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Camlin Fine Sciences Ltd
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Ladies and gentlemen, good day, and welcome to the Camlin Fine Sciences Limited Q4 FY '24 Earnings Conference Call. This conference may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to the management at Camlin Fine Sciences Limited. Thank you, and over to you, sir.
Thank you. A warm welcome to you, ladies and gentlemen, to our fourth quarter earnings call. I have with me here Nirmal Momaya, Managing Director; and Santosh Parab, CFO. We will begin by Santosh giving you a brief synopsis of the quarter and the year, after which Nirmal will be there to answer your questions. So I hand over to you, Santosh.
Thanks, Ashish. Good afternoon, and thank you for joining us today. As you know, this call is being recorded and we will make available the audio and the written transcript on our web page in due course. You would have seen the results and you would have also observed us the struggle of global chemical sector, which is reflecting in our results for the quarter and the year. We have seen unprecedented demand witnessed across all sectors in which the company is operating. Predatory pricing and excess supply by Chinese producers have also put extreme pressure on the margins and has also resulted into geography anomalies in the business.
The price headwinds have hampered our top line. In all verticals, except that of Aroma, we have hold on to our market share. And in some cases, we have, in fact, increased our volumes. The corresponding fall in raw material pricing have to some extent, helped our margins, but the fall in prices did overshoot this benefit. As we have seen the consolidated revenue was INR 402 crores, which is 4.1% higher than the sequential quarter, but it's less by 6% than the corresponding quarter.
The gross margins stood at significantly lower percentage of 34.9% going to the potential mark-to-market provision of inventory of catechol and it's downstreams of around INR 36.81 crores. The adjusted margins after adjusting this credential mark-to-market stood at 44%. Thus the other products, mainly hydroquinone and downstreams and blends have seen marginal fall in margin.
The highlight of the quarter has been revenue from Blends, which clocked INR 190 crores, though lower by INR 10 crores, the growth momentum is expected to continue in the coming quarters. Increase in Performance Chemicals was duly -- mainly due to sale of catechol in the current quarter.
But due to the low prices, there of this sale impacts the margins negatively. Looking at the current environment and the progress of the downstreams of catechol, it is more than likely that a large part of stock of catechol held as on 31st March '24 will be sold in the open market. This has triggered the recognition of mark-to-market loss in the current year, which I just mentioned.
Coming to Aroma business, we have liquidated the major portion of legacy inventory of vanillin, amounting to about INR 17.5 crores in quarter 4 and the continuous fall in prices have forced us to recognize a mark-to-market provision for vanillin in quarter 4 as well, which I just mentioned. In the current market month, we have now started the [indiscernible] of production of ethyl vanillin. In the interim, we have stabilized the production, improved the quality further to match it with the main competitor and are planning to have consistent production to optimize the cost.
Production of vanillin augurs well for the company as the impact of cost of catechol is well absorbed in the cost of vanillin and hence, we don't foresee further mark-to-market on catechol. The validation for approval is an ongoing process. And we have approved our products with significant customers in flavors and fragrances and foods and beverages. We are envisaging a capacity utilization of around 40% to 50% in FY '25 and are confident of ramping up the sale to match the pricing trends and market demand. Our plant in Italy, as you know, remains under shutdown.
However, as mentioned in our last call, we are planning to repurpose the plant to produce alternative products such as MEHQ and guaiacol. We are in the process of completing the designing of the repurpose plant, and it is in the process of actually in financial closure. We'll keep you apprised on the progress of this in the future.
Since we have arrived at a decision to repurpose the plant, the erstwhile inventory which mainly consisted of internally manufactured catalysts for production of diphenol has been rendered as unusable. We have prudently recognized a onetime provision for mark-to-market for these inventories amounting to INR 22.8 crores. Since this does not form part of operations and being material, it has been appropriately disclosed as an exceptional item. It is a onetime impact on the financial statements.
However, we see no impairment on the investment in CFS Europe as -- in this quarter on the basis of the circumstances, we are at present. Operating cost other than foreign exchange loss has remained stable, as can be seen from the results. So consequent operational EBITDA stood at INR 4.47 crores only in Q4, but if this EBITDA is adjusted with the provision of inventory of catechol, it would be 10.28% of the revenue.
Considering all the onetime impact, including that of foreign exchange loss, the adjusted PAT would have been positive 5.6% of the revenue. Coming down to China Wanglong. Our JV partner in CFS Wanglong has reached a settlement with the litigant in the IP [indiscernible] case. This has finally paved way to produce by repurposing the existing plant to manufacture a new aromatic product, heliotropin which is also a catechol derivative.
As an abundant caution, we have recognized an impairment provision of INR 24 crores -- INR 27 crores on the exposure of CFS Wanglong. At present, we contemplate to refurbish and reset the plant for manufacture of heliotropin in the next financial year.
A bit of future scenario. We would reiterate that our business remains -- the fundamentals of our business remains solid and our resilience is more steadfast. You can effective addressing of legacy issues, we are in drivers position to focus on the levers which are within our control by striving to protect margins, recalibrate costs and optimize our product mix. We are hopeful that the microeconomic indicators will ease out and will help us in our growth. The name of the game is to be resilient, remain relevant and be ready for the growth thereafter.
I will now hand it back to conduct -- to open the floor for questions.
[Operator Instructions] The first question is from the line of Abhishek Navalgund from Nirmal Bang Equities.
So my first question is on vanillin. So you indicated that you are eyeing for almost 40%, 50% utilization in FY '25. And you also mentioned upon the validation of the client approvals, which are underway. So could you please help us in terms of the current pricing of vanillin? Is it like $8 per kg or even lower than that, the current pricing let's say post March?
Yes. So the current pricing of vanillin in some of the markets -- it's different in different markets. In some of the markets, we look at some -- we see pricing of $8. We see pricing of $9. We see pricing of $15, depending on end-use application in the market that we're in. I think average price as we see it going forward in this year should be in the range of -- between $9 to $9.50.
Sure. So I mean, broadly we are talking about some INR 150-odd crores of revenue, if we go by...
So I think if you estimate a 2,500 tonnes at $9 -- so 2,500 x $9 would give you a little more than...
Yes, that's almost close to INR 190 crores if we go by 50%.
Yes, correct.
And what proportion of, let's say, this INR 190 crores, you can say you have visibility, I mean over next 2 to 3 months, or there will be an element of spot orders also because I know that we have enough capacity and pricing also be the assumption. But from demand visibility standpoint, how confident are we in this?
For the 2,500 tonnes?
Yes, yes.
Yes. So this, we are pretty -- very confident to get to this 2,500 tonnes, not only production but also of selling in this year.
Sure, sure. And next question on margins. So if I remember correctly, earlier, we used to say that if the pricing of vanillin is, let's say, below $10, then it is difficult in terms of clocking that 15%, 20% margin. So what sort of margins, one should be aiming at, considering the realization you just talked about?
Yes. So currently, if you look at what we are doing with catechol, we have a negative of almost INR 100 per kilo on catechol, okay? When we convert it to vanillin and we typically end up at a $9 price -- selling price at 50% -- I mean 45% capacity utilization, the cost should be around $7.5 to $8. So we have a 10% margin there. It's about $1 there and INR 100 negative turns into this one -- into a INR 80 positive here. So the delta is about INR 180 for us, even if we were to sell the vanillin at $9.
Sure. Okay. And my next question is, Santosh sir, if you could highlight the subsidiary-wise EBITDA margins for full year FY '24, if that's possible?
EBITDA margin, we generally don't share, but you can find the revenues in our -- EBITDA margin gets knocked out because it's an elimination. The companies are interconnected. So -- because it's difficult because it can show a wrong EBITDA margin.
But to add to that, Abhishek is that our subsidiaries in Americas, that is U.S., Mexico and Brazil, all three are -- which are in the Blends business, are positive and strongly in the high teens is the total EBITDA margin between all the subsidiaries. The drag really is from Italy, where we have the large negatives that have come and some -- and partly the write-downs in India on the inventories. But other than that, if you look at our Blends business, we are in high teens margin.
Okay. So even in Brazil and U.S., you're saying we are in high teens for...
Totally, totally. I mean, not in Brazil, it will not be in high teens, but when you add up all of it, they'll be in the high-teens.
[Operator Instructions] The next question is from the line of Surya Patra from PhillipCapital.
Sir, my first question is on the European unit as well as the China unit, where we are thinking about repurposing the plant. So what is the likely investment in these 2 projects separately, sir?
So in Europe, it's probably in the region of between $2 million to $3 million. And in the China, it would be in the region of about INR 25 crores or so, another $3 million.
This is just to inform you that you have a disturbance on your line.
Am I audible?
Much better.
Okay. So this is -- what is the nature of this investment? It is just some -- there is no official CapEx. It is just some adjustment CapEx or something like that?
Yes, it's just some balance equipment and piping and repurposing some equipment.
Okay. And if we have decided that way, any inventory that is still lying in European unit, sir?
No. The inventory is all more or less been sold.
Okay. Okay. Second question is about the vanillin. See if we are anticipating about 2,500 tonnes, around 40% kind of utilization we are anticipating. So is it driven by the long-term contract? Or here, we are also considering the spot business?
It's a combination of both, Surya. So the long-term contracts would probably start kicking in now some of these. And -- but it's a mix of both.
Okay. Okay. And so if vanillin would be around 40% utilization level, so will that restrict our utilization of the diphenol plant at certain level or should not be any restriction that way?
No. I mean, you're right that there would be -- we can't run it at 100% capacity because there would be a pile up of catechol. So we will calibrate it to a level where effectively we don't carry too much stock of catechol.
So based on how much we can sell in terms of catechol, but ideally, we don't -- we want to convert as much as we can into value-added products. But of course, we'll have to sell some surplus catechol til we go up to 100% in vanillin. So I think operating levels will be between 80% to 85%, again, subject to vanillin -- if vanillin takes off and gives higher utilization, this can go up.
Okay. And given the pricing situation remaining suppressed only because of the Chinese factors, at least in the catechol and the HQ, those kind of pricing scenarios. So what -- how long this pricing -- suppress pricing situation can sustain? And there could be a possibility of we taking further M2M on our inventory? Or that situation is over?
There's no further [indiscernible]. I think whatever inventory we are holding today currently is at market price. How long will the market price be subdued is a very, very good question, difficult to answer. But the sense we are getting is that towards the end of this year, I think demand situation also should improve.
The destocking that has happened or is happening currently in some of the markets would be done by then and -- I mean, whatever commentary we are seeing from other companies and from other markets as well, is that towards the end of the year, there should be some improvement in demand and then, obviously, consequently, improvement in pricing.
Okay. Another question about the Blends business, sir. See, in fact, for the full year, if I see it, is more than INR 700 crores kind of Blends revenue that we have seen. And if I just -- for the calculation sake, if I just consider it is a 20% kind of margin business, then the core EBITDA, what we have seen this year is around INR 150-odd crores. So that is what is coming from, let's say, if it is the Blends. Then is it fair to believe that this year all the antioxidant operations, including the diffluence of India, Europe, all put together have seen kind of no EBITDA contribution?
Yes. So I mean, of course, Italy was negative. India also was very little contribution. It's -- all the contribution did come from the Blends business.
Okay. So then I think the delta from '24 to '25. So do we see a kind of meaningful delta, sir, with some normalization coming in the antioxidant space? And the Blends maintaining its growth momentum. And the one-off charges and the M2M losses that we have factored this year. So considering all these negatives, so should FY '25 look really meaningfully different than the '24?
So the -- yes, in a way, you're right. It would -- of course, catechol and in downstreams will get -- at least catechol on its own is a loss-making business. And we will yet be selling catechol in the market. So there would be a bit of a drag coming from the catechol business. However, the big drag, which was there for us last year was, of course, the inventories which we cleared. So the drag will be very limited to maybe 3,000 -- about between 2,500 to 3,000 tonnes of catechol that we sell, there will be a drag on our -- minus INR 25 crores roughly would be the drag.
It really is to be seen is what happens in Italy because that is where the big losses were in this year, right, in FY '24. So in Italy, our sense is that even if towards the end of the year, we can start producing MEHQ and guaiacol reaching, I would say, breakeven in this year may be a little tough. But even if it's a minus of EUR 2 million, EUR 3 million, we should be in a much better position in FY '25.
Okay. And is it fair to believe, sir, this heliotropin and this guaiacol and MEHQ may not contribute entirely this FY '25?
FY '25 our assumption is that it will start only towards the end of FY '25. So it will -- we'll be in the validation phase. And so it will be in FY '26.
Okay. Okay. Sure, sir. yes. And since it is the full year performance, so can you give some sense about -- what is the growth outlook that you are building, sir, for the full year? Because there are so many moving parts, and it is really difficult to really build a number for '25.
Yes. So if you look at the Blends business, we closed the blend business at about INR 780 crores odd, which this year, we expect it to grow to at least about INR 1,000 crores plus, then vanillin should contribute about INR 200 crores. And our other businesses HQ and other downstream, our sense is it should contribute another INR 600 crores to INR 700 crores. So INR 1,800 crores, INR 1,900 crores is what we are saying conservatively, we should be looking at.
Okay. So at least 10% kind of a growth visibility that we are expecting?
Yes, yes.
Before seeing a kind of improved performance in the following year?
Yes. And this is, of course, considering today's price.
Yes. Okay. And do you really see, sir, price improvement? Generally, commodities price swings also. So can we think about some price upswing in the current financial year?
I think towards the end of the year, I don't think in the next 2 quarters, we are seeing any significant price improvements. But what we are hearing from the market is that like say, for example, agrochemicals where, of course, hydroquinone also plays a role -- big role. There seems to be now a turnaround and the companies have kind of got rid of their old stocks and now they're building new stocks. And so all that activity is expected to start in the next month. So like these, there are some green shoots that may come. And I think -- I mean, it's too early in the day, but I think towards the end of the year, we should see some improvement.
Because you've had like literally almost 12 months of this kind of pricing and maybe another 2, 3 quarters. But I think more than that, unlikely. I mean, you will see some players then exiting the market or there would be some capacity downsizing.
Sir, even if the price recovery to happen, then which are the segments or which are the product areas you think that, okay, that can see the price recovery first then other products? Whether it is vanillin or it is TBHQ, BHA or price -- it should not be a problem for the Blends, I believe.
Yes. No, the Blends is fine. I mean that is okay. My sense is that hydroquinone and its derivatives will probably take price increases faster than catechol and its downstreams. So vanillin may be in this range. But TBHQ, BHA going forward, if HQ prices do firm up, which -- the first one to firm up should be that, then that would possibly give us some uptick there.
[Operator Instructions] The next question is from the line of Jatin Sangwan from Burman Capital.
Sir in FY '24, we -- Blends did a revenue of INR 730 crores and you mentioned that the EBITDA margin on the product is around 20%. So that gives us an EBITDA of INR 146 crores. And now if I look at the full year EBITDA would be like INR 70 crores, INR 75 crores. And of course, if I would have included the losses for Europe and China and one-time inventory, could you just specify the amount for each one?
How -- I mean I could look at Blends, it's like INR 140 crores, INR 150 crores, but the resulting EBITDA comes out to INR 70 crores, INR 75 crores. So -- but led to losses. So our antioxidants, mainly shelf-life extension also are like 0% EBITDA levels?
No. The negative has come from Italy. And from India, it is the catechol downstream. It is not the antioxidant business. That's where the big -- two big hits have come.
Sir, can you please provide some breakup? I know EBITDA loss of Europe is around INR 100 crores, but will the EBITDA loss due to Europe?
No, EBITDA loss in Europe is around INR 63 crores.
And due to India, mainly catechol? And how much would that be?
INR 36 crores is catechol and vanillin mark-to-market in India.
And now for the next year, we're guiding for revenue for Blends of INR 1,000 crores, that means alone from Blends we would do INR 200-plus crores of EBITDA. Vanillin is like INR 200 crores, that would give us INR 50 crores of EBITDA. So that would be like INR 250 crores of EBITDA. How much EBITDA loss would still come from Europe and China?
Loss from Europe and China would probably be about $3 million or so.
And this would be EBITDA level?
Yes. Yes. And of course, in this year, we also had -- it's in Argentina currency hit of almost INR 15 crores, which was one time, which going forward will not be there. So those minuses will come out or reduce.
And sir, are my assumptions correct that Blends would be like 200-plus EBITDA level going forward in FY '25?
I think it will be in the high teens, like I've mentioned earlier. So if we are at INR 1,000 crores INR 1,100 crores -- INR 1,000 crores, it would be at INR 180 crores to INR 190 crores.
And also, my assumptions around vanillin, if vanillin does INR 200-plus crores kind of revenue. The ultimate EBITDA could be INR 45 crores counting catechol and margin on vanillin?
Yes, the negative of catechol is 100, which becomes positive. So delta on EBITDA would be yes, you're right, roughly about INR 40 crores.
Okay. So if I just combine this two, that gives me INR 220 crores of EBITDA and lowest from Europe and China would be INR 25 crores. So are we expecting INR 180 crores to INR 200 crores of EBITDA for FY '25? Or would there be...
It would be in that region, yes. Yes. Correct. 10% to 12% would be a fair estimate.
And sir, any update on NegoLyte, we had a contract with local markets and there were talks that they could ask us to build a larger plant.
Yes. So that talks are yet going on. We've supplied them large commercial lot, which goes into their first battery that has been done, shipped in this quarter. And that will get installed in Q2 of this financial year by July, August. And thereafter, discussions will start on looking at a bigger facility.
And sir, the facility that will come on board by Q2 FY '25, how much tonnes will it be?
No, we'll start the discussion of what tonnage and what is the capacity requirements are. The discussion will begin in Q2.
Okay. Got it. And sir, just one last question around vanillin. So why are we not selling in India? Is it because our plant is in SEZ and by regulations, we are not allowed to sell in India? Or are there some other challenges? Because India alone is like 2,000 tonnes of market annually.
Correct -- no. So yes, I mean, that is also a point that from the SEZ there are some restrictions, but we've kind of overcome that. We have enough exports to show out of there. Of course, you have to pay import duty on the goods that we sell from the SEZ. So we are addressing the Indian market. And in this year, we will take a decent market share in India.
Any kind of ballpark number you are targeting?
We're targeting about 400 to 500 tonnes at least.
From India only?
Yes.
And this will be in addition to 2,500 tonnes of orders that you are...
Including that, that's part of it.
[Operator Instructions] The next question comes from the line of Rohit Sinha from Sunidhi Securities.
Yes. So one question from my side is that at what level we are currently operating at the edge for our HQ and what is the market outlook we will be seeing for hydroquinone considering the euro will shut for some time?
Yes. So right now, we are working at about 80% capacity. It's not driven by hydroquinone market, it's more driven by the catechol market because since the joint product we have to curtail the production. Hydroquinone, we can consume more of hydroquinone if we produce more, but that leaves us with a problem with catechol. So that's the reason why we are working at 80%. The outlook for hydroquinone seems to be positive.
The market, like I explained earlier, on the agrochemical side, AgChem should start picking up. So I think there would be some uptick in HQ consumption as well as towards the end of the year even in pricing. Our European plant is shut. One of our competitors, American plant is also mothballed right now. So there is capacity, which is being taken out of the market. So I think it's a matter of time.
Okay, okay. I mean if I heard correctly I think you said that Europe -- I mean we have ultimately sold out all the inventories that we have in Europe. So practically from next quarter might be -- there would be no sales. Is that correct?
So hydroquinone inventory has already been liquidated from Europe. There could be small, very small inventories of few hundred tonnes. But mainly all the hydroquinone, catechol inventory has been liquidated by this date.
Okay. Okay. And I mean, if we look at the numbers, so we have done kind of -- flattish kind of a sales top line despite the significant price correction in last year, so can you help us with what kind of volume increase there was? And roughly how much prices are down on Y-on-Y basis?
So as far as TBHQ and BHA are concerned, our volumes have grown -- the same volumes have grown by around 10% to 15% this year. If you see the sale prices in '23, the average selling prices were in the range of $13-plus, which have come down to average realization in FY '24 was $9, $9.5. But at the fag end of the year, the TBHQ prices were as down as $8.5. Because we started the year at high, we got $9.37, $9.5.
BHA was also the same story. It was $13, $13.5 in '23, which started coming down, we realized around $10, $10.5, $10.8 in '23, here also '24, in FY '24, we did $10.5, $10.8. We are also at the fag end of the year, the prices are falling. At present, we are somewhere in the range of $9. So we did lose on -- we did gain on volume, but we did lose heavily on the pricing front. Because the prices went down by 20% to 25%, but the volume increased by $10.
So we did hold on to our share in this too big market. As far as hydroquinone is concerned, in '24, we had hardly any production from Europe. And as Nirmal was saying that entire hydroquinone which is manufactured in the [indiscernible] is internally consumed. So in market, we had almost the entire year's production of hydroquinone last year. This year, we only had [indiscernible]. So those numbers are not comparable.
And in any case, hydroquinone prices have come down from $9, $10 in '23 to average $7 last year and now the prices are at $4.5, $5. So overall, the catechol is the only thing where the pricing -- there also the price went down. It came from $2 to some $1 in '23 and this was down now. So the prices have been down. We did get some hold on to our share and in some of the products we did increase our share.
Okay. That's good. Lastly, on the Brazil and North America side, I mean there we have been gaining a decent revenue. So especially for North America, are we at EBITDA positive level this quarter?
Yes.
Okay. Okay. And this price increase or whatever contract we have gained in Brazil and North America, should I think, going to continue also going forward as the prices would slightly improve as we are expecting in the second half there would be decent growth -- should be a decent growth in these subsidiaries as well. Am I right?
Yes, you're quite right, in North America, as you have seen in the presentation, we have almost gone by -- gone up by 200% [indiscernible]. So there is a growth, and we will keep -- we will be holding on to this sale, and we'll be adding further more in Europe and Brazil. And in Brazil, also the growth thing will remain.
So in Brazil, so last year, we did around INR 112 crores, we are almost more than INR 150 crores this year. And here also, the growth will remain with interesting market as biodiesel and other things. So this growth is going to sustain and on this growth, Mexico is also growing, India is also growing in Blends. So all this growth will ultimately result into that INR 1,000-odd crores which we are selling for Blends in the next year.
[Operator Instructions] The next question is from the line of Nitya from KamayaKya.
What are the names of the products which will be manufactured in Italy now in place of the earlier products?
We're contemplating production of MEHQ and guaiacol.
So it's still not started yet?
As we've also said in our presentation and in the results, we are on the verge of financial closures. We have already done the basic engineering thing. So when the financial closure is done, we'll start the project. And as Nirmal said some time back, the stabilization and commercialization of this plant will be sometime in the fag end of this year. So we'll really see the sale and everything in the next financial year, FY'26.
The next question is from the line of Pradeep Rawat from Yogya Capital.
So I would like to know why our Performance Chemicals revenue was significantly down from INR 688 crores to INR 400 crores. Can you explain a bit about it?
So as you know, last year, our European operation was running and it was selling hydroquinone and catechol, which are termed as performance chemicals. We closed down the European plant in -- because of the economic reasons on 15th of August, so there was significantly lower production, which we sold outside. So the main delta on performance chemicals is lack of production of hydroquinone and catechol in Europe.
[Operator Instructions] The next question is from the line of Amit Shah, an individual investor.
I just wanted to know, as an investor, what should I expect from this quarter will be the positive numbers from the profit making and all that?
Yes. So -- I understand we can give you a guidance, we cannot...
I want the guidance only we have seen INR 81 crores loss and the prices are going haywire. As an investor -- I'm not an analyst or anybody, but as an investor, I just wanted to know what is your guidance? Any positive come out would be there in the coming?
Guidance is that we just said that we will be growing by 10% to 15% in next financial year, and we are targeting an EBITDA of 10% to 12%.
So including all the losses, what -- other chemicals I'm making that will be discounted in that, right?
So this is a net impact of whatever initiatives are there and these negatives and other things were. And this, of course, is as of today because the impression is that the economic, something happens, [indiscernible] then we can't do anything. So what is in the future, this is on the current prices.
So current prices are [indiscernible], so it's positive like there will be no any hidden losses which will surplus in future, like any unknown factors. War and all is a different thing, but...
There were no hidden losses. So these are...
Chemicals and all, whatever the setbacks we had to take it like onetime hit and all. So now they won't be there for next quarter. That's what I wanted.
So we have taken the legacy issues out. And at the base of current basis, these are all our numbers. We cannot expand anything above this, 10% to 15% of revenue, 10% to 12% of EBITDA.
The next question is from the line of Jatin Sangwan from Burman Capital.
My first question is around the debt. And now we mentioned that we'll be doing INR 180 crores to around INR 200 crores of EBITDA and add to that we'll be doing like INR 30 crores, INR 40 crores of CapEx only and interest payment would be INR 60 crores. So should we see some reduction in debt levels? Are you expecting that?
We don't expect a significant reduction in that level. But on a year-to-year basis on long-term borrowings, we will be repaying around INR 25 crores of loan. So if at all reduction will be that we are not planning any fresh loans at this stage. Of course, some growth in the turnover may require some working capital. But I don't think we will increase any debt by the end of next year.
Okay, got it. And you mentioned that TBHQ prices have decreased from USD 13 plus to like USD 8.5 to USD 9. And also the prices of BHA have also decreased from USD 13 plus to USD 9. So what are the sustainable level of prices for TBHQ and BHA and by a sustainable level, but were the prices, let's say, that of TBHQ and BHA that were in 2019 or maybe 2018?
Yes, they were on similar levels in the past. And anything below this would mean that hydroquinone prices will have to go down further, which would mean that the diphenol business is not viable. I don't think producers will continue to produce it. That is the situation. So our sense is it will be in this region.
Okay. So these are the sustainable prices? Or are these the bottom of prices?
Yes. I would say close to bottom. I mean, maybe some few percent here or there, but yes.
And are we expecting any further write-offs in Q1 or Q2?
On what -- on which?
For this quarter, you take a write-down of, let's say, INR 49 crores that was related to your subsidiaries in China and Europe. And then there was a write-down of inventory in this quarter. So are you expecting such similar write-off going forward in -- maybe in Q1 FY '25 or Q2 FY '25?
As of now, whatever are the legacy issues and related to FY '24, we have accounted for. And whatever we have given you the numbers of the future thing, we are not anticipating any further write-offs or unaccounted losses are not there in the books. Of course, the write-offs are generally because of the economic conditions or uncontrollable factors. If there are any uncontrollable factors which come into the picture, that would be event of that time. But as of now, we have provided what was required by the law and by the current economic situation.
Got it. And just one follow-up. You mentioned that ex of this write-off, PAT would have been 5.6% of revenue. So should we expect similar profitability in Q1 or Q2 also?
Can you repeat the question? I missed the first one.
Yes, you mentioned in the earnings call starting that adjusted PAT would have been 5.6% of the revenue. Now since there would be no more write-offs and of course, you would be selling vanillin. So should we expect a similar profitability to continue 5.6% or 6% type?
So if vanillin -- as Nirmal said, if vanillin is sold, we will be recouping the loss we sustained in catechol because it will get value added. So if the guidance which we are giving, it should happen if we grew 40% to 45% capacity utilization of vanillin plant and 80% to 85% of diphenol, I think we will not be having losses.
And what kind of capacity utilization are you expecting specifically, let's say in Q1 and Q2 for the full year, right now it's 40%, 50%.
With the same capacity utilizing, only thing is vanillin -- sale of vanillin is skewed more towards the last 2 quarters.
Okay. Got it. And any idea how will the mix like H1 could be 30%, 40%, H2 more or it's like entire sale, it could come in H2 FY '25?
Can you repeat the question, because we missed, it's not clear, we missed the first part.
Yes. Sure, you mentioned that the sale would be skewed towards H2 of FY '25. So I wanted to understand what will be the mix between H1 and H2 of vanillin sales?
So traditionally, our sale has been 40%, 60%, if you see first part does 40%, 45%, and the next part does 60%, 65%. But as far as vanillin is concerned, it looks like we'll be doing 75% of the sale in the next half. 25%, 30% in the first and 75%, 70% in the next.
The next question is from the line of Amey Chheda from Banyan Capital.
Just one question from my side. What would be the consolidated tax rate going forward, especially this year?
So see the tax rate remains -- looks very skewed because the uncertainty of adjusting of tax losses in Europe. We have not made any deferred tax assets, so that's why it looks skewed. But if you see on a cash flow basis, generally, the tax rates across the -- wherever we're operating are between 25% to 31%. If everybody makes profit, the tax rate should not be more than 25% to 27%.
Okay. But like you know that it is not going to be profitable, right, this year? So you would have made some internal estimates for the profitability this year, right? So based on that, if you could just guide on the tax rate.
It's very -- I don't understand your question because we have already said that we'll be doing $3 million to $3.5 million loss of EBITDA -- negative EBITDA in Italy and another $3.5 million in China. So the figure as to -- cannot be told on a basic basis. I can only say that there are losses, tax losses which will not be adjusted up to USD 7 million, then we can calculate average 7% -- 27% rate.
Ladies and gentlemen, that brings us to the end of the question-and-answer session. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Ladies and gentlemen, thank you very much for being present and giving you a valuable time to us. We hope we have answered your questions satisfactorily, and we look forward to interacting with you again at the next call. Thank you.
Thank you. On behalf of Camlin Fine Sciences Limited, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.