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Nocil Ltd
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Ladies and gentlemen, good day, and welcome to NOCIL Limited Q1 FY '23 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not 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 Mr. S. R. Deo, Managing Director of NOCIL Limited. Thank you, and over to you, sir.
Thank you. Good morning and a very warm welcome to everyone present on the call. Along with me, I have Mr. P. Srinivasan, our Chief Financial Officer; and SGA, our Investment Relations Advisors. I hope you all have received our investor presentation by now. For those who have not, you can view them on the stock exchange and company website. I hope you and your loved ones are safe and doing well.
We'll start with the performance of Q1 FY '23. We have achieved highest ever volume growth during this quarter. Good volume growth on the back of some easing in supply chain resulted in a record high quarterly revenue of INR 509 crores. This increase in revenue comes from the heels of a 17% increase in volume in Q1 FY '23 as compared to Q1 FY '22, and sequential growth of 12% to 13%. This was largely due to good demand uptick from tire companies on account of improvement in both OEM and replacement markets. As mentioned in our investor presentation, we could largely maintain flattish selling prices for large part of our production portfolio.
On the production front, we could utilize our plant around 75% of our installed capacity. Most raw material prices were flattish for the quarter. In a few products, due to domestic situation, few abnormalities got experienced. The quarter also witnessed some increasing utilities costs due to increasing gas and coal prices. As you all are aware that in view of the Russian-Ukraine war situation, there have been disturbances, particularly on the energy front. Its impact is visible across the globe in the form of higher inflation, higher interest rates and a recessionary trend. This is also endorsed by IRSG, where in for the quarter Jan to March '22, most major markets shown a degrowth of 1% to 3%, the only exception being India and U.S.A. Southeast Asian markets shown a degrowth of 10%.
Further, based on the interactions with customers, we do believe that the coming few months may see some muted demand. However, we are confident that on an overall basis, the volume for H1 FY '23 will be higher by around 10%. Quickly, on the industry scenario, keeping in mind our long-term vision of capturing double-digit market share, we are envisaging growth opportunities for our Rubber Chemicals business in the global space. To pursue the trade objective, we intend to optimize the capacity utilization, say by September 23. However, keeping in mind the short-term recessionary outlook, we believe that this can get extended by another 3 to 6 months.
To meet the shortfall thereafter, we have already started debottlenecking of certain capacities. This exercise may take about 12 months, which will help us to meet the demand for another 1 to 2 years. At the same time, we are evaluating capacity expansion plans to achieve our long-term vision. Execution shall be decided once the global business environment stabilizes.
This is from my side. Now I will hand over to Mr. P. Srinivasan to give you an update on the financial performance. Thank you very much, Srini, over to you.
Thank you, Mr. Deo, and good morning, everyone. Hope you all are safe and in good health.
Yes. So just to re-encapsulate the Q1 FY '20 performance, we have registered the highest ever quarterly revenue and volumes. This is already explained by Mr. Deo on the back of better sales quality in the quarter. Some of the financial highlights. Volumes grew by -- in this quarter -- about 51% taking base as Q1 FY '20. So when we are looking at quarter June '19, it was 100. Today, we are at 151. On a sequential basis, it is about 12% to 13%. During the quarter, we saw volume growth largely from domestic business, as there has been changes in the geographic dynamics.
Net revenue from operations stood at -- for the quarter -- INR 509 crores as against INR 462 crores (sic) [ INR 463 crores ] for Q4 FY '22, a sequential growth of 10%. To recapture it, this is the highest ever revenue parameters for NOCIL Rubber Chemicals. The sales growth was largely even volume growth across product segments during the quarter. On the operating EBITDA performance, operating EBITDA performance for the quarter stood at INR 101 crores as against INR 73 crores in Q1 FY '22, a Y-o-Y growth of 39%; and INR 111 crores in Q4 FY '22, a degrowth or sequential degrowth of 8% on a sequential quarter basis. EBITDA margin for the quarter stood at 20% in FY -- Q1 FY '23 as compared to 21% in Q1 FY '22 and 24% in Q4 FY '22.
Profit before tax -- or the PBT -- for Q1 FY '23 stood at INR 88.49 crores as compared to INR 63.19 crores in Q1 FY '22, and INR 95.24 crores in Q4 FY '22. The profit after tax for Q1 FY '23 stood at INR 65.63 crores as compared to INR 47.08 crores in Q1 FY '22 and 68.47 crores in Q4 FY '22.
That's it from our financial front. So with this, we would like to open the floor for question and answers.
[Operator Instructions]
The first question is from the line of Rohit Nagraj from Centrum Broking.
Congratulations for another good quarter. Sir, my first question is on the RM side. You indicated on a Q-o-Q basis, RM has been flattish. What has been trend during the ongoing quarter and when do we expect that the RM prices will start alleviating incrementally?
Rohit, I think this is a very difficult question to predict because currently, if you really see, I think there is a huge amount of instability which we see in the world market. The oil prices are fluctuating, the petrochemical derivatives are fluctuating. So I think to reduce the oil prices and get the oil, oil prices and petrochemical derivatives is going to be a big hazard and we could be wrong for that case. However, if you ask me for a month or so, I think they look flattish, but that's a very small time frame -- we'll not be able to guess it for maybe 2 months after or 3 months after.
Sure, sure. Got it. Sir, second question is on the debottlenecking. So you said probably it will take another 12 months, and it will be sufficient for next 1 to 2 years' growth. What is the CapEx that we are envisaging for this? And second, we had also indicated in the past that we will be working on some other products as well. So any status update on the same?
As far as the debottlenecking is concerned, it is always low hanging fruit. So the CapEx involved is very small, okay? And that's precisely what we are trying to do. As far as the long-term vision is concerned, I think it continues to be -- as I said, that we want to establish ourselves as a substantially major player in the world market, and we are working on that.
The next question is from the line of Aditya Khetan from SMIFS Limited.
My first question is on the spread part. So this quarter also for our EBITDA spread, it's roughly around 65 per kilo, although lower than last quarter, but still higher than our average. So just wanted to know, so is this benefit that has been largely led by the inventory gains or actually the spread for the industry has improved?
I don't know, Aditya, I'm not able to understand from where you come to the figure of 65 per kg or something. I think that's...
Your volumes for the quarter, which means your EBITDA that is divided by the volumes.
So somewhere, I think there are calculation, maybe please have a recheck -- relook at it. That we can handle -- answer it separately.
Secondly, the performance on the business industry perspective, you have to look at what is the global trend for the last 6 to 9 months. And when you look at -- and we have been communicating in the past or even today also that most of the price corrections are happening in commensurate with the raw material price movements. And that has been the trend which we have witnessed for the last 18 months. And our Chinese competitors are also doing it, and we being also a significant player in this industry, we also take corrective actions based on that trend.
So sir, the benefit has happened. So that has been largely led by the spread for the industry has really improved. Meaning, if this has been not led by the low-cost inventory, if you meant to say that?
There could be few cases here and there, but that's not significant to talk about.
Sir, second question, sir, now we are witnessing that the pricing decline in majority of the raw materials, whether it is aniline or another. And similar to collection, we are also witnessing into the rubber accelerator prices also. So can we make a case that the spread will normalize towards around INR 45 to INR 50 per kilo for the coming quarters?
Cannot be specific about those numbers because it depends on the situation, the customer profile, the product profile. So what we are seeing is the price corrections, if at all if it is happening, it happens along with the cost movements.
And Mr. Deo has said in his initial remark that the utilization for the quarter is around 75%. But sir, considering there is 11% to 12% volume growth on a quarter-on-quarter basis, so that utilization should be around 85% for the quarter, at least. In last quarter also, we had utilized around 75%, and considering an 11% volume growth, so this should be easily around 85%. So just wanted to clarify on this part.
Gentleman, I think, however, if we look at the March quarter results, there was an inventory change of credit of INR 36 crores. Maybe if you adjusted, possibly all your questions get answered.
The next question is from the line of Mr. Nitesh Dhoot from Prabhudas Lilladher.
Congratulations on a good Q1 performance. So my first question is on the strong volume growth in the domestic market. So what we understand is that the imports of rubber chemicals into India has slowed down in Q1, and NOCIL has substituted that demand. So was this slowing of imports temporary in nature going into some production or cost challenges for the players exporting into India? Or -- is there some other -- is there some structural change?
I think this is a question which should be asked to Chinese manufacturers because they were doing...
In fact, what I observe is that the slowing exports is not from China, but I think from some other geographies.
See, basically...
If you see the numbers, that has slowed down, but it's not necessarily from China. So any sense that you have on the overall imports slowing down into India?
No. I think first and foremost, in most of the imports which come in India in Rubber Chemicals, they mostly come from China. Imports from other geographies are very, very small.
Yes. So that is actually a slowdown is what I see. So China is largely flattish, to my understanding. And whatever comes from the other geographies, that has slowed down and that is what has been substituted by NOCIL. So that's the broad number. So..
This question should be addressed to our customers because what is going to be their strategy in terms of their procurement, how they're going to import or how much they are going to buy from domestic market, okay. It's a typical procurement strategy from the customer. And we hope that this procurement strategy will continue.
Just to add a bit. I think, gentleman, I would like you to clarify because what happens is when you are looking at an import data, you're looking at an HS code. But in case of rubber chemicals, you cannot look at HS code as standard because there are so many items coming under the rubber, compounds or rubber accelerators. So there could be some products which may not be necessary rubber chemicals in which we are playing. And there could be some products which you have not been capturing in other chapters. So it's important to understand the overall scheme of things, then only we will be in a better position to comment on that.
Okay. Sure. Okay. So my next question is on your share of exports in Q1. What would be the share of exports?
Exports contribution to your revenue volume?
Yes, one second. I will just tell you, export, I think, 35 or -- it's about INR 165 crores. INR 15 crores.
INR 165 crores. Okay. Sir, just one more question. So on your depreciation number, what I see over the last 2 quarters, it has moved from INR 11 crores to INR 16 crores in Q4. And then in Q1, it has -- from INR 16 crores to INR 14 crores. If you could just give some color on this movement up and down?
I don't know whether you have had the chance to look at the annual report. There is this fixed asset schedule or what we call as property, plant and equipment schedule. Under that schedule, we have given a note what that pertains to and what is a onetime correction and what is a recurring correction. That has been adequately explained. So my request is please refer to that.
The next question is from the line of Amar Mourya from Alfaccurate Advisors.
So first question is that in terms of the debottlenecking, how much of the capacity, sir, will get expanded because of this?
I think I can't put a number, but I am very, very clear that we continue to look at the growth. We continue to look at which product may have a shortfall after maybe 23rd September or 24th March, and we continue to debottlenecking -- debottleneck the plant. So putting a number is difficult. The only thing we can very confidently say that by debottlenecking, we will be able to meet the demand of next 1 to 2 years beyond our current capacity utilization.
Okay. So that means like at least the volume growth would be at least 10%, right? And when we say that now that capacity will be sufficient for 2 years from there on.
I mean, because of the debottlenecking, are we talking about like at least 70%, 80% kind of a capacity expansion then from the current level?
No, no. It doesn't require 70%, 80%. If you take a growth of 8% to 10%, I think you can really find out how much is the capacity expansion by debottlenecking.
Okay. So 25% to 30%.
[indiscernible] plan on the debottlenecking, no?
Okay. And how much of the land would be utilized currently at the current locations?
Current location, we have 2 locations. So one is Navi Mumbai, where the land utilization is practically 100% and Dahej is about 50% to 60%.
Okay.
In other words, we have the scale for brownfield expansion.
Okay. Okay. And secondly, sir, just continuing to the last question. I mean, what we are trying to understand is that like have we increased our market share in domestic from the current client -- current customers because of whatever supply chain issues were there in this current quarter?
I think we have been maintaining that 42%, 43% in the domestic market share. It moves a percentage here and there depending on the quarterly fluctuations, but we intend to consolidate further as we go along. But today, that's what we can comment.
Okay. And then the point here is to understand like the kind of domestic volume growth we had seen in this particular quarter. I mean, is this likely to continue given that the market share has inched up in the customers [indiscernible]?
So it all depends on how the demand outlook seems. And we will -- if the demand is growing, we will definitely participate in that.
The next question is from the line of Dhaval Shah from Girik Capital.
So just to understand the business a bit better...
Can you speak a bit louder please?
Yes, yes. Sorry, sir. If the raw material starts reducing and so is the selling price, the per tonne or per kilo margin -- you have seen an improvement as per your -- the way you have explained that you always try to maintain the per unit margin. So in a declining raw material scenario, will we be able to do that? Or I just want to understand how the numbers will look.
It's difficult to predict the way it is going. But what we have seen so far -- so far, the delta is being maintained by the -- over all the manufacturing players of this industry. [indiscernible] contraction trend, that has still maintained so far. So maybe as we go along, we'll understand because it all depends on how the market is -- how long the -- I mean, if the recession is for a shorter period, we may not worry about it. But if it is for a long period, that is a different issue altogether. So it all depends on how the demand outlook is and it all -- it's a reflection of capacity utilization and how much extra stock you have.
Correct. So now, sir, last quarter, we saw China was under lockdown. So what change did you see in terms of the production, the excess supply which was being not consumed in China was it -- was it getting dumped in the other global markets? And how is the demand-supply scenario in the global markets?
See, if you see the domestic rubber consumption, one doesn't see that much slowdown in China. It was a minus 3%. So when we are talking about a lockdown, the slowdown will be much deeper. What we see is minus 3% rubber consumption in January to March. So one doesn't get a feeling -- maybe the domestic parameters must have been higher as compared to the exports, we don't know. As we see the data, we'll come to comment on that. It all depends on how they participate in [ December. ] What we are seeing is there is a shift in the strategy, and that is still continuing. I mean we don't know whether they will go back to their old ways, we don't know. But so long from November '20 onwards or October '20 onwards, we are seeing that strategy is continuing. They are adjusting their prices according to their raw material price movements.
Okay. Okay. And so you mentioned January to March, but April, May, June, also there was [indiscernible] some lockdown was -- some cities had; some were open. So even during that time also, you did not see much of supply coming from there?
It was there, we cannot say it was not there. But what we are trying to say is we have to see the data for January -- or April, June, then we can comment on it. Today, we don't have the data. But we have the data in January-March rubber consumption from IRSG. On that basis, we are able to derive this conclusion.
got it, sir. And sir, just last question. Any new capacities which have been announced or you feel can get announced in the near term which will impact your expansion plans?
Those have been -- already been announced in the marketplace by China Sunshine. I think that you guys -- or most of the guys or investors are aware of it. And other than that, we are not seeing any new announcements.
The next question is from the line of Sachin Kasera from Svan Investments.
Just a couple of questions.
Sachin, your audio is not [ clear yet. ]
Is it better now?
Yes, it is.
Yes. In -- actually, your presentation, while your volumes have gone up by 10%, your value addition is up by 2% quarter-on-quarter. So is it because of some lag in terms of passing the raw prices or some product mix change, if you can comment on that?
Which slide you're referring to? Let me know.
Slide #5, sir.
Okay. Okay. Basically, if you recollect, in the last quarter, we had an inventory built up, number one. Number two, our capacity utilization in Jan-March quarter was higher as compared to the sales volume. So that had an inventory buildup. And what we saw is in this quarter, as Mr. Deo explained at the starting opening remarks, the most of the prices -- selling prices were flattish for the quarter as compared to January and March. However, on raw materials, few domestic imports we had some abnormalities, and that did impact the -- to an extent, marginally the delta.
Should we take March quarter value addition number as a stable number? Or this number -- this quarter number the more stable number?
I mean, how can we give a stability in the way the business environment is so volatile? Also, uncertainty. I think it's not proper to look at 1 quarter and take a reference point. We should look at an average trend, what is going on, and then take a follow-up accordingly.
Sure, sure. And secondly, you mentioned that the utilization this quarter was around 75%. You think -- what type of utilization -- and you also mentioned that because of the demand, you are looking at some debottlenecking. Practically, what type of utilization can you achieve at the current plant -- it's like 90%, 95% -- from the existing capacity?
I think Mr. Deo in his opening remarks addressed this question also. He said that our endeavor has been to utilize the capacity to be filled by September '23. However, given the current short-term recessionary outlook, one can see the possibility of this getting extended by 3 to 6 months.
That I understood. My question is different. So I'm saying, can you operate the plant at 100% level if demand is there? Or technically because the way the mix and all are there, we peak out at 90%, 95%-plus. That was my question.
It depends on the plant. I think we can definitely -- if there is a demand, we'll definitely operate 100%. Why should we not?
The next question is from the line of Saurabh Kapadia from Asian Markets Securities.
Sir, the government in the notification rejected the antidumping on 3 products. So just wanted to understand, has the industry dynamics changed compared to last year versus this year that antidumping is not -- will not have been implemented by government?
It's a policy of the central government, which we are not privy to. But what we have been seeing a trend is most of the recommendations are being rejected. We are not unable to ascertain the real reasons for it. So it's not advisable to comment on this today.
But general industry dynamics in terms of competition or dumping, has there been some better condition in the current fiscal compared to last fiscal?
No. I think as far as the trade remedies are concerned -- these are all trade remedial lows. This is a reflection of what has happened in a particular injury period. And on that basis, the Ministry of Commerce, through Directorate General of Trade Remedies, comes to a conclusion if there is a material injury or injury as per the trade treaties or WTO guidelines. And then they recommend. However, the central government has this ultra powers where they can take a view independent of what the loss is from a public interest or from a [ nominal ] national interest, they can take a call, which they can reject the recommendation.
So my other question is on the exports. So probably the export has been [ accrued, ] but is it in the volume terms, the growth in the domestic market was stronger this quarter compared to export?
Just a second. I think, yes, domestic growth this quarter as compared to previous quarter, domestic growth is much higher in volume.
Okay. And sir, like when should we expect the -- because we have been guiding exports would do well given the approvals or we're moving from the -- some parts to the second stage of the customer list. So when should we expect the momentum in the exports of pickup? Although we are -- initial comments suggest there is some slowdown. But ideally, with the changes, what NOCIL have witnessed over the last 2, 3 quarters, we should be better off than the industry?
We are -- our performance has always been better than the industry performance average. That's number one. Number two, on the exports trend, hitherto we were annually doing a INR 300 crores exports. Today, we already passed the 650 mark. So that always is already a reflection there where we are in -- where in which direction we are heading for. And we have been communicating in the past. And even today, we are -- like to reiterate, that what we are today is 35% probably. Maybe tomorrow, we will end up with 40%.
Okay. And sir, just the last thing on the slowdown in the overall demand. So is it largely from Europe is what we are witnessing? Or is it across the geography the slowdown trends have been seen?
It's across geography, I mean, I think one has to look at the global economic outlook of all countries. Every country is going through a rising inflation, rising interest rates. Obviously, this will result in some temporary setbacks. So this is a natural fallout of that.
The next question is from the line of Dixit Doshi from Whitestone Financial Advisors. [Operator Instructions]
[Technical Difficulty]
Ladies and gentlemen, thank you for patiently waiting. Okay, we lost the line for the management again. [Operator Instructions] We have the line for the management reconnected. And I will request Mr. Doshi to go ahead with your questions.
I'm attending this call for the first time. So a couple of basic questions. One, what would be our capacity, including both the plants? And what would be the global capacity or global demand?
Dixit, I think please read the investor presentation where we have said the global demand of rubber chemicals is 3.5% of the global rubber consumption. So if you take 30 million tonnes of rubber consumption today, we are looking at something like 10 lakh, 50,000 tonnes of rubber chemicals global demand. That's point number one. And so far as NOCIL is concerned, we have capacity of 1 lakh, 10,000 tonnes installed capacity, which includes finished goods and intermediates.
And one -- second question is if you see our FY '18 and '19, the EBITDA margins were almost 27%, 28%. Obviously -- so is it fair to assume that our per tonne margin, absolute margin is fixed, and that's why as the prices have gone up, the EBITDA margin has gone down? Or there is some pricing pressure as well?
EBITDA, I think when you're looking at FY '17 or FY '18 or FY '19, those 3 years were an area where we had antidumping duty in the revenue parameters which constituted about INR 45 crores per annum. So you may have to exclude that to arrive at the EBITDA margins, number one.
Number two, as far as the EBITDA margin, it's a reflection of market situation where the supply is equal to demand or supply is in excess of demand. It's a common economic that whenever the supply is in excess of demand, you will have a margin pressure because each player will not behave the same way. One can expect every player can behave differently and head up a different strategy. So I think that is what we can give guidance here.
The next question is from the line of [ Damodaran Gupti ] from [ Acuitas Capital Advisors. ]
Congratulations on a good set of numbers. Most of my questions have been answered. There's just 1 question on -- so if I look at your COGS growth, which is around 50% to 57%, and if I tie back to basically aniline prices, which have been broadly stable on a year-on-year basis. So can you recompile while the sharp increase in COGS on a year-on-year basis?
I just did not follow your question. Can you repeat the question, please? Sorry.
So if I look at your cost of goods sold, that has increased by around 57% on a year-on-year basis. But if I look at the aniline prices broadly, on a year-on-year basis, we are somewhere in the range of 5% to 10% increase year-on-year. So can you just reconcile why the difference between this -- I mean, COGS, 57%, whereas volume has only grown by 15% and the aniline price.
Gentleman, we are not only consuming aniline, we are also consuming solvents. We are consuming nitrobenzene and other inputs like caustic, carbon and sulfide and so many parameters. So I think it's not fair to judge a raw material cost movement by a single item called aniline. It's a composite of several items.
Right, right. So these items have seen a much sharper price increase. That's what you can give us?
Can you just repeat? I'm sorry, we are not able to hear your audio clearly. I'm sorry for that.
Hello. Is it better now?
Yes, yes.
Yes. So what I was saying is the other items that you mentioned, that has contributed to the sharp price increase is what I can understand.
It is there. It is there.
The next question is from the line of Bhargav Buddhadev from Kotak Mutual Fund.
Sir, clearly, NOCIL's competitiveness in the export market has been improving. Is it possible to quantify if we've moved up the ladder? I understand there are L1, L2, L3, L4 suppliers oversupplying to customers. So if you can sort of highlight on this?
I think it all depends on the strategy with each customer. What we endeavor is whenever a customer is having a long-term relationship with us, we take a view from that perspective. And then gradually move up the ladder. So maybe we may start at L4 and thereafter, we move to L3, then move L2 and L1. It's a long journey because it's not only -- pricing is one part; it also involves a weightage of several products, which we are ready to offer along with the quality and the commitment on delivery schedules. That's very important.
So one of the key things which today, every supply chain seller is looking at is how assured is the reliability of the supply chain. On this trend, NOCIL has a proven track record, they are sticking to the delivery schedules commitments. So that helps NOCIL to win larger contracts in the export market.
So sir, is it fair to say we've moved up the ladder or no?
Yes, we've definitely move up the ladder.
Okay. And sir, how important is the share of value-added product portfolio also in determining whether we move up the ladder or not?
See, we have been communicating that we are generally about 25% revenue stream is coming from specialty applications. We intend to maintain around that. Maybe there is a scope to expand further or improve further, we will definitely encash those opportunities. But at this stage, we are around 25%.
And lastly, sir, amongst the non-Chinese suppliers, would it be fair to say, after them, we'll be the next in the line -- in terms of the ladder?
In terms of the capacities and ladder, I think in terms of [ our strong ] product portfolio, I think NOCIL stands out #1 in the world, I would say, because we are there in every aspect, every product, including the -- if you see the self-sufficient intermediates, which is a key aspect in this supply chain of rubber chemicals to the customers. So there, I think NOCIL will stand #1 or #2, we can say it. But as far as non-Chinese players, yes, there are 2 major players. Lanxess -- Lanxess has one dependency on China for their intermediates, whereas Eastman, which has been sold to One Rock Capital or what is now known as new Flexsys. They're in a single product portfolio.
The next question is from the line of Aditya Khetan from SMIFS Limited.
There was news recently that the United States is planning to remove duties on some commodities imported from China. And we know that in rubber chemicals, U.S. has imposed an antidumping duty on China. So now if that duty is removed, can we again see that Chinese flow increasing to U.S. and how this will impact NOCIL? If you can tell us in brief on this one?
We don't have the updated list with the rubber chemicals included in this or it is being considered, number one. Number two, independent of that, today, we are not getting that 25% benefit when you are selling to the export market in U.S. So for us, whether -- today, when a U.S. customer is looking, he's looking at what cost he's buying it. He's buying from Europe, say 100; NOCIL, maybe 105; and China, maybe 130. So for us, it doesn't matter much. The only thing is during this Chinese absence, we have established our credentials much deeper. And that's why in the U.S. market, we have grown over index, to the level of 100 to 300 over the last 3 years.
Correct, sir. So volumes definitely had ramped up from 200 tonnes to around 2,000 tonnes. Now with the U.S. and other global markets, so might slipping into a recession and demand taking ahead. And if suppose this duty also would be removed on rubber chemicals. So how do you see that U.S. market to shape up? And also, can we like change our strategy to focus on domestic rather than on exports, considering if the global markets take a hit on demand? So domestic demand would be robust considering that the tire players have announced a good CapEx. So how that strategy would fit like for the next 2 to 3 years?
See, once you establish a relationship, I don't think so we are out of that business ever. It's a competitive world. There will be -- the relationship will involve some element of commercial transactions going through and we don't see -- yes, what may happen is the further growth potential may get hampered to an extent because of Chinese competition. We are not denying that. But that doesn't mean that the existing volumes will be -- largely, they will be retained. Maybe we can consolidate at a slower pace if there is competition, very aggressive competition from China. That's number one. Number two, it depends on how the rubber consumption grows over the next few years. And if there is no additional capacities, then we are there for that.
Okay. And sir, what was our target into U.S. to take the volumes to maximum levels? Like previously, we had stated around 4,000 to 5,000 tonnes. So if that is maintained onto the volume side?
I don't think so we have ever given any volume targets in the U.S. market. Any of the markets -- we have always been communicating on index parameters on the U.S. market. 100 to 300 is what we have been communicating. If [indiscernible] this communication from some others, please remove that out from your mind. And we don't want to specify what targets we have in any markets.
Okay. Just one more question, if I can, sir. Onto the exports part. Sir, we have reached around 36% of sales in FY '22, and that is almost near to our guidance of 40%. So if we cannot push some value-added products into international markets further, how do you see that value addition or that specialized portfolio, which is 25% -- it will move up or it will remain at the same levels for the next 2 years?
I think we answered this question just a few minutes back where we said our endeavor is there to move further. We will definitely like to move forward -- move up the ladder. But as it stands today, we don't see -- it will be over [indiscernible]. Because in the overall scheme of things, these specialty applications is not even 10%. It will be less than 5% probably. So as again, the 5% in the global space, we are already 25% -- I think we have already reached [ that ] level. I think unless we see further deepening or a further opening of new customers, new account relationships, to grow far beyond this, it will be very difficult, I would say.
So no new products are being developed right now, sir, on...
There are some in the pipeline, but this is not getting into the commercial mode so far. As and when we get into the commercial mode, we'll communicate about the same.
The next question is from the line of Dhruv Muchhal from HDFC Mutual Fund.
Sir, would you have any sense on what would be Europe's total production and their share in global trade in our chemicals and particularly large set of products?
No, Europe's demand will be about 12% or 11.5% of the world market. And on the supply side, I think they will be about -- I mean, we are talking about Europe incorporated entities. They may have plans across the globe. But if we are looking for Europe-incorporated entities, they may be about 15%.
Okay. But any sense on what the absolute physical capacity is in Europe? And are they big exporters?
Yes, they do exports. They do exports to the U.S. also. Because the U.S. has a preferential duty arrangement with Europe. So obviously, they have a good access to U.S. market.
Okay. Okay. Okay. But sir, on the physical assets probably in Europe, any share on that, if you have?
Physical?
15% production is of European-based entities, but facilities which are in Europe, any sense?
Maybe about 10%, thereabout.
We can just guess.
Yes, it's a guess. We don't have the full state of -- but I think around 10%.
Okay. And sir, secondly, sir, last year, if I see our share of exports for FY '22 as a whole, the share of exports was about 36%. And I believe you also mentioned last -- in the last call, the share of volumes is also about 35%. So that -- can we mean that the domestic broader realization is equal to the export realization? So is that because of the benefit that we have something in the domestic market because of duties that the realization is the same? Because I thought what you export is relatively more value-add.
Because what happens is the component of the product mix. So if the product mix has high-value products in export as compared to domestic market, obviously, the weighted average realization will be much different than the domestic market. So what happens is on a comparative terms, yes, if you are looking at our same product, identical product, exports in revenue parameters will be lower as compared to, but mostly because of the duty production. But what is happening in the export market is we have the high-value products, and that gets -- will take the basket up.
Sir, so that's what the point, sir. So in value terms, your export share was 36% and volume terms your export share was 35% last year, FY '22 as a whole. So it seems -- I mean, it's equal.
Maybe it may [indiscernible]. Maybe it's going to a [indiscernible]. What we are saying is we have to look at independently, the weighted average, the composition of the product mix, and the weighted average realization per KG. And that -- and generally, what happens is in identical products, exports generally have a lower [ trend ]. But as far as NOCIL is concerned, because of our product mix, we are able to maintain that.
[Operator Instructions]
The next question is from the line of Rohit Nagraj from Centrum Broking.
Sir, we have been -- everybody manufactured a similar set of products. So is there further scope for optimization by including, say, digitization or industry 4.0 or anything from the existing set of products?
This basically, Rohit, this optimization continues to be a part of growth. So, obviously, when we put up the plants at Dahej, Dahej was a much better optimization than what we had in Navi Mumbai. And as we walk in, all these things which you are talking of like industry 4 point -- 4, they will continue to get incorporated in the new plants.
And from the market share, so last couple of years, we have gained a good amount of market share from about 35% to 42%, 43%. In historical, going back a little bit in the history, generally, this market share gain is irreversible even if there are some [indiscernible] new volumes come up from China. Do we -- have we in the past seen that we have been able to maintain the same market share?
I think we are certain that we'll be able to maintain the market share.
Right. And just one last clarification on the earlier participant's question. In terms of the Europe capacity in rubber chemicals, so have we come to know that because of the particular challenges in Europe, any of these capacities have been suffering or probably operating at lower levels and that may be a positive thing for us or the other competitors?
I think, Rohit, if you're talking of European situation as it is emerging, I think the clarity will come when the winter starts. And what is going to be the priority of each government in terms of their energy to the domestic and the energy to the industry. So at this point of time, I think it will be very difficult to guess.
As there are no further questions from the participants, I now hand the conference over to Mr. S. R. Deo for closing comments.
Thank you. I take this opportunity to thank everyone for joining the call. I hope we have been able to address all your queries. For any further information, kindly get in touch with us or the Strategic Growth Advisors, our Investor Relations adviser. Request all of you to be safe under the given circumstances. Thank you, once again.
Thank you.
Thank you. On behalf of NOCIL Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.