Sudarshan Chemical Industries Ltd
NSE:SUDARSCHEM
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
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 |
452.05
1 201.1
|
| 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.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Sudarshan Chemical Industries Ltd
You don't have any saved screeners yet
Ladies and gentlemen, good day, and welcome to the Sudarshan Chemical Industries Q2 FY '23 Earnings Conference Call hosted by Axis Capital Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Ankur Periwal of Axis Capital. Thank you, and over to you, sir.
Thank you, Inva. Good morning, friends, and welcome to Sudarshan Chemical Industries Limited Q2 FY '23 Post-Result Earnings Call. The call will be initiated with a brief management discussion on the quarterly and first half performance, followed by an interactive Q&A session. Management team will be represented by Mr. Rajesh Rathi, Managing Director; and Mr. Nilkanth Natu, Chief Financial Officer. Over to you, Rathiji for the initial comments.
Thank you. Thank you, Axis Capital and Ankur Periwal for hosting our earnings call. Myself, Nilkanth Natu, I will be giving the opening remark. So good morning, ladies and gentlemen. Welcome to Sudarshan's Q2 FY '23 Earnings Conference Call. Our investor presentation has been uploaded on the stock exchanges for your daily reference. I would like to take you through the financial highlights for this quarter.
It was indeed, again, a very challenging quarter, both on the sales as well as margin trend. On a consolidated basis, total income from operations stood at INR 528 crores as compared to INR 498 crores for the same period last year, reporting a growth of 6% year-on-year. EBITDA for the quarter stood at INR 43 crores compared to INR 53 crores in Q2 FY '22. EBITDA margin stood at 8.1% as compared to 10.6% over the same period last year. Profit after tax is at INR 5 crores compared to INR 23 crores for the same period last year.
On half yearly basis, total income from operations stood at INR 1,083 crores versus INR 972 crores in the same period last year, a growth of 11%. EBITDA for H1 is at INR 84 crores versus INR 115 crores last year. And EBITDA margin is at 7.8% versus 11.8% over the same period last year. PAT is at INR 12 crores compared to INR 49 crores for the same period in the last year.
Now going into the details of our Pigment business. For the quarter, income from operations stood at INR 476 crores as compared to INR 448 crores for the same period last year, a growth of 6% year-on-year. However, most of this increase is due to price corrections and there have been volume degrowth both in India as well as export markets. India sales for the quarter is at INR 235 crores as compared to INR 239 crores in the same period last year.
We have continuously buying decisions deferment by the customer due to volatility in overall prices, which has resulted in lower inventory levels at the customer end. Especially in the Plastic segment, it has impacted due to the volatility in polymer prices, which remained throughout the quarter. In the Coatings segment, all the coating companies were a bit in Q1 about the season and generated healthy demand and increased the inventory levels. Unfortunately, due to the extended monsoon, demand for paint did not pick up as anticipated.
Growth was seen in -- growth was seen more in economy and commodity product segment of the Coatings industry, which is economy, emulsion undercoat, et cetera, where we have a lesser presence. Overall, this has led to the lower demand generation for our product as majority of the coating companies optimized its requirement from the inventory buildup in the quarter 1. However, our market share in coatings and plastic has been well maintained.
Export for the quarter is at INR 242 crores compared to INR 209 crores, a growth of 15% year-on-year. However, geopolitical situation due to Russia-Ukraine war, supply chain constraints, tightening of the monetary policy by majority of the central bank to control inflation, rising interest rates are leading to subdued demand across majority of the region. Europe has witnessed major demand disruption, and China's zero COVID policy has also led to overall demand contraction.
Speciality segment sales stood at INR 331 crores as compared to INR 302 crores for the previous year, same quarter, up by 9%. Non-speciality sales for the quarter is at INR 145 crores as compared to INR 146 crores for the same period last year. Gross margin for the quarter is at 39% as compared to 44% for the same period. Raw material prices during the quarter were at relatively stable level, driven mainly due to lower demand and subsequent price corrections of majority price drivers, such as Brent crude, benzene and [ solvent ] prices. However, due to higher inventory level, we could not accrue this benefit immediately.
Apart from the raw material costs, we continue to see energy cost at an elevated level. Coal prices have gone up further, and this is pushing up the manufacturing cost. EBITDA for the quarter stood at INR 39 crores as compared to INR 50 crores in Q2 FY '22. And the margin -- EBITDA margin is at 8.2% compared to 11.2% over the same period last year.
As mentioned earlier, overall geopolitical scenario and tighter monetary policy resulting in subdued demand, leading to volume degrowth in certain segments and geographies, this has also resulted in pricing pressures leading to short pass-through of the cost increases. Both these factors have impacted margins, both in absolute as well as in percentage terms.
Given the difficult external environment, management is aggressively focusing on structural cost reduction initiatives, which has reflected in the EBITDA margin percentage for the quarter, with direct as well as indirect cost -- material cost pressure lingering. We will have to continue with our pricing decisions with calibrated approach to balance on volume growth.
Now coming to CapEx projects, which is our test for future growth. We are in a growth phase to implement overall CapEx of INR [indiscernible] crores, out of which we have put to use assets worth INR 620 crores till now, balance INR 110 crores projects are in CWIP. All these projects are at advanced stage of completion, and we expect commercialization soon. About 85% of our CapEx has been put to use and started generating a good demand.
For the new product CapEx, we are getting the good responses from the customers, and these products are at advanced stage of customer evaluation. However, due to demand contraction, the revenue ramp-up is slightly getting delayed. In the midterm, the management remains confident to accrue the benefits as these are the specialty product and should generate good demand and product line remains very attractive.
I will just hand it over to Mr. Rathi for his view on the midterm.
Thank you so much, Mr. Natu. I think the current results should be seen in view of the global situation. But however, the midterm to long term, the company sees a very bright perspective given that we have built the broadest portfolio in the industry, and we've also built good techno-commercial capabilities. So we do expect midterm and long term to kind of look at improved margins. The matter is, it's a little difficult to predict when this turnaround would happen given the current geopolitical situation. But as soon as I think demand is back, all our CapExes [ start firing, ] we should be able to see a far better situation.
Yes, over to you, Mr. Natu.
Yes. Thank you, sir. So thank you for our participants. We look forward to our -- continuing our growth journey and delivering value to all our stakeholders. With this, we now open the floor for question-and-answer session. Thank you.
[Operator Instructions] We take the first question from the line of [ Sharan Andipul, ] an individual investor.
My first question is, as the -- as you mentioned, the energy costs are high, which is impacting the margin and profit. How long it is going to be there as per your view? And also, like -- from when you will be able to pass on the price to the -- your customers. Hello, am I audible?
Yes, yes. So -- this is Rajesh here. I think given the -- given -- like I mentioned during the current situation, we do see the India demand to be improving. However, the global context, the geopolitical situation kind of continues to be intense. And we do see a contraction of demand, especially in Europe and China. Given this context, I think probably Q3, we expect some improvements in the research. We are taking a very cautious stance where we increase prices but don't lose volumes, right? So we are maintaining a very delicate balance there.
Okay. And second question is on the 2 of your competitors who are exiting this domain. So from when exactly we are going to get benefit from them and you will see the profit and additional volume coming to you because of the exiting business?
Sure, sir. There's a balance of headwinds and tailwinds. So there are several headwinds because of demand contraction, et cetera, but there are certain tailwinds like some competitors exiting the business and also the high energy cost in Europe, right? So this should give us some tailwinds in the coming quarters that our competitors will not be competitive, but there's a balance between the headwinds and tailwinds. So we do expect certain benefits to start coming especially from Q4.
Okay. Yes. And last question on the new product launch last year, I think a couple of quarters, we have launched a new product, right? of -- Can you through some light on those like new products from when they are going to give you a benefit? And the capacity utilization will be -- from when it will be almost full for the new product?
Yes, sure. I think several of the -- like we shared in our commentary, several of our new products are just being put to use. There are 2 product lines still being put -- still we have to put to use. So there is a good attraction of demand for these products. However, given the slowdown, there is a certain -- the sales activation is at its low. The one product, yellow product, which we had launched some time ago that we are able to hit our targeted volumes and we are able to get good response for that.
Our next question is from the line of Ankur Periwal of Axis Capital.
Yes. So first, if I look on the revenue side, on the domestic side, we're seeing decent volume or revenue growth until Q1. But there is some slowdown now. Is it largely led by the demand pushback that you talked of earlier? Or if you can probably share your thoughts on the segments -- the key segments in domestic market?
Sure. So basically, sir, in the India market, I think what we have seen is that basically -- in the Plastics segment, we have seen a big -- either differing the decision because polymer prices were dropping. So inventory in the supply chain was very low. Or the second thing is there was polymer ability issues in Q1, right? So the plastic demand there has been very, very sluggish there.
In terms of the Coatings, the economic Coatings segments have been -- have increased more than the premium where our products play, right? So that's where we see a little bit of the demand contraction. However, I would like to [indiscernible]. We have not lost our market share or we've not lost any of our wallet share. So we are keeping a very close eye on that. And it's just given the current situation, and as I mentioned, we are already seeing some improvement in demand in the India market.
Sure. And similarly, on the international side, the numbers are broadly, we are -- we have been able to manage the quarterly run rate there. But as you mentioned, there is a volumetric decline and, pricing-wise, there is an improvement, which is where the growth is coming from. Any thoughts with respect to specific geographies? Maybe Europe, is it more? Or if you can provide some color there?
Sure, sir. I think Europe and China as -- Europe and China has been hit. Europe because of the energy crisis and the demand contraction in Europe. In China, given the zero COVID policy, I think demand has been very, very subdued. Also, there is an antidumping duty proposed on phthalocyanine pigments for -- by China -- is levered by China on all the Indian producers. So these have hit us and the industry quite badly. Natuji, you would like to add something.
No problem, okay. So Ankurji, as we have mentioned that the export demand remains subdued. And with this overall tightening monetary policy, the inflation rate is higher, interest rates are going higher, we see that the demand will remain in the same range. The regions which we mentioned impacted was Europe wherein we saw the demand contraction. China, as Mr. Rajesh Rathi has mentioned, has been due to zero COVID policy has been the demand disrupted. The new one, which is the antidumping, which we have mentioned on the phthalocyanine for the India exporter to China. This is something we have to watch out for.
Sure. And sir, if you can share the broad revenue breakup, as in revenue contribution coming from Europe and China put together?
So Ankur, Nilkanth here. So we don't give the breakup region-wise, but Europe being our major subsidiary, it is a material subsidiary. So that portion is available in the public domain, but we don't give it right now here.
Sure, sure. And sir, lastly, on the CapEx that is coming for a completion. So CWIP of around INR 190-odd crores. A large part of it or maybe the entire, this CWIP will be put to use by the end of this financial year? And secondly, on the new product side, if you can share your thoughts in terms of product approvals and how the clients have been taking it, both domestic and international.
Yes, sir. I think most of the CapEx should be put to use by December end. In terms of -- if you look at our CapExs, most of the new product CapExs are getting put to use now. So we expect that there is a good product -- the product -- like Natuji mentioned, the product approval cycle is working well. However, due to the sluggish demand, we are seeing a little bit of a slow demand. That's one area. The yellow pigment which we had launched earlier, we are seeing a very good demand -- and very good demand. And as per expectation, we are kind of looking at that. The -- some of the conjoined investments which we have done for improving our EBITDA, those are not playing out well because of the coal price increases. So all those benefits which we had approved for that, that's not playing out well on those.
[Operator Instructions] Our next question is from the line of Meet Vora from Axis Capital.
My first question was on the gross margin side. So Q-o-Q or Y-o-Y, we are seeing around 300 basis points dip in our gross margin, primarily because of high-cost inventory that we have maintained because in a deflationary environment [indiscernible] have been falling. So your view on that. And secondly, on cost-control measures, what specific things we are doing? So that -- how are you going to look at overhead going forward?
Nilkanth here. So on the gross margin, the year-on-year gross margin percentage, what you have seen is 3% to 4%, this is down. But last year, H1, it was a period where the inflation has just started in terms of the cost inflation and where pricing pass-through was happening, and we were able to push the prices early in the market. So that was a trend. But if you really see the Q3, Q4, the gross margin has settled in the last year in the range of around 41% to 42%.
If I see the quarter-on-quarter gross margin reduction, it has been around [indiscernible] plus. This has been majorly because we have seen the raw material prices getting stabilized. We had some raw material inventory. At the same time, considering the subdued and lower demand in the market, we have to take those calls to have our market share and volume protected. So there has been a short pass-through in terms of maintaining that volume, which has been a conscious call. We see that this should get revised over a period once we start the demand getting picking up. And we see raw material prices to be stable. At a given point of time, we really don't know how again the geopolitical situation will play out.
But with this, we should see some bit of traction and gaining the momentum in the coming quarters. In terms of the cost reduction, considering this difficult external environment, we as the management has taken various structural cost initiatives. And we are looking at all the cost which are fixed in nature or which can be controlled irrespective of whether it is a manufacturing or whether it is an employee or whether it is any other costs. So those cost initiatives are put in place, and we are rigorously monitoring that. We expect some benefits also -- this benefit should come in place. If you really see our EBITDA percentage, while the sales has been low compared to Q1, the EBITDA margin is at around 10%, so it shows that cost has been tightly [ controlled ] and we will continue to monitor that. Thank you.
Our next question is from the line of Dhruv Muchhal from HDFC Mutual Fund.
Yes. Sir, the question was in some of the products where China is dominant, we are seeing that because of their local weakness, they have become more aggressive in exports. So sir, is there any similar trend that you see even in pigments for your domestic market and probably even in Europe? And if you can -- if that is true, what is the level of intensity, if you can give some thought there? I mean has the -- I mean the low on pricing already achieved or still the aggressiveness continues? Or where are we in that phase, if it's there?
So we do see some aggressive pricing in -- within India and in the Middle East region. But I think the other regions, we don't see that so much happening from India, right?
Okay. So China is not very intensive. I was trying to understand -- I mean the China intensity is not being...
China intensity. Sorry, I didn't understand your question. Then, I am hopefully...
I was trying to understand, I mean, some of the other communities, we see that China is -- because of the local weakness, we are exporting a lot in other countries.
Absolutely. Given the very weak demand in China, China has especially been very aggressive in Southeast Asia, right? In U.S., there is an antidumping duty, so that doesn't work out much for them. But in Southeast Asia, we've seen a lot of aggressive pricing from -- And especially the [indiscernible] from China.
Yes. And Europe and some comments on the intensity of this. I mean where are we in this phase of the aggression...?
So I think even the -- in terms of -- I think China has already hit the bottom. I don't see this happening more. And that's where we have been trying to maintain our volumes. In some of these countries, we are still sticking to the wicket. And even if we have to manage with a lower margin there, right? This -- we are looking at -- we are hoping that some of the China demand revise. The zero COVID policy is looked into, et cetera, the demand normalizes there. And then I think China should become a little more less aggressive, right?
Sure, sir. And related to this is -- so there was also an issue at least for last 3, 4 quarters that the RM prices are very high and increasing consistently. So given the demand weakness, do you see a relief on RM prices? I understand the demand can be weak, volumes can be weak, but can there be some offset from RM price decline? Or are the RM products something which goes into many products, so there's not pigments which influences the RM pricing and hence, we will not see a significant influence?
So we are seeing a shortening of our RM prices and some of the customers do expect to pass that on given that we had increased some of these prices. So on a selective basis, we are looking at where the opportunities and we do pass those on, right? But we are seeing a considerable softening in the raw material prices monthly? Yes...
Okay, that will not lead to meaningful, given the situation in your view, given the demand situation, given improvement in the gross margins, given the...
So I think the question really comes in is how does volume a little bit pick up, and that's where we will be able to kind of -- for the industry, everyone sees the volume, and that's how we would be able to improve the gross margin going forward.
Got it, sir. Sir, last 2 questions is, earlier, we were also impacted significantly because of the high sea freight rates in Europe and U.S., and which have been our major markets for exports. Now we have seen they have come down very significantly, although probably a bit still higher than the pre-COVID levels. But do you see any benefit from that in terms of your competitiveness to the markets now?
Surely, sir, you rightly said they softened, but not to the original levels. And we should be -- we should see a favorable -- we should see that favorable for us going forward.
Sir, can you give some quantitative sense just for us to understand how -- what was the impact -- [ pre-COVID, ] what was the cost? How did it change post-COVID, I mean the peak of the sea freight and what it would be now? Just trying to understand how -- what was the impact for us and how can that change?
[indiscernible]
Just 1 second.
Sir, relative sense. I mean I understand we get the numbers for the sea freight, the index numbers, but how does it impact us in terms of probably per kg of our product or percentage of our product that way?
Nilkanth here. So like -- we will not be able to share the specific on the call, but if I see the freight prices and that too in terms of the export market, the issues were twofold. One was the container availability, that is a logistic challenge, and second was the type of getting rates. We had seen for particular segments to Europe and U.S., rates has been going up as high as 300%, 3x the cost, which we had seen during the pre-COVID stage.
While we are seeing the softening of this particular freight rate on the select routes, it is still above the pre-COVID level, but it is not what we have seen as a peak, which is 3x. It is now coming in an average range of 150% to 200% in between that range. But we see the softening. And majority of the softening of this rate has happened during Q2. That is a late part of Q2, from August onwards. We will see the benefit to come in, in the coming quarters.
Sir, because even in the annual report, I don't get the split of expenses of freight and forwarding, so I'm just trying to understand what will be pre-COVID levels as a percentage of sales? What did it change to? And what can it be in the future? Just to get some quantitative sense in terms of what the implication could be.
But one part here, as a percentage to the sale, we were able to maintain the percentages to some extent...
[indiscernible] going forward.
Going forward, we'll look at it what can be shared and then we'll put it on -- we'll look at it, what can be shared and then we put it on. We will look at the [indiscernible]
Sure, sir. And sir, one last question just to squeeze, is your new products, say -- I understand some products are still ramping up. But in your yellow pigment, the newly launched yellow pigment, do you see the margin profile similar to what you were expecting or you were targeting? Or any comments there?
Sure, I think basically, the pricing which we expected, we are getting that. Some of our initial costs were a little higher because of the [indiscernible] issues, et cetera, in yields in terms of conversion costs, which the team is working on it, and we see going forward to attain those margins, right? And it should be in a very short term that we should be able to attain those margins?
We'll take our next question from the line of Viral Shah from Enam Holdings.
Sir, I have a few questions.
I'm sorry to interrupt. Mr. Shah, we can't hear you clearly.
Is this better? Hello?
Yes, yes.
A few questions from my end. Firstly, sir, on the volumes, while I appreciate that you do not share the volume numbers, but can you just help us understand, from the peak volumes, now how much our volumes will be down?
On a quarter-to-quarter basis, our volume is down by about 9%.
Okay. Okay. But from the peak, would we have seen a 20%, 25% drop in volumes or that would not be the case?
I think we look at it, sir. We're going to have an answer of that.
Sure, sure. Sir, secondly, just on the raw material side, we believe that we've seen possibly the peak of raw material prices. So would it be possible to share as a basket what is the kind of price decline that we've seen on our raw material side?
Viral, can you please repeat your question? There was some disturbance.
Sure. Sir, just on the raw material side, I wanted to understand as a basket of raw material, how would our raw material basket have behaved? So let's say, if it was 100 in August or September, what would it currently be?
So we have a wide -- so Viralji, it's a difficult question to answer on a call. We'll study how we can kind of publish this information.
Okay. But at least the key raw materials, would we have seen a single-digit decline in pricing or a double-digit decline in pricing? Just -- and expenditure could [indiscernible]
In couple of commodities, we have seen a single-digit decline. It has been the early sign of the raw material getting softened. We have not seen the correction to the extent of double digits. It has been this early time, and it has been in the single digit.
Sure, sure, sure. And sir, to one of the earlier questions, you said that there is some RM softening in which we may look to pass on. So just to understand, sir, our EBITDA margins have actually dropped from 15% or 16% to around 8%. And in an inflationary scenario, we were not able to fully pass on the price rise. So once the deflationary scenario is starting, why are we looking to pass on prices? Is it that competitive intensity remains high? Or is there something else that we should be looking at?
So 2 things there. One is given the demand contraction in the market, we want to ensure that we are not losing our market share, right? That's one. The second is the EBITDA margins have dropped also due to lower volumes, right? So as we gain back our volumes, our EBITDA -- the EBITDA should improve, right, with a better leverage on the operating cost. So we are taking very calculated decisions. We are not saying that [ en masse ] we are going to reduce prices to the full extent. We are looking very calculatively where -- what we need to do, et cetera. And as I said, there are certain pigments, because the energy costs in Europe are high, so our competition -- competitors from Europe are significantly looking at a higher cost compared to us.
Sure. Sure. Sure. Just on the demand with -- as you said, the volumes have continued to remain low. So is it possible to throw some light? How the exports are behaving in October and November? While domestic, you did guide that you are seeing improvement, but can you just guide how is exports?
So exports remain currently are at the same level, so we've not seen any improvement in exports like in Europe and China.
Okay. Okay. So just last bit on the clarification, you said China has imposed ADD on Indian imports. So have they already imposed ADD? Or are they still evaluating?
So it is -- so it's a provisional duty right now. And for all phthalocyanine imports, the provisional duty is -- the confirmation will come later, but right now the provisional duty.
And what will be the rate base? Would it be different for different [indiscernible].
Only for phthalocyanine pigments.
So what would that number be, sir?
So it ranges between 14%...
14%. Okay.
[indiscernible] to 19%.
Okay. Okay. And just one last thing, sir, the other expenses during the quarter has seen a drop from INR 135-odd crores that was there in the last quarter to INR 118 crores. Would it be possible to highlight the reason for this?
Nilkanth here. So as we mentioned earlier in the call, we have taken the structural cost reduction initiatives. So that is also helping us during the quarter. And as well as, as we mentioned, the volume has degrowth. There has been some variable costs, which are linked to the production that has also been on the growth side.
Our next question is from the line of Amar Maurya from AlfAccurate Advisors.
Sir, couple of questions from my side. Like firstly, sir, I mean, I know the results are bad, scenario is not that great. But if we see the green shoots which are available to you, first, is that you are talking about domestic business recovery. Second, you are saying that new product launches are seeing good traction, specifically the yellow pigment. I believe where the bulk of the CapEx was there, around INR 350 crores to INR 370 crores.
Second -- and then you are saying international freights because you have the contract in Q2. So from Q3, the international freight prices are also going to decline for us. So don't you see that these all 3 things will bring some improvement in your profitability?
So sir, like we said -- Firstly, sir, I think the figure is not correct, and we've not declared about that the yellow #138 figure. So the figure is not correct. It's not that high, right? So there are several projects, several products which we've gone into the CapExes and several of the CapExes have just got completed, right. So that is one. Of course, there are several tailwinds, and most importantly, a management focus on controlling costs, right? So these are working very well for us.
However, there are several headwinds too, right? So it's a balance between the headwinds and payments, and that's where we are not coming out saying -- and we don't know how this is going to pan out, right? So it's a little difficult to say how Europe is going to come out. We are talking about U.S., we've been doing well, but we are still seeing no contraction of demand there, right? So from that perspective, we are kind of -- we have a neutral view right now. That's where we come through with that?
And secondly, like -- so what is the big problem you are seeing? Are you seeing that the volume degrowth, which you are seeing in the international market, is the big problem for you?
Yes. Absolutely. Yes.
Okay. And are you also seeing the volume degrowth in the domestic market as well?
The last quarter was, and like I said, we are seeing some recovery there.
So basically, let's say, going into the Q3, do we see the domestic volume growth or volume degrowth?
I think we should recover the volumes, whatever was degrown.
Okay. And then sir, then in the international side, basically, don't you see that, as you said, that euro prices, Europe players -- I mean majority of your competitors are European and they would be having their facilities in Europe. And as you said that their costs have increased dramatically. So don't you see that some, of the volume -- because their prices would have gone up significantly high, some of the volumes which we can attract from that business also?
So sir, like I said, these are the tailwinds, right? And there's a balance between the tailwinds and the headwinds, right? And how it plays out is a question. Because as in the earlier question, we also mentioned that China, there is a lot of pre-capacity because of the lower demand within China, right? They are also very aggressive. So there is a balance of that, and that's where we are saying that -- that's why we're seeing there's a balanced view on that.
Okay. So basically, you are not seeing that any early indication -- of this Europe cost prices going up. So you are not likely to get some benefit out of that? Because I believe Europe is the major competition, right, for you in terms of your all players, whether Clariant, BASF?
Yes, yes. So Europe is a competition. I'm saying -- like we are saying, yes, we should get some tailwinds there. Yes, sir.
So because why I'm saying, sir, when the -- I mean when the scenario is negative, everybody is going to see that way only. But I mean I'm just trying to understand that a lot of green shoots [indiscernible] visible for you at this point of time, which may not -- I mean which may not culminate immediately, but at least going into 2 quarters, don't you see that these all tailwinds will basically benefit you ultimately?
Like I mentioned in our opening remarks that midterm, long term, we are very bullish on both -- we have the broadest portfolio. We are in a low-cost region. We have immense technical capabilities, including technical marketing. We have the commercial reach. So I think we have a lot going for us. It's a matter of the current scenario, just the current scenario of geopolitical situation, what's happening, right? That's where we are.
So let's say, sir, going back to Q4, until Q4, don't you -- I mean do you see that something will normalize for us. It's just a 1 quarter kind of a pain, which is just left?
It's very difficult to predict accurately, right? That's why I'm saying that -- so I'm the -- we will not like to make forward-looking predictions exactly. I can tell you directionally what it is, right? Directionally, the fundamentals of the company are very strong, right? So that's where I think we are coming.
And sir, lastly, sir, the new products, like yellow pigment took a lot of time to basically give the approval and pick up. So all the other new CapExs, which we have done, are we going to take same time for that? Or this would be a [indiscernible] faster than the earlier one?
I think it should be faster because the other products go into various industries, not just paints, right? And also, we have lost -- we did have a [indiscernible] issues with yellow 138, which means we are not seeing so much with the other products.
Mr. Maurya, I'm sorry to interrupt [indiscernible] return to the queue. We'll take a next question from the line of [ Jinal Shah ] from Awriga Capital Advisors.
Yes. I'm new to the company. So just wanted to understand a couple of things. The yellow pigment that you spoke about, the new product, can you just talk about it in terms of the differentiating factor there?
Sir, can you repeat your question, please?
Yes, sorry. Am I audible now?
Yes, you are.
Yes. Okay. So I just wanted to -- I'm new to the company. So I just wanted to get a basic understanding of the new product, the yellow pigment, and its basic characteristics versus the other products.
Sure, sir. So this is a very unique Europe high-performance pigment product for mainly the paint application, which has very good weather fastness. There are only 1 or 2 other producers in the world, and probably Sudarshan is the third producer in the world. And this was one of our flagship products, and the first one which was introduced in our CapEx program.
Okay. And lastly, what I wanted to understand was that, in a normal environment, all the CapEx that has been spent, how many years would you take for it to get fully utilized?
Our normal would be 3 to 4 years or so.
Our next question is from the line of Aatur Shah from ICICI Prudential AMC.
So basically, sir, I just wanted a view on -- in terms of margins if you have to take a call, do you think we have hit the bottom and there's a possibility, directionally, we will move up from here? I know quantum will be difficult. But if you have to take a call in terms of probability, how much probability will you assign that margins would directionally go up from here?
Aatur, this is Nilkanth. So yes, given the current scenario and what margin we have reported now, with the outlook on the India market, which should get revised considering that export remains at the same level, raw material prices getting softer and we are able to calibrate our pricing pass-through, we expect that margin should improve. Maybe the immediate recovery may not be seen in the quarter, but over a period, in a quarter or 2, we will start looking at the upward trajectory in terms of our margin.
Our next question is from the line of [ Deep Paul, ] an individual investor.
So my question is regarding the competitive landscape. So can you please comment on some Indian origin competitors and Chinese origin competitors, how they are sharing compared to our product portfolio?
So on an overall basis, I think we have the broadest product portfolio in terms of high-performance pigment, classical yellow pigments, classical phthalocyanines, solvent dyes, CICPs, effect pigments, right? In fact, if you look at our product portfolio, you combine the #1 and #2, that would be our portfolio. Most of the Asian competitors have a very limited product portfolio and also limited capabilities on go-to-market and technical marketing -- Coming to the short-term scenario, I think probably amongst the industry, so I think the industry has been facing a concern currently on both margins and volumes.
As there are no further questions from the participants, I would now hand the floor back to the management for closing comments. Over to you, sir.
Thank you. Thank you, Ankur and Axis Capital, and thank you participants for your time and interest in Sudarshan Chemicals. As we mentioned in the opening para, this has been indeed the difficult quarter and we had seen the H1 being in a difficult H1. However, we remain confident in our longer-term prospects of our business. And we look forward to engaging with you again in the future. Thank you.
Thank you, members of the management. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.