ANALYST MEET
Indo Rama Synthetics
Though Crude Oil prices have moved up to new highs, the PTA (a key raw material) prices are showing downward bias
Indo Rama Synthetics (IRSL) held an analyst meet to discuss the financial performance for the second quarter of 2007-08.
Highlights of the meet
During the quarter, the company achieved 70% increase in net turnover, 97% increase in sales volume, 58% increase in domestic sales volume, 79% increase in production volume as a result of enhanced capacities and penetrating new markets.
During the quarter, the Interest cost grew by 72% due to Debt taken for funding the new polyester plant. Also, the depreciation cost increased by 39% because of commencement of new polyester plant.
The sales volume has grown from 124514 MT in H1 2006-07 to 217777 MT in H1 2007-08. For the second half of 2007-08, the sales volume is projected at 243000 MT as against 181094 MT in H2 2006-07.
Emerging Polyester Scenario
- US Cotton acreage has fallen by 20-25% this year & is expected to fall to further 20-25% next year because of substitution of land by other crops. Therefore,
- Cotton Prices are expected to remain firm leading to higher demand of Polyester as alternative fibre.
- With increasing demand, the operating rate of Polyester Filament Yarn (PFY) is projected to improve to 73% in 2007 as against 68% in 2006. In 2008, it is further projected to increase to 75%. Similarly, the operating rate of Polyester Staple Fibre (PSF) is projected to rise to 80% in 2007 as against 76% in 2006. In 2008, the operating rate of PSF is projected at 84%.
Crude and Raw material outlook
- Though Crude Oil prices have moved up to new highs, the PTA prices are showing downward bias with increasing availability and are expected to remain benign. The PTA capacity is projected to increase from 38.4 MMT in 2006 to 43.9 MMT in 2007 and by 2010, the same is projected at 54.3 MMT. On the other hand, the demand for PTA is projected to increase from 34 MMT in 2006 to 37.5 MMT in 2007 and to 45.8 MMT in 2010. With supply surging ahead of demand, the PTA prices are expected to soften further. Also, the domestic availability of paraxylene (a key input for PTA) is improving with players such as Reliance, IOC and MRPL announcing plans for putting up new Paraxylene plants.
- Although the MEG prices have been on the rise for the past few months, the same is expected to decline from the third quarter with capacities coming up on later half of the year. The MEG capacities are projected to increase from 22 MMT in 2007 to 29 MMT in 2010 whereas the demand for the same is projected to increase from 18 MMT in 2007 to 22 MMT in 2010.
Indian Polyester industry dynamics
- The total PSF capacity in India currently stands at 1.2 MMT. Of this, Reliance Industries is the leader with 60.3% share in the pie, followed by Indorama Synthetics at 25.7%, Bombay Dyeing with 12.4% and Indian Organic with 1.7%.
- The total POY (Partially Oriented Yarn) capacity in India currently stands at 1.9 MMT. Out of total 32 players, the biggest 2 (Reliance Industries with 28.1% and Indorama with 13%) dominate the market with capacity share of 49.2%.
- The Company has been steadily increasing its market share across all the products in its portfolio. For the second quarter of 2007-08, the Company has a market share of 23.6% in PSF as against 18% in corresponding previous quarter. Further, the market share of POY has increased to 12.5% as against 8.6% in the corresponding previous quarter whereas the market share of FDY (Fully Drawn Yarn) and Polyester Chips stand at 4% and 5.4% as against 1.2% and 6.9%, respectively.
Having successfully placed the entire production in the market, the company shall be concentrating in improving the bottom-line. Being present across the entire Polyester value chain IRSL is expected to greatly benefit from the improvement in the industry scenario.
courtesy: sanjib
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