Nocil Ltd
NSE:NOCIL
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Estee Lauder Companies Inc
NYSE:EL
|
Consumer products
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Church & Dwight Co Inc
NYSE:CHD
|
Consumer products
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
American Express Co
NYSE:AXP
|
Financial Services
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Target Corp
NYSE:TGT
|
Retail
|
| US |
|
Walt Disney Co
NYSE:DIS
|
Media
|
| US |
|
Mueller Industries Inc
NYSE:MLI
|
Machinery
|
| US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
Technology
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
223.85
330.55
|
| Price Target |
|
We'll email you a reminder when the closing price reaches INR.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Estee Lauder Companies Inc
NYSE:EL
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Church & Dwight Co Inc
NYSE:CHD
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
American Express Co
NYSE:AXP
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Target Corp
NYSE:TGT
|
US |
|
|
Walt Disney Co
NYSE:DIS
|
US |
|
|
Mueller Industries Inc
NYSE:MLI
|
US |
|
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
This alert will be permanently deleted.
Nocil Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the NOCIL Limited's Q4 FY '24 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. V.S. Anand, 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 Investor Relations advisers. Hope you all have received our Investor Presentation by now. For those who have not, you can view them on the stock exchanges and the company website.
To start with, let me provide an overview of the company's performance for quarter 4 financial year '24. During this period, revenue from operations amounted to INR 356 crores, representing a 5% growth sequentially. However, it's important to note that volume showed an impressive 12% increase in quarter 4 financial year '24 compared to the preceding quarter. The domestic market continues to stay robust. However, there remains the challenge of aggressive dumping from China and other markets. This has resulted in muted volume growth from the domestic market. We are maintaining a balanced approach by judiciously managing both price and volume to navigate these pressures.
As indicated in our previous calls, our strategic initiatives and engagement with global strategic customers has started gaining traction. For financial year '24, we have recorded a year-on-year volume growth of 9% in our export segment despite the challenges posed by geopolitical tensions and fluctuating raw material prices. We are hopeful of building on the growth trajectory going forward.
Commenting on the industry, let's take a look at that. As per market reports, the Indian tire industry is expected to grow in the mid-single digits in the current financial year on the back of a stable growth in the replacement segments and growing segments for OEMs in the passenger vehicles and 2-wheeler segments. The replacement market in the commercial vehicle sector is also expected to be on a positive trend with increasing infrastructure initiative resuming post the elections.
Tire exports have remained subdued since June 2022 and are expected to witness modest growth in the near term due to muted demand growth in key destinations such as the U.S. and Europe. We expect to see robust growth in the non-tire sector on account of a penetrated market presence in key subsectors like tire retreading and auto components. The increasing radialization of commercial vehicles and focus on sustainable tires augurs well for the tire retreading sector. As part of our strategic roadmap to continue to expand our market presence, all of you will be aware of our Board approval for INR 250 crores investment at our Dahej site for further expansion of our rubber chemical capacities. We have begun work on the same.
Sustainability remains at the core of our business strategy. We have implemented several green initiatives, including the installation of solar panels at both our plants, sourcing of green energy, and cogeneration which is expected to reduce our carbon footprint. I would also like to take this opportunity to thank our dedicated employees for their relentless efforts, hard work and commitment. I also extend my gratitude to our customers, partners and stakeholders for their continued trust and support.
Looking ahead, we have a clear roadmap for sustained growth. We remain optimistic about the future, underpinned by strong market fundamentals and our strategic initiatives.
That is it from my side for now. I will hand over to Mr. P. Srinivasan to take over -- to give you an update on the financial performance.
Thank you, Mr. Anand, and good morning to everyone. Now let's run through the consolidated financial highlights. Volumes for Q4 FY '24 is at monthly index parameters taking a base of Q1 FY '20 at 100. On revenue parameters, the net revenue from operations for Q4 FY '24 stood at INR 357 crores from INR 341 crores in Q3 FY '24, a growth of 5%. Selling price was strong by 6.5% on a Q-on-Q basis. Volumes for Q4 FY '24 has shown a healthy growth of 12% on a Q-o-Q basis. Net revenue from operations for FY '24 stood at -- the whole year at INR 1,445 crores as against INR 1,617 crores in FY '23.
Coming to the operating EBITDA parameters. The operating EBITDA parameters for Q4 FY '24 stood at INR 45 crores as against INR 49 crores in Q3 FY '24. EBITDA margin for Q4 FY '24 stood at 12.5% as compared to 14.3% in Q3 FY '24. Operating EBITDA for FY '24 for the whole year stood at INR 195 crores as against INR 253 crores in FY '23. EBITDA margins for FY '24 stood at 13.5% as compared to 15.7% in FY '23, a drop of 220 basis points.
Turning to the profit before tax parameters. Profit before tax for Q4 FY '24 stood at INR 56 crores as compared to INR 41 crores in Q3 FY '24. PBT for the whole year FY '24 stood at INR 180 crores as compared to INR 202 crores in FY '23. The nonoperating other income includes some profit on sale of fixed assets, about INR 17.5 crores to INR 18 crores.
Coming to profit after tax or PAT as we call, for Q4 FY '24 stood at INR 42 crores as compared to INR 30 crores in Q3 FY '24. PAT for FY '24 stood at INR 133 crores as compared to INR 149 crores for the whole year FY '23.
With this, we would like to open the floor for question and answers.
[Operator Instructions] The first question is from the line of Nirav Jimudia from Anvil Research.
Sir, I have 2 questions. Sir first, on the volume growth of 12% which we have clocked in Q4 on a sequential basis. So if you can just break it between how much was the growth in the export market and the domestic market, a? And b, was there any growth in the speciality volumes this quarter or the growth predominantly come from our traditional products, which are accelerators and antioxidants? And c, does this improvement in volumes includes the volumes from our existing customers taking higher volumes at their existing locations or the existing customers taking volumes at the newer plant locations?
So on the volume parameters, Nirav, the both domestic and exports have shown a growth of double digit. In domestic, we are almost the higher single digits and exports on a higher double digit, a little on the higher side. So the average 10% to 12%.
And the spread on the speciality of which growth.
The speciality, we are not seeing any significant. Some improvement is seen in certain products, not significant in volume terms, but some improvement is there on a sequential basis.
And coming to your third part on where this growth is coming from, Nirav, this is some -- also from existing customers as well as new customers. So it's not entirely from existing.
Sir, is it possible to give some sort of understanding here that let's see the newer -- out of this volume growth, predominantly how much of this would be coming from the newer customers or existing customers taking higher volumes, some sort of understanding over here. So is the share higher from the newer customers or the share is higher from the existing customers taking higher volumes?
I'll not be able to put my finger on a specific number if I split the growth, but I would say it's kind of more or less uniformly distributed.
Sir, second question is, let's say, if we see on an indexation level of 100, how is your confidence currently in terms of the additional volumes placing to the customers in terms of our confidence before 8, 12 months and today, given the kind of customer interactions and engagements, which we have entered over and also in view of the current challenging pricing scenario? So if you can just give your confidence level before 8, 12 months and currently on an indexation of 100 that would be helpful.
Yes. So I think clearly, confidence levels are compared to 12 months before to now is, I would say, more higher on the positive trajectory. In terms of -- again, looking ahead for the next 12 months, I think some of -- we just discussed some of the businesses where just new customers also added just in the last few months. Obviously, they will continue to add up along with newer additions coming within the next 9 to 12 months. So I see the growth trajectory to continue, Nirav.
So sir, is it possible to take Q4 FY '24 volumes as a base number for FY '25 and the volume buildup could happen relatively on a quarter-on-quarter basis where our Q4 volumes now become a base and the volume buildup should start happening over there.
Yes, yes, Nirav, should happen over that. Yes.
Yes. Sir, last bit from my side before I join back. Sir when we compare FY '22 and FY '24 in terms of our volumes and if we exclude the speciality volumes, which have been, I think, showing some de-growth, how much de-growth have happened on those speciality volumes between these 2 periods? And along with it, if you can just help us explain how much is the growth in the volumes ex of speciality.
Nirav, I would prefer to answer in a different sense. What you are trying to understand is a portion of the speciality which we were discussing in the last few calls is about the latex market, if you are looking at the latex de-growth per se, you can say it was -- if it was index of 100 in FY '22. Today, it's probably at -- probably around 56, 60. So there's a 40% degrowth.
But what is heartening is on the other products, we have actually started showing signs of growth in other consumer products and other specialties as well. So it gets in a way negated.
Yes. Correct. So do you feel this speciality volumes could be recouped to some extent in FY '25, given some improvement in the Malaysian market, which we have observed over last....
Yes. Definitely. We are already seeing some tractions emerging that the bottom most period is over. We actually started consolidating something. And as time goes along, we expect to some -- shows an improvement. We cannot expect to recover back to 100. The 60 will go gradually to 65 thereabout something like that.
Very positive. Basically it's a mild recovery one can say so I'm sure it's coming back slowly.
The next question is from the line of Aditya Khetan from SMIFS Institutional Equities.
Sir, my first question is a broad idea on to the company. Sir, when we look at the last 2 years, sir, we are standing at flattish volumes. And sir, when we also look at the EBITDA and gross per kilo basis, so we are really standing at multiyear low. And there is also a risk of dumping from China which is going on, which is not expected to subside in the near term also. So sir, what is our sense, like have things bottomed out from here? Or we see further pain from going right from here? And if our outlook is bullish, sir, what is making us that bullish outlook?
Yes. So I think first part, I see that -- probably it has bottomed out. That's the sense we get. On the other hand, what is it that keeps us on a positive outlook looking ahead is also the fact that quite a few of our strategic engagements also with customers internationally have kind of, as we said earlier, come to fruition and there is positive traction there. So that is at least also on the positive trend with the new businesses coming in. And we see that with the margin situation bottoming out, this should hold us in good stead.
Sir, any idea on to the Chinese dumping when we are expecting that to subside? Or it will continue at least for the next 1 to 2 years?
I think it's also a factor of how much the domestic consumption in China picks up. And I think until then, they're going to be looking at markets to push their products or dump their products. And I think it will stay on unless domestic volumes pick up.
Okay. Sir, in this fiscal FY '24, sir, we are nearly standing at 65% utilization. So when this capacity will reach peak utilization? And what is the rationale like for setting up a new capacity when we are already sitting at nearly 60%, 65% only? Any sense like how that capacity will be filled?
Yes. So while we have always mentioned that 65%, the number that you mentioned is an overall number, while at an individual product level, we could be at different stages, and some could be at 95, 100, and then we do the usual debottlenecking and stretch it to the maximum possible. And then we start planning for the specific products. So the product that we are planning or the products that we are planning are more the ones that are already at peak capacity, and we see that we will need to invest for further growth opportunities that we have.
Any breakup, sir, like if you can give in terms of market like whether it is [indiscernible] or Pilflex like [indiscernible]? Any thought of like you can say, so this product is at peak and this is underutilized currently?
We will communicate this part, Aditya, at the appropriate time. Not today.
The next question is from the line of Rohit Nagraj from Centrum Broking Limited.
Sir, first question is on volume growth. So you spelled out the exports volume growth was 9% in FY '24, if I'm not wrong. What was the total volume growth in FY '24 and it is a split of domestic and exports, I mean exports, you have given the number. And what were the primary areas where we have seen this volume growth across different subsegments? Or just a broader perspective would be helpful.
For FY '24, the overall volume growth is about 2%. I think the domestic was flattish. Export is 9%. And I think we have already addressed the question of the other products in exports, the latex market there. This year, we have seen some marginal improvement, not great from the FY '23 numbers. So in that sense, the growth is more of a non-latex thing.
Sure. Got that. Sir, second question is the -- in the recent AGM for one of the Chinese large player. They have indicated that the top 3 players are further adding capacity in accelerator as well as antioxidants. And we are also going ahead with this INR 250 crores expansion. So how are we doing at the market on a broader basis? Because obviously, there is presently overcapacity in China? And so effectively, what markets are we targeting once we do this debottlenecking and expansion?
So I think the addition of capacity by Chinese players is not something that's new. I think it's been happening over the years. But our clear value proposition, which our customers see from somebody like a supplier, NOCIL is -- one is China de-risking strategy, which is China + 1 and they're looking at long-term supply reliability. So that is -- and for some of the products outside of China, there are very other few players who are really kind of making some of these products.
So there is one positive trend on that side and also, when we look at expansions that also supports it further in terms of being able to support the growth of the customers. So I think this also will contribute in terms of adding to the growth.
Sure. Fair enough. Sir, third question if I can squeeze in. We have been saying that we would like to diversify into other segments. But again, the expansion is into rubber chemicals only. So any thought process on this? I mean you've been saying that it is still in the wraps. We are still working on it. But any timeline that you would like to give that maybe in the next 2 quarters or 1 year will have something to add on in our product basket and based on which there could be some CapEx, which may happen?
Yes. So like we also mentioned, while our growth plans in the flagship Rubber Chemicals business will continue. It will not be affected in any way by what we do on the diversification side. That work is also continuing and it's underway. Very difficult, Rohit, to put a finger on will this happen in 1 quarter, 2 quarters or 3 quarters because they're all at different stages of discussions. And unless we get some real confirmatory to this, we will not be able to share an update. So I'm sure you understand, but work is underway, yes. I just would like to leave it at that.
[Operator Instructions] The next question is from the line of Aryan Sharma from B&K Securities.
Sir, about the capacity expansion. I just had one question regarding whether you could segregate the product category in which we are adding more capacity, whether it is more in accelerators or antioxidants or how much is facility, if you could segregate that?
So it is -- what we can communicate here today is it's in the Rubber Chemicals segment -- in the existing Rubber Chemicals segment, but we cannot give you the product details for whatever business confidentiality purpose. We will disclose it at an appropriate time.
Okay, sir, I understand. Sir, we see that the volumes on a Y-o-Y basis has increased approximately by 1% as far as on a index basis -- on Y-o-Y basis, and the business are down by 9% Y-o-Y. So approximately realizations have dropped by 10%. Sir, my question is whether you could segregate the realization drop between the pricing pressure from competition. And how much was from the drop in RM prices because what I believe is you pass on the RM price as well to the customers?
Are you referring to quarter 4 or annual number?
Quarter 4 only. Quarter 4.
Quarter 4, okay. Okay. So you're looking at a 1% growth. Yes, you're right. I would say -- we can say more or less -- it's more or less equal distribution between domestic and exports, not materially wide variations. Yes, there is a price drop is there. We are not disputing that. But at the same time, there is also corresponding drop in raw materials also. The value addition part is where we may if you are looking at the part that may impact us in the profitability parameters.
Okay. Sir. Could you give some guidance about what you're expecting in FY '25 in revenue terms and EBITDA margin terms?
Sorry, what was the last part? I got you -- you spoke about guidance, but what was...
Yes, sir, guidance about FY '25, FY '26, how much you are expecting in revenue and EBITDA margin?
Yes. Like I mentioned, we see that volume to grow here.
Here only. The base of effect if anymore will be taken, I think we are going to grow from here. Definitely it will have an impact on the pricing. As far as the EBITDA margin, it's an ongoing thing because we hope these conditions stabilize. We hope that the Chinese domestic parameters also improve. And if once those things start improving, we are seeing some stability factor coming in. I think the recession which has extended for 2 years, we cap off as we go along. That's what our belief is.
Okay. Sir, one final question, if I can put in. So for the expansion part, so we -- like the previous participants have also mentioned that the Chinese players are adding capacity. But we also are adding capacity. So currently, we are already adding in an oversupply situation in the rubber chemicals market. So could you guide me as to how much potential demand you are sourcing in the future that led to us going for this CapEx decision?
The market growth in terms of the specific products that we're looking at continues to be on a positive trend. And there are markets where we can continue to grow with these products, not only a bit more on the domestic, but also in the international market. So while -- like I just answered one of the earlier questions with regard to capacity is also being there in China, for most products, that has always been the case. But we see that customers would like to also participate with non-Chinese sources and that gives us quite a bit of traction.
Okay. Final question why were the other expenses higher this quarter, like on a Y-o-Y basis. As a percent of sales, it is higher by 140 bps. So like you mentioned in power and fuel cost -- the power and fuel costs are supposed to come down because of [indiscernible] we are going with the [indiscernible], so power and fuel costs were supposed to come down. So could you just guide us why other expenses are high?
Other expenses are not high?
It's in the lower side.
On a Y-o-Y basis, sir, when we compare with sales on a percentage basis, it is higher by 140 bps.
No. Are you looking at in a percentage of turnover or are you looking at an absolute number. If you look at as an absolute number, other expenditure was last year, March '23 was INR 90 crores. This year it's INR 87.6 crores. So it's actually showing a reduction.
As a percentage of revenues, as a percentage of revenue.
As a percent of revenue because the revenue had a higher pricing parameter last year, so that we know we -- the revenue parameters are down in selling prices. So obviously, as a [ external ] percentage of a reduced revenue price if we show a marginal increase in the percentage.
On net income basis, it has come down.
The next question is from the line of Nitesh D from Dolat Capital.
I joined the call a little late, so I'm sorry if I'm repeating. My question is on the key raw material prices. So aniline if you see the prices have further moved up in the last couple of months and so have [indiscernible]. So do we see this margin pressure persisting in the near term? Or have you also taken price increases to be able to offset the RM pressure there?
Yes. So typically, with movement in raw material prices, also the finished goods prices tend to move, and it also played on the supply/demand situation. Yes, you're right, aniline prices did move up, but it's kind of been a bit up and down in the last few weeks due to a different macro environmental reasons. But we see that if the prices moving up, we will also be able to realize that -- with the cost moving up, the prices also can be raised.
Okay. So given the competition and what you spoke about and even your Chinese competitors mentioning that competition even within the Chinese rubber chemicals industry has been intensified and there has been pressure on selling prices, so do we see any fundamental or structural change to the sustainable spreads? I mean is it going to settle lower than where it used to be historically? How do you see this shaping up?
So this is something one of the earlier questions, and we said we get the sense that it's kind of bottomed out and should not go further down this year.
Should not move further down.
Yes.
But coming back to the normal spreads that we used to do historically, do you see that happening in the near term? Or is it likely to sustain maybe at these levels only?
So the possibility is there to come back to normalcy. Yes.
All right. And just one more question. So on the other income in Q4, so that's INR 25 crores, which appear significantly higher. So what does it pertain to?
I think we explained in the investor presentation, that it includes a component of INR 18 crores from a profit on sale of fixed assets.
The next question is from the line of Parth Mehta from Vallum Capital.
Just a bookkeeping question, what is the contribution from exports in Q4 and what will be for the same quarter last year?
Contribution -- sorry, your audio was not clear. Was it contribution of exports to the overall?
Yes, yes, yes.
Around 30% to 32%. Yes.
And for the same quarter last year?
For the last year, I think, at least for the year-on-year for the full year, I would say maybe 1 percentage would have been lower in the previous year. Yes.
Okay. So around last year's same quarter, should be around 30%, 31%?
No, I am not talking about the quarter, but I was referring to the full year as a percentage. Yes.
Okay. Okay. If you could give the quarter, it would be great.
Mr. Parth, does that answer your question?
Sorry. Your audio was not clear. Did it answer your question, sorry?
Yes. I mean if it is possible to give for the quarter, that would be fine.
What exactly you're looking at? The same number for the quarter.
What I have given is for the year, but what is it for the quarter in terms of exports and domestic?
Yes. It's about 23 -- around 23%.
For the quarter?
Yes.
33%, 34%.
[Operator Instructions] The next question is from the line of Aditya Khetan from SMIFS Institutional Equities.
Sir, the existing capacity, sir, when it is expected to reach peak utilization levels, if any guidance that we can give?
We did have in the past a certain timeline. But I think given the uncertain external environment while we see the ramp-up to happen quarter-to-quarter, difficult to put a finger on a specific timeline, Aditya.
Okay. Okay. sir, on to the export market, sir, when we are hearing commentaries from other chemical players, so they are indicating that the exports market is still weak. And Europe and U.S., so materially, there has been not an uptick. Sir, but our volumes like it is showing a good growth into the exports market. So what is driving our growth?
Yes. So like I mentioned a little while earlier, you're right about the overall environment not being that conducive. But still, with the work that's gone on in the last few months in terms of engagement with our strategic customers, these are showing results, and that's what we see is gaining traction.
And sir, this new capacity expansion, which we have outlined. So when this is expected to get commercialized?
We actually -- we have said in 2.5 years, we'll be commissioning it and it depends on the approvals both thereafter from the customers. So while we expect our endeavors to complete faster, so maybe '26, '27, some part of the last second half or later half something like that you can expect commercials.
Okay. And sir, apart from the existing business, is there any new expansion into new chemistry onto the pipeline right now, which we might take up say in the next 2 to 3 years?
Yes, yes. We've been looking at it, again, moving to the earlier question, what is under progress on that front Aditya.
[Operator Instructions] The next question is from the line of Nirav Jimudia from Anvil Research.
Sir, my question is on the operating leverage, which we have achieved in Q4 of FY '24. So if you see on a per kg basis, our gross margins would have fallen, but some portion of those lost gross margins were also recouped in terms of the benefits of operating leverage. One was visible in the employee cost. So apart from the employee cost, where was the benefit coming from? So it is predominantly from the power side where our power cost has come down? Or was it because of some other factors because of which we have seen the conversion cost on a per kg basis coming down?
So you may recall also, Nirav, in one of the last calls, we were talking about operational excellence initiatives in our manufacturing. And this is coming from our utilities benefits that we have looked at efficiencies and areas to improve. So that is actually showing up in the other expenses coming up.
So sir, if we see our utility cost at the start of the year, probably when we started this financial year and how we ended this financial year, how much of the utility cost would have come down in some percentage terms, if you can just highlight on that?
So while there is -- it's a combination of also a certain price benefits on the utility per unit basis, but also efficiency measures coming in, I would say, roughly about -- yes, just working on the percentage, just to 1 sec -- it was around 15% to 20%.
Sir, is our power cost also contain some portion of fixed component also whereby when we will start ramping up the volumes, that cost would remain fixed at that point of time and the operating leverage benefit could accrue to us towards that portion of fixed power cost also?
There is expected to be a benefit because we're also working on power cogeneration. And so that's also going to add to it as we keep increasing our volumes.
Sir, last from my side is on the freight cost. I think what we have seen over the last few weeks and months is that the freight costs have gone up substantially. Even the container shortages have been prevalent. So is it affecting us or whether our contracts are built up in view of those increased freight costs where it won't impact our contribution margins? Some sort of thought process on the same would be helpful.
Also, I think it's not very significant, and we have also been able to discuss with customers on how this can be mitigated. So that's also kind of played in. We don't see any significant impact on account of that.
[Operator Instructions] The next question is from the line of Rohit Nagraj from Centrum Broking Limited.
My question is on the industry front in terms of the molecules that are being used in accelerators or antioxidants. So correct me if I'm wrong. These molecules have been in the industry since past maybe 50, 60 years. So has there not been any new molecules which have been developed by the industry over the last few years? Or are there any areas where such an R&D is going on to replace the existing set of molecules with maybe better characteristic molecules? Just your broader thought process on this.
Yes. Thanks, Rohit. Yes, you're absolutely right. I think some of these molecules are there for the last 50 to 60 years. I think partially, we can also say that these have been real strong workhorses that it's also been very challenging to get better ones than this from a performance point of view. There have been those small tweaks over the years in terms of the restrictive substances where you've got changes in the molecules that have happened fundamental changes.
So that -- and also the other part on account of that is that you've got -- it's a lot of safety related and a lot of testing and years of application testing before we -- any molecule or product sees light of the day and then the ramp-up on production capacity. So it's a pretty long road way, which is also actually one of the other contributing factors, but there is scope coming to the latter part of what you said. There is scope in terms of spaces of innovation. We are working on those spaces where we can add value to our customers. But it ties its own runway like I just mentioned about the testing, application, safety, and I think it's all related to safety so everybody wants to be very sure.
Sir, second question is in terms of the operational efficiency through improvement in processes. So I mean, generally speaking, it's an ongoing exercise. But given that we have been doing this since a fairly long, most of the benefits are now in place and incrementally, there will be only marginal benefits which will come from any such peaks? So just your perspective on this.
I think we have over the years like you said, I won't put my finger and say that there will only be marginal impact from here on because we continue to keep working on it. And I'm always positive that we will find more and more areas in that space. So I'd never say that we have reached a certain plateau.
[Operator Instructions] As there are no further questions, I would now like to hand the conference to Mr. V.S. Anand for closing comments.
Thank you. Thank you very much, and thank you for all your questions. So I take this opportunity to thank everyone for taking a valuable time to join this call. I hope we've been able to address all your queries. For any further information, kindly get in touch with me or Strategic Growth Advisors, our Investor Relation advisers. Thank you once again, and have a nice day.
On behalf of NOCIL Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.