving energy cost savings of INR1.65 crores through wind mills and biofuels.
Negative Points
- Realizations have marginally declined by about 2% to 2.5% due to reduced share of exports caused by the prolonged crisis in the Red Sea.
- There has been a marginal increase in freight costs, which the company has been unable to pass through to customers, impacting export margins.
- Operational margins have dipped due to lower export volumes and increased freight costs.
- Employee costs saw a one-time increase due to rewards given as part of the company's 50-year celebration.
- The company's tax liability has increased significantly due to deferred tax benefits converting into current tax liabilities and provisions for contingent tax liabilities.
Q & A Highlights
Q: My first question is on the crumb rubber capacity that we are setting up. Do we have any plans of further going down to producing micronized rubber product (MRP)?
A: MRP is one form of crumb rubber. As part of our expansion into crumb rubber, we will look at different sizes, including micronized rubber. In Phase 1, the total capacity of crumb rubber will be about 40,000 to 50,000 tonnes.
Q: How do you measure the maximum amount of debt that you are willing to take for new projects?
A: We are confident in our ability to generate internal cash supported by margin improvement, volume growth, and EPR income. We will not exceed a debt-to-EBITDA ratio of more than 2.5. The first phase of investment will be funded through a combination of internal accruals, debt, and a rights issue of up to INR40 crores.
Q: Can you provide an update on the new technology for reclaim rubber and its commercialization timeline?
A: The new technology for reclaim rubber, which involves lower CO2 emissions and improved product quality, is under evaluation. We expect to commercialize it in Q2 and achieve close to 50% utilization towards the end of the year.
Q: What is the reason for the recent spurt in demand for reclaim rubber?
A: The increased demand is primarily from the tire industry. Additionally, high prices of natural and synthetic rubber have led to increased offtake by tire and non-tire manufacturers to offset their costs.
Q: How do you see the profitability of the core business excluding EPR income?
A: The core business margins have been impacted by a reduction in export volumes and increased freight costs. However, we expect margins to improve with better capacity utilization and energy cost savings from renewable sources.
Q: What are the expected asset turns for the INR150 crore CapEx?
A: The overall asset turn for the INR150 crore CapEx is expected to be between 2.5 to 3 times on an annualized basis. This includes investments in crumb rubber, new technology for reclaim rubber, and plastic recycling.
Q: How does the EPR policy impact the tire industry and GRP's reclaim rubber volumes?
A: Tire companies are working to increase the percentage of recycled/reclaimed material in their formulations. The EPR policy encourages circularity by ensuring the obligation of recycling is met through responsible recycling practices.
Q: What is the status of the recovered carbon black (RCB) project?
A: The RCB project is in the nascent stage. We are evaluating technologies to ensure environmental friendliness and continuous processing. The industry is working on establishing standards for RCB, and we aim to meet those requirements.
Q: Is there an opportunity for EPR credits from international markets?
A: The EPR regulation in India applies to waste generated and recycled within India. There is no equivalent EPR regulation in international markets that would benefit us.
Q: Can you provide more details on the new technology for reclaim rubber?
A: The new technology involves a process that eliminates the use of chemicals and reduces labor dependency, resulting in lower CO2 emissions. It aims to produce a superior quality of reclaim rubber, which should improve margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
