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Apcotex Industries Ltd
Earnings Call Analysis
Summary
Q1-2025
For Q1 FY 2025, Apcotex Industries reported robust financial performance. Operating income rose to INR 337 crores, a 21% increase year-over-year, driven by higher volumes, favorable product mix, and better pricing. EBITDA climbed by 25% to INR 32 crores, with a margin of 9.45%. Net profit after tax grew by 22% to INR 14.8 crores, translating to a PAT margin of 4.4%. Operationally, there was a 14% volume growth, and exports increased by 12%. The company expressed optimism despite past industry challenges.
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Ladies and gentlemen, good day, and welcome to the Q1 FY '25 Earnings Conference Call of Apcotex Industries Limited. [Operator Instructions] Please note that this conference is being recorded.
At this time, I would like to hand the conference over to Mr. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.
Good evening, everyone, and a warm welcome to you all. My name Purvangi Jain from Valorem Advisors. We represent the Investor Relations of Apcotex Industries Limited. On behalf of the company, I would like to thank you all for participating in the company's earnings call for the first quarter of the financial year 2025.
Before we begin, a quick cautionary statement. Some of the statements made in today's con call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by, and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today's earnings conference call is to only to educate and bring awareness about the company's fundamental business and financial quarter under review.
I would like to introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Abhiraj Choksey, Managing Director; and Mr. Sachin Karwa, Chief Financial Officer.
Without any delay, I request Mr. Sachin Karwa to start with his opening remarks. Thank you, and over to you, sir.
Thank you, Purvangi. Good evening, everybody. It is a pleasure to welcome you all to the earnings conference call for the first quarter of financial year 2025. I hope you had an opportunity to review our financial statements and earnings presentation which have been circulated and uploaded on the website and the stock exchange. .
Let me provide you with a brief overview of financial performance for the fourth quarter ended June 30, 2024.
Operating income for the quarter was INR 337 crores, which grew by around 21% on year-on-year basis with increased volumes, product mix and better price realization.
The EBITDA was reported around INR 32 crores, an increase of approximately 25% year-on-year. The EBITDA margin stood at 9.45%. The net profit after tax was INR 14.8 crores, which grew by 22% on a year-on-year basis. And PAT margin stood at 4.4%.
On the operational front, we achieved an impressive 14% year-on-year volume growth. On the international front, export volumes grew by 12% year-on-year.
With this now, I open the floor for question-and-answer session. Thank you.
[Operator Instructions] First question is from the line of Ankit Kanodia from Smart Sync Services.
Congratulations on a good set of numbers. Sir, my first question is related to our quarterly revenue run rate. So, if I remember correctly, June 2022 quarter was the first quarter where we crossed INR 300 crores. And then we had some industry-related issues, and we have had a rough time after that. Now we are back to above INR 300 crores in the last 2 quarters, specifically this quarter, it may be up than the highest quarterly revenue. If you have to compare June 2023 quarter with this, both in terms of volume and revenue, if you can provide some more color as to which segments have done well and what in terms of volumes and value. That would be very helpful. That's my first question.
Ankit, this is Abhiraj Choksey. Thanks for your question. So I don't have the June '22 quarter numbers directly with me. But if I remember correctly, I mean, if I were look at the financial year '22, '23 and financial year '21, '22, those years just post COVID, there were certainly years where there was a lot of pull from the market, a lot of goods being bought, that, of course, benefited us as well. And raw material prices as a result were higher as well.
But going into '23, '24 also, while the revenue figures may -- I think for the whole year were up only 4% in '23, '24 financial year, full year, compared to '22, '23, our volumes were up by 28%. So '22, I would not say in terms of revenue, I would say we did fantastically well in last year as well. And Q1 of -- or the June quarter of FY '23, '24 compared to the previous year, which I think you are referring to, is the June quarter of the previous year, we also had very good growth in volumes, if I look at, we collected 25% to 30%. But overall, the raw material prices, and therefore, the finished goods prices were quite muted and, yes, margins were definitely under pressure last year, and to some extent continue to be even currently for various reasons.
So I would say, I think from a revenue and volume perspective, we are quite happy with where we are. And yes, comparing last year is not really fair because of the really muted prices of all our goods. I hope that kind of answers your question.
Yes, yes. Sir, just one more question related to that. If you can share segment-wise performance as to how all the segments are doing currently, compared to June 2023 quarter.
Again, I don't -- sorry, but I don't have the June -- I mean we were ready with the last year's figures, but...
I'm talking about last year figure, June 2023, and June 2024.
Sorry, say that again.
I am saying June 2023 quarter versus June 2024 quarter.
So not June '24, you don't want to talk about the June '24 quarter?
Also the June '24 versus June '23. That is what I'm asking.
You asked June '22.
Earlier I asked about '22. Now I'm asking about the performance of the different segments....
Almost across the board we have had growth in June quarter, largely led by Paper and Construction, as well as Tyre Cord. So those are the 3 large ones that -- I mean, in terms of growth, those are highest. But overall, it's been a good growth segment in terms of volumes. I think we are up, Sachin, by about 14% this quarter?
Yes, we are up by 14%.
Yes. So Q1 against Q1 of last year, volume growth is up by 14%.
So is it correct to assume that the margin is taking -- zipped around linearly because of the Gloves segment, where probably we are getting good volumes, but the margin is getting hit.
Yes, for sure, that is one of the reasons. But as you would see, compared to Q4, in terms of overall EBITDA per ton, I think we've done a little better than Q4 of last year. And compared to Q1 of last year also, if you see our margins are certainly better, right? Again, Sachin, if you can correct me if I'm wrong, but....
So, you are right, absolutely. So compared to...
EBITDA is up by 23%?
Yes.
Yes. You were saying something, Sachin.
Yes. No. You are [indiscernible].
Okay. So is it then fair to assume that we are close to bottom in terms of margins, which you are closing at right now? 9% EBITDA margin?
Yes. I mean, difficult to exactly predict, of course. But there is 2 areas. I have always said there are 2 plumbers. One is EBITDA percentage margin is EBITDA per ton. So EBITDA per ton is, of course, better in this quarter compared to Q4 of last year as well as Q1 of last year.
EBITDA percentage is around 10%. So there, of course, last year, the overall price revenue or prices per goods were lower, so that helps us in terms of percentage. But both are important numbers, of course.
And, as I said before, look, I do think that the margins for this business can be 14%, 15% -- 14%, 15%, 16%. We have achieved that in the past. And as the volumes grow, that should happen again in the future. Of course, the Glove segment is pulling it down.
A couple of other segments also, we have built capacity. Some of our competitors have built capacity, that is in the short term, all sort of industries go through this cycle. I think the chemical industry is going through a cycle of lower margins, I would not say terrible margin, but lower margins in general, for most chemical companies that I have been watching. So I think we are in the same boat.
Then last question related to ApcoBuild. Any color you want to highlight on that? How we did this quarter?
Yes. I mean it continues to do well. I think in terms of quarterly, again, we have grown at double digits. Perhaps, I don't remember the exact number but about 12% to 14% is what, as I recall, we've grown for the quarter.
Yes. Sir, one question, not related to the results. Our Q4 presentation was very detailed and it was very useful for us. Any reason why you have kept a very short presentation for Q1?
In what way detailed? Like what specific?
So you talked about different products which you have, profits, your strengths, your -- basically future strategy, CapEx was little detailed. It was a......
Okay. Quarter-on-quarter doesn't change. So since it was the annual presentation, we perhaps have given more details, of course. So that's the only reason. Because a lot of these things quarter-on-quarter, there's almost -- perhaps nothing much to add. Therefore, it's a shorter presentation for this quarter.
[Operator Instructions] The next question is from the line of [ Chandpal Singh ], an individual investor.
Am I audible?
Yes, sir, go ahead. You are on.
This is [ Chandpal ]. Abhiraj, my question is regarding ApcoBuild. What advantages do we have in case of ApcoBuild products in the market?
Look, I've said this before, as you know, we are focusing on certain niche products where we have certain advantages. For example, the backward integrated in some polymer products. And then we're building -- or we have built a product range around those products that we really have an advantage of. And we're focusing on the states that are -- that we understand well and are closer to us. So we are in 4 or 5 -- 5 or 6 states that we're growing further and deepening our reach.
Can I know how many competitors of these products are there in the market in India? Who can make these products.
Look, you're talking about the construction chemical B2C segment, right?
Yes, yes.
Look, the B2C segment, there are lots of different kinds of products, from solids to powders to liquids, grouts, all kinds of seals, all kinds of products, timing adhesives and so on. So I mean there are hundreds and hundreds of products, of different companies, and many companies as well competing.
And different companies have been focusing on their own strategy. Some companies are focusing in certain states. Some companies are focusing on the retail segment. Some companies are focusing on the B2B segment. Some are on the -- with the government and infrastructure segment.
Similarly, some products are -- some companies are focusing on waterproofing only. We are largely a waterproofing -- our strength is waterproofing. So I think it would be wise for you to sort of learn more about the industry through sort of there are a few industry handbooks and so on that you can look at.
Okay. And Abhiraj, some light on the Valia project, how it's performing?
Yes. I mean, look, Valia, you're talking about the Valia acquisition overall, that 8 years ago or?
Not acquisitions. The new project that you started last year.
Yes, the new project that was on -- so we -- again, just to recall, there were 2 projects that we invested in last year. About INR 150 crores with Valia, INR 150 crore, 160 crores in Valia for the Gloves project, and another INR 50 crores in Taloja to expand our current product lines of Styrene Butadiene and other latexes.
The Gloves project, in terms of volume, is not an issue. We've done reasonably well. We are now confident of -- by now, we had expected to get to close to 100% capacity utilization. But we are at about 50%, 60% capacity utilization. We can go more, but the margins were very low. So we are only focusing on certain customers.
So going forward, we do expect capacity utilization to be in the range of 50% to 70% for the next couple of quarters. So from a revenue perspective and a sales perspective, it's gone well. But from a margin perspective, given what happened post-COVID, there was a huge additional capacity of -- or additional inventory of Gloves that was created, a lot of additional capacities of Gloves and Nitrile Latex that was added all over the world, especially in Asia, actually, largely in Asia. As a result of which, margins have been very muted, and that's what I would say. Yes.
Is the project EBITDA-positive or not?
It's just -- no, it's not -- it's about EBITDA neutral, I would say. Some quarters negative, some quarters positive. But overall EBITDA sort of 0, EBITDA neutral. EBITDA breakeven rather than.....
Thank you.
We do expect -- we're seeing some green shoots. I mentioned it last quarter also, we saw initially some green shoots, and Q1 was slightly better than Q4 of last year. But Q2 is expected to be even better. We're seeing capacity utilizations go up, even though they are nowhere close to what they were pre-COVID, prices of gloves go up. So we are seeing better traction in the Glove industry. Some of the glove manufacturers, some of our customers who were in a red have sort of started making some profits in the last few months. So some good signs are there, but it may be a little early to expect immediate turnaround.
The next question is from the line of Nikhil from SIMPL.
Am I audible?
Yes. Go ahead, Nikhil.
Yes. Abhiraj, congrats on a good volume growth which we are seeing. One question. You mentioned during the call that our volume growth was 14%. So rest is the price increase. So is it because of RM increase or is it because of the natural price increase for the products? If you can just highlight that.
Yes. I think it's -- RM increase, of course, has a significant part to play in that, yes.
Okay. And on the capacity utilization, because what we've seen is, during this whole last quarter, while the prices have been weak, we've done a good job on the volume growth. So versus last year and today, how would that capacity utilization be at different plant level?
Yes. So I'll explain to you in 3 different plant levels. One is our -- in FY '22, '23, we were at full capacity utilization for our current plant capacities then. We added 2 plants, one in Valia, one in Taloja. The Valia plant was largely for Nitrile Latex for gloves. And that is now running at about 50% capacity utilization, about a year after we have commissioned it. And we expect over the next 1 or 2 quarters to move to 65%, 70%.
As far as the Taloja plant is concerned, the additional capacity that we created, there we are running last quarter at -- had these numbers with me -- at about 70% capacity utilization. And we expect to go to 100% over the next 1 year, 1 year to 15 months.
Okay. And last question from my side. See, the pain point has been on the glove. So if you can just talk about the global, how are we looking at the overall scenario? And what's your reading of how things are playing out now?
Yes. I just mentioned to the previous caller, but I'll kind of repeat it again. I think the glove industry, things have improved in the last few months. I'm talking about the glove industry, but -- because from what we see, some of the glove manufacturers have improved their selling prices, improved their volumes, from the red, they moved to at least making some profits.
However, a lot of capacities have been added. Now the issue is both glove capacity and latex capacity that has been added, especially in China. So as a result of it, overall, the capacity utilization is still quite low. Therefore, margins are quite muted for both the glove industry as well as us, the raw materials, which is Nitrile Latex for gloves.
We expect that to keep improving as time goes along. And we expect in the next few quarters margins to keep improving. We are focusing, as I said, on volumes. Last year, we had a 28% growth. On the back of that, we have had an additional 14% growth in Q1 of this year. So if you just compare us to like 1.5 years ago, we have grown by, in terms of volumes, we are like 40%, 45% higher than where we were just 1.5 years ago.
Okay. And just lastly, there was a point on latex Chinese presence and the capacity in which they have added. Are you hearing any capacity shutdowns? Or are they sustaining at these prices?
And an additional point, see, what I understand is that U.S. has also put some duties on Chinese gloves and all, which most people are talking about should help the non-Chinese players. So how does it impact us as a supplier of latex?
Yes. So look, as a latex supplier, for us, the main market is Southeast Asia, India, Sri Lanka and South Asia, basically. So obviously, if the duty is going to come in, in 2026, while the U.S. has announced it, it doesn't get implemented till 2026. I forget the exact month, but it's at least a 1.5 years to 2 away.
Having said that, at some point, towards the end of '25 or next year, obviously, people will start moving back towards Southeast Asian suppliers versus Chinese suppliers given the high duty that the U.S. has imposed on Chinese gloves. So that will help us -- help our customers and therefore help us, but it's a little while away.
The second question you asked, whether there were some capacities that are being closed down. And yes, that's also true. One of our -- one of the manufacturers of Nitrile Latex has already shut down one of their old plants in Malaysia recently in the last few months. And another Japanese player has announced that in 2026 they are going to shut down their Nitrile Latex. Again, old capacity, perhaps the costs were not shooting them in terms of their cost curve. So the older plants are shutting down.
However, we have not heard of any shutdown in China, because a lot of the plants are brand new as well, right, like ours, in the last couple of years. But there's no additional capacity.
[Operator Instructions] The next question is from the line of Ankit Kanodia from Smart Sync Services.
Thank you for allowing a follow-up. If I look at our asset turnover also, it is providing [indiscernible]. I've never seen in the last 7 years reaching that kind of low in terms of asset turnover. And based on what you have just shared with the previous participants also, as we expect the volumes to increase, can we expect this to rise up to 4x or 5x [indiscernible]?
Yes, yes, absolutely. Because look, when you first invest, and that's true of asset turnover, return on capital, because our company has taken up a substantial CapEx last year, obviously, that INR 200 crores, INR 250 crores got added literally overnight. So the denominator has gone up overnight, so therefore, asset turnover has dropped overnight.
Now over time, 2 things happen. One is the assets depreciate so the overall assets come down in terms of the denominator reduces. And the volumes will keep going up as we go move towards 100% capacity utilization. So again, asset turnover will go back up to 4 and 5.
[Operator Instructions] The next question is from the line of [ Om Prakash ], an individual investor.
[Foreign Language].
[Foreign Language] We are still in the middle of assessing the exact damage. [Foreign Language] So there is no problem. [Foreign Language].
[Foreign Language].
[Foreign Language].
[Operator Instructions] The next question is from the line of Manav Vijay from [ MV ] Investments.
A few questions from my side. So if you can you tell us the volume growth on a quarter-on-quarter basis, because 14%, I believe, will be Y-o-Y.
You mean Q4 against Q1?
Correct.
Okay. Sachin, would you have that?
Yes. It's almost flat, to almost [indiscernible].
It's flat volume growth compared to Q4.
Okay. So that means whatever, let's say, 7% to 8% difference that you have, let's say, compared to last year Y-o-Y or even quarter-on-quarter, that is all price-driven, that's correct?
No. Quarter-on-quarter, yes. Y-o-Y, no. Quarter-on-quarter, it's all price-driven. Year-on-year, it's 14% on volume and the rest on price.
Okay. Second thing, Abhiraj, in last few weeks or I must say, months, we have been hearing about the availability of containers and also the freight trade again playing havoc. So is that also impacting your export level because [indiscernible] for you form a decent part of the total top line now? .
You're absolutely right, Manav. Good question. And it has become a bigger challenge. Of course, it started a few months ago. But certainly in the last quarter, we would have at least another 2%, 3% higher sales or higher volume sales, had it not been for this delays in export consignments. A lot of our consignments that were going to Malaysia or Thailand actually got rerouted because of the huge congestion in Singapore, got rerouted to Shanghai, and then had to come back. So everything was delayed.
It is a challenge for sure. We're trying to work through it. 30% of our sales continues to be export even in Q1. So at least we didn't lose out on it. In fact, we grew our export sales in Q1 also.
So it is a challenge, but it's -- I mean, it's a short to medium-term challenge because what we have done is, of course, we've got approvals in all these new customers. We're continuing to do business with them. These kinds of issues do cause delays.
But a lot of the countries that we export to are also importing, whether it's from India or it's from another country. And so it's a global phenomenon, right, right now, whether you're importing from Europe or importing from China or any other country, or Korea.
So I think it's a challenge that all companies will face. We've seen that impact our margins as well to some extent because we tried to absorb some of those trade costs. Of course, we try and pass it along as well, but it takes time sometimes. So yes.
But on the flip side, it may in the long -- medium term, also help our -- some of our businesses like NBR because, since we are the only manufacturer of NBR in the country, NBR coming into India, the freight rates will also -- are also high now. So we'll see how that plays out. But I don't -- I mean in the long run, it's not such a big issue. We've seen it during COVID, right? It was much worse at that time, in '21, I would say.
So, actually my second question, is that, so if the exports are a challenge, so I believe the same thing applies even to import as well. So even on the import side, are you seeing any kind of [indiscernible] for you or not, especially on the NBR side?
We're seeing some amounts, but not significant yet. I think just in the last month or 2, where 1 month, 1.5 months, I would say it's become really difficult now, also going back towards the difficulty in getting -- earlier the rates went up, but availability was still not a problem. I would say only in the last month we've seen availability is also a problem. So we'll have to wait and work for 1 month or 2, and maybe things will take care of itself. I'm not sure how to predict when.
Look, but on the flip side, raw materials is also a problem, right? We have had to now again go back to higher raw material inventory norms, especially for important raw materials.
So I think we're waiting and watching. Not really 100% sure of how it will impact the company. Short term, there might be some positive and some negative impacts. I think in the long term, it's okay. This happens from time to time.
Okay. Lastly, my point is that, in your annual report, you mentioned that the accelerated capacity in Valia will [indiscernible]? So has that decision taken or you are still, let's say, waiting for things to improve before you execute that second sale?
So 100% we have not taken any decision given the margins where they are. I think we'll wait for some time. In fact, what we're thinking of doing is, we expect our capacity in Taloja to be completely utilized by end of next year. So we may actually use that space where we had left some space for the additional capacity for Nitrile Latex. We will actually use it to manufacture our current Styrene Butadiene and other current latex products.
That decision will be taken in the next 3 to 6 months. I will keep you posted.
Okay. But the earlier thought process of converting some of the XNB Latex capacity to your -- to the other latex that you make, that process -- so I would say that thought process, as of now, is not in a working mode?
I mean it's still an option. We haven't decided yet. As I said, we have enough XNB capacity of Styrene Butadiene capacity side and latex capacity in Taloja. So I think in the next 3 to 6 months, we'll take a call.
The next question is from the line of [indiscernible] [ PMS ].
Sir, my question was, sir, in this quarter, could you share the split between the sales from nitrile latex and non-nitrile latex segment?
We don't typically give this data, but I can -- actually -- Sachin, do you have broadly revenue percentage numbers for nitrile latex versus non-nitrile latex? But I mean, my guess would be nitrile latex would be about -- around 10% to 15% -- around 10% to 15% of the total sales, maybe even less, around 10%.
Yes.
Sure, sir. Sir, my question was, I mean, you mentioned that nitrile latex has been obviously going through a tough period, and now closer to breakeven or slightly [indiscernible] breakeven. But even if I look at the non-nitrile latex [indiscernible] traditional business, there also your margins have been -- have still not come back to, let's say, 13%, 14%. Is that a fair assessment that -- is that a fair assessment or am I reading it wrong?
Yes, I think there are 2 other areas of business where margins have sort of come down. Mainly one is on paper, the latex we make from paper, and that's because both us and BASF have added more -- or our competitor has added more capacity over the last year or two. So that we are going through a cycle, I think things will improve.
The other is NBR. Over the last year, or 14, 15 months we've seen NBR margins been lower than what we have seen in the past, what I would say the average over the last 6, 7 years. So that's been another challenge. And I think the main reason for that is China, because of the China slowdown, which is the largest NBR consumer.
Two reasons actually. China slowdown, being the largest NBR consumer. So a lot of the exports going into China, or in China, imports have sort of made its way into India. And the other reason was also Russia. The Russia NBR, which used to largely go to Europe, because of the sanction, are now finding its way towards Asia.
So I think there's a little bit of a glut of NBR in the Asian region causing the margins to be muted. However, since we are the only manufacturer in India, we continue to run at 100% capacity utilization for this NBR business. But margins have been lower than the average, I would say, over the previous 7 years that we have run the business.
Those are the 2 other reasons our margins are a little lower in the rest of the business.
Got it. And...
[indiscernible].
But I just wanted to -- let him finish the question, sorry to interrupt. But I just wanted to say that, look, these cycles continue, and we see that -- we've seen this in the past. When capacities are added for a year or 2, margins at an all-time low, and then not all-time low, but they got lowered. Then they go higher up. And in fact, capacity utilization and total volumes go up. The margins will go up in this wave fashion. So this is what I suspect.
Earlier, we used to be in the 6% to 10% range. Now we're in the 10% to 15% range. And so we'll perhaps over the next 4, 5 years, I expect that you would see us at the 13% to 17% range. So this is how I think things will go -- will happen, as long as we keep growing and growing at a reasonable margin.
Yes, we can move to the next question.
The next question is from the line of Karan.
This is Karan from Asian Market Securities. Abhiraj, just some clarification, this 14% volume growth Y-o-Y. So in this quarter, we will have XNBR Latex contribution as well. So can I have a like-to-like comparison, Q1 to Q1, ex of XNBR? .
I don't have that with me. But I would suspect that, I mean, overall -- you have these numbers, Sachin, with you? Not including nitrile latex, right? Not including nitrile latex, what the growth was for -- I think it'll be similar, right?
Yes. It is almost in the range.
Yes, same range.
Okay. And if there is any clarity on the NBR CapEx...
No clarity. Unfortunately, while we were going to take a decision last year, the margins have been, as I just mentioned to the previous caller, the margins have been challenging for 2 reasons, is Russia NBR as well as overall Chinese slowdown. So at this stage, I don't think it justifies for us to make an investment in NBR.
I think if we see some longer-term viability, we'll look into it. It's still not a bad investment, but I just feel like -- or we feel as a Board as well, and senior management of our team, feels that there could be better opportunities to invest in. So we're just waiting and watching. We are at 100% capacity utilization.
We would love to grow, and given the [indiscernible] trust of the government, this would really help India also with reducing the imports of NBR. Because even currently, more around 70% or more than 70% of NBR is being imported in the country. So we would love to do that. But given the current CapEx costs, it was not working out to be viable. I think in the next year or so, we'll see if it makes sense.
Right. I've got one more question. Do I go ahead or follow the queue?
No, go ahead, finish your question.
While we've seen selling prices move up quarter-on-quarter while the volume growth was flat. So in this 9.5%, what percentage could be the inventory gain, if at all? .
Sorry, can you repeat the question? I'm not sure if I understood it.
I'm saying while the volume growth was flat Q-o-Q, there were price increases. So correct to assume we have some inventory gains in the quarter, and hence, this 9.5% kind of margin profile?
No. I mean margins are very similar compared to last quarter. So there is no inventory gain as such. Nothing significant. Yes.
The next question is from the line of Jasdeep Walia from Clockvine Capital.
Sir, could you give us your thoughts on the demand/supply balance in nitrile latex you see going forward? So I would guess the inventory -- the higher inventory situation in this product would have been taken care of. So can we expect the growth to accelerate from here and mention, so that -- should that result into better margins going forward?
Yes. Look, I think there's 2 things, right? One is the inventory of gloves and inventory of latex. The inventory of latex is not -- never a problem. You can't store latex for very long. It's difficult, it's 55% water and so on. So the issue was your inventory of gloves, which, as you said, is -- rightly said, from all reports being utilized or come to an end now. Now the issue is mainly the additional capacity of glove and latex as were put up. And so the capacity utilizations are at maybe 50% to 60% is what we are hearing.
But the market growth is still there, double-digit market growth for gloves, and therefore, latex. So as it goes up to 75%, 80%, again, margins should look fairly healthy, that is what we think.
But your economics should be independent of the capacity utilization of the industry, right? So the volumes of nitrile latex are now growing, which means demand for nitrile latex is growing, which should -- that's the variable that should impact you rather than the capacity utilization of the glove manufacturers.
There are 2 things, right? So one is the volumes and the revenue. And you're right, volume/revenue is totally up to us. We have a small capacity compared to the global capacity of nitrile latex, and that should not be a problem.
The issue is margins. So when an industry is running at a low capacity utilization, automatically, margins are muted, because buyers are able to negotiate harder, right? And sellers are wanting to sell their capacities. So the margins is what is the main issue that lower capacity utilization.
Got it, sir. And have you seen some fresh competition in nitrile latex, as newer companies which have put large capacities in nitrile latex, I'm talking about the latex, not the gloves.
Yes. No, it's generally been the player -- I think out of -- not including China. Outside of China, it's largely been players that have already been established and they have created additional capacity. They are not the new players that have got into this business.
As far as China is concerned, I think a couple of glove manufacturers integrate -- sort of did a backward integration project when the glove demand was so high and they were running short of material. So they decided or China decided to -- or some of the large players decided to make sure that they were at least largely not dependent on imports for nitrile latex. So that's how, in China, capacity was definitely created, since [ 2020 ].
Does China remain a net importer of this product or?
Yes, it still remains a net importer.
Got it, sir. So you don't see any...
Sorry to interrupt Mr. Jasdeep......
Let him finish. If there's one more question, Jasdeep can finish. Go ahead, Jasdeep.
Broadly, what I've got is that, broadly, you don't expect much improvement in the margins in this business going forward?
No. I think -- that's not what we're saying. We're seeing margins will improve slowly. In fact, we're already seeing margins in Q1 have been marginally better than Q4, for example. And we expect Q2 to be marginally better than Q1. Now whether they'll go back to the pre-COVID levels or when they will go back to the pre-COVID level is where we are not sure.
Got it. Just finally a question on your CapEx plan for fiscal year '25.
Yes. So as of now, the main CapEx that we have so far, that we have approved have been either projects that are going to help us cut operating costs or maintenance projects. Those are the 2 main things that we have done.
But we have a couple of other projects that we're looking at. One is a complete overhaul of our R&D center, so that will require some CapEx, and we are planning to build a new R&D building and invest in our R&D. I know it's a little bit counterproductive and counter-intuitive, but we think this is a great time to invest in R&D, and we have a great set of people. And we've built our team, so to speak, over the last year, 1.5 years under a new Chief of R&D. But we think that given that the company is 40 years old, we have 2 R&D centers we want to consolidate a little bit and have a new building in one of our facilities in Taloja -- in our facility in Taloja itself.
So that's going to be one investment that's going to be made. I will announce it at the right time in terms of the value and how much we're going to invest.
And the second investment is in -- which we will announce again in the next 3 to 6 months is additional investments for our Styrene Butadiene latex products because we expect that capacity to be utilized by end of next year. So we will have to start working on that because the lead time is typically a year to complete that project.
The next question is from the line of Sukhbir Singh from SMIFS Limited.
My first question is, sir, is there any antidumping duty applied by the Indian players for the NBR?
There is not. In the current context, there is no antidumping duty that's applicable.
Okay, sir. And sir, for the ApcoBuild business, what is the contribution of [ ND ] revenue? .
Again, something that we don't talk about. But it's quite small in terms of revenue. As and when it gets a little significant, we will, of course, report it.
Thank you. As there are no further questions from the participants, I would now like to hand the conference over to the management for their closing comments.
Sachin, would you like to take the closing comments?
Yes. So thank you, investors and...
Sorry to interrupt, sir. There is a question in the queue. It's from the line of Avinash Nahata from Parmani Financial Services.
What does a steep hike in natural rubber prices do to our products, if it happens within a short period of time? That's my question.
Nowadays, I don't think there is any large impact either way, because we don't really compete with natural rubber at all in any of our products. If at all, sometimes we do find that on the latex side, because natural rubber also includes natural latex, right? On the latex side, there are some applications that are -- that can move from natural latex to synthetic latex. And that's when Styrene Butadiene latex comes in.
So there can be an advantage depending on the relative pricing. But it has to be significant and long term for those customers to move completely. So they should -- they typically see -- if they estimate in the next 6 months natural latex prices are going to be 20% higher than synthetic latex prices, that's when they will move. So it may have a -- it may have a marginal advantage to us if natural latex prices are higher.
Natural rubber is not so much. Not so much of an impact.
Okay. And I mean, how fast they can switch between the 2 products you spoke about, synthetic latex and natural latex?
They can switch. I mean, it's not -- doesn't take time, but sometimes the whole process needs to be changed. Again, people -- formulations need to be changed. So people don't -- wouldn't do it typically for a couple of months.
Is that last question?
Yes, sir, that was the last question for today. You can go ahead with your closing comments.
Thank you very much.
Thank you, everyone, for joining the earnings call of Apcotex. The quarter has been good and we have got the volume growth of 14% and in revenue growth of 21%. We will be focusing on increasing the volume capacity and capacity utilization and improving margins.
We look forward to see you all in Q2 of FY '25 call. Till then, take care. And bye.
On behalf of Apcotex Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.