PCBL Chemical Ltd (PCBL) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day, and welcome to the Q2 and H1 FY '27 earnings conference call of PCBL Chemical Limited, hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I would now hand the conference over to Mr. Sanjesh Jain from ICICI Securities. Thank you and over to you, sir.
Sanjesh Jain (ICICI Securities): Thanks, Muskaan. Good afternoon, everyone. Thank you for joining on the PCBL Chemical Limited Q2 FY '27 results conference call. We have PCBL Chemical management on the call represented by Mr. Nilesh Koul, Managing Director; Mr. Rohit Narang, CEO, Aquapharm Chemicals; Mr. Raj Gupta, CFO; and Mr. Pankaj Kedia, Executive Director, Investor Relations. I would like to invite Mr. Nilesh to initiate the call with his opening remarks, post which we will have a Q&A session. Over to you, sir.
Nilesh Koul (PCBL Chemical Ltd): Thank you so much, Sanjesh. Good afternoon, everyone, and thank you for joining the PCBL Chemicals Q2 FY '27 earnings call. Before I get started on that, I'd like to extend my warmest wishes to all of you for the festive season ahead.
Nilesh Koul (PCBL Chemical Ltd): Going back to business now. The September quarter was marked by volatility in carbon black market with crude price movements influencing customer purchasing patterns. Geopolitical developments, particularly the conflict in West Asia and between Russia and Ukraine continue to disrupt trade routes, elevate freight costs and influence customer destocking decisions. Amid this market condition, we remain focused on factors within our control: pricing discipline, cost management, and reliable customer servicing. Despite the volume headwind, we delivered and grew revenue by 12% to to 310 crores and profit after tax to 20% to 74 crores, a testament to the improved pricing discipline and cost optimization effort. Sorry, just just give me a sec. Amid these market conditions, we remained focused on factors which are within our control: pricing discipline was maintained, cost management, and reliable customer services. Geopolitical developments, particularly conflict in West Asia and between Russia and Ukraine, continue to influence energy markets and trade flows. In fact, in some cases, the supply chain supply chains are getting derouted with crude movement from Middle East being disrupted. There is a change in trade patterns for crude coming in from the US to Europe. For our business, the impact has been felt through changes in feedstock costs, shipping expenses, and customer destocking decisions. Some customers continue to maintain lean inventories and adopt a wait and watch approach amid expectations of softening prices, adding to the pressure on quarterly volumes. Freight and logistics costs have risen very sharply with shortage of vessels, availability, and longer transit times. Longer shipping routes are increasing ton miles, while higher freight rates and war risk premiums are adding to the landed cost of feedstock. We are balancing customer commitments with realization and remain selective while logistics costs make the economics less attractive. Let me briefly touch upon the quarterly performance before going into other details. I mentioned this earlier, but let me repeat it again. Consolidated revenue grew 14% year on year, EBITDA grew 12%, and profit after tax grew 20% during the quarter. Just quickly going back to the global carbon black industry and feedstock trends. Coal tar prices have firmed up in China, increasing production costs for carbon black manufacturers. This should in the medium and long term support prices in in in Southeast Asia. Disruption of Russian refineries continues to impact availability of CBFS. As we highlighted last quarter, Russian refineries throughput has fallen to multi-decade lows with a meaningful share of capacity offline. This shrinking of of the Russian supplies is impacting both their export of carbon black as well as CBFS and keeping global feedstock availability relatively tight. This should hopefully also support higher realization in the market. Now, on the domestic demand exports and exports, domestic demand continues to be supported by strong OEM performance, steady replacement demand, and active activity across key automotive segments. However, cautious procurement and inventory management by customers is affecting volumes during the quarter. With capacity utilization in domestic carbon black industry inching up, we can reasonably expect some improvement in spot prices and margins going forward. In the international markets, we are maintaining price discipline, while elevating freight costs are impacting the economics of serving customers. Our focus is to maintain strategic customer relationships and protecting realizations while pursuing opportunities where commercial returns are appropriate. We are strengthening our presence in Europe and North America through Antwerp warehouse and US entity, improving supply chain flexibility, customer engagement, and local support. Our power business continues to support the overall operating model. Short-term power tariffs remain elevated and we continue to benefit from the same.
Nilesh Koul (PCBL Chemical Ltd): provide potential support to vehicles and tire sales. However, tire manufacturers continue to face elevated raw material costs, not just carbon black, but on on elastomers and rubber as well. So, while overall cost inflation the OEM and replacement market is adding to cost pressure, price increases by them into the market is not fully passing through and that keeps pressure on on their margins going. Capacity expansion across tire industries remains encouraging, and leading manufacturers operating at healthy utilization levels and progressing their planned CapEx. This supports our confidence in the underlying demand outlook for carbon black. On specialty carbon blacks, during the quarter specialty carbon blacks operations is impacted by global uncertainty, elevated oil prices, and higher freight costs, which affected trade flows across key markets. Despite these external challenges, we continue to make meaningful progress on our strategic growth initiatives across products, applications, and geographies. In the interim, we are exploring opportunities to reallocate volumes across customers and markets, while remaining well-positioned to scale up supplies as conditions normalize. In parallel, we are deepening customer engagement through technical collaboration, solutions-led offerings, strengthening supply chain, and integrating into customer product development roadmaps, enhancing long-term customer stickiness. Expanding the proposition of business covered under long-term supply and offtake arrangements with strategic customers remains a key priority, improving revenue visibility, reducing demand volatility, and supporting a more predictable earnings profile. These initiatives, combined with our expanding market reach, position us well to drive profitable growth and steadily increase the contribution of specialty carbon blacks to our overall portfolio. A little bit of a deep dive into our advanced battery materials business. Our battery materials strategy is progressing from advanced materials to integrated high-value solutions for the lithium-ion battery industry. Through Nanovace, our 51% joint venture with Australian technology partner Kinaltek, we are developing high-purity nano-silicon using a proprietary chemical reduction process with the potential for lower cost, lower carbon manufacturing. Silicon of course offers 10 times the ener- energy storage capacity of graphite, 35 3,579 milliampere/gram versus 372 for for for graphite, creating opportunities for high energy density and faster charging. However, managing silicon's volume expansion of up to 300% remains a critical challenge. That's where our innovation and program is focused on overcoming these limitations. Our pilot project in Palej has started creating some samples, making an important mark milestone in the scale up of the technology. Materials produced as the facility are currently undergoing internal qualification to be followed by customer evaluation and validation. This represents a significant transition from laboratory scale technology pi- development to pilot scale manufacturing, strengthening the foundation for future market adoption. There is another change from last time. We are now moving beyond nano-silicon additives to silicon-carbon composite solutions as well, combining PCBL's expertise in engineered carbons with Nanovace's silicon technology. Our objective is to improve conductivity, manage expansion, enhance cycle life, and delivery deliver commercially scalable anode materials. Development is progressing across Palej, Belgium, and Australia, leveraging complimentary capabilities in electrochemistry and carbon engineering. Just for reference, the global silicon-carbon anode market, estimated at approximately $1.2 billion in 2025, is projected to grow at over 25% annually through 2035. Together with our conductive carbon black and acetylene black programs, this positions PCBL to capture a large
Nilesh Koul (PCBL Chemical Ltd): some of those parameters. Consolidated carbon black sales volume was 1,34,180 tons, revenue from operations stood at 2,474 crores, EBITDA was 310 crores and profit after tax was 74 crores. Domestic carbon black volume was 92,843 tons, while export volume was 41,337 tons. Within the carbon black portfolio, tire grades contributed 77,914 tons, performance chemicals 39,698 tons, and specialty grades were 16,568 tons. Power generation was 186 million units, of which 108 million units were sold externally at rupees 5.34 per unit. We reiterate our guidance of double digit growth in average EBITDA per ton over FY26 levels. We remain committed to that guideline. Through the quarter, our focus was to maintain the impact of market volatility while maintaining operational efficiency and customer commitments. Now, a little bit about Aquapharm and I'm going to hand over to Rohit, but before I do that, I'd like to highlight a few priorities of Aquapharm. Green chelates continues to perform well, while PBDC is moving into its next phase of ramp-up. We're also focused on improving capacity utilization and accelerating customer validation for the newer products. These measures support our FY27 target of double-digit revenue growth. I now invite Rohit to take through the Aquapharm performance for the quarter and its priorities going forward. Rohit, over to you.
Rohit Narang (Aquapharm Chemicals): Thank you, Nivesh and good afternoon, everyone. At Aquapharm, our focus is on improving utilization of existing assets, strengthening our product mix, and converting ongoing initiatives into growth. We are working towards double-digit revenue growth for FY27 supported by execution, customer deployment, and new products. Let me first take you through the second-quarter numbers. Aquapharm reported sales volume of 24,253 metric tons, revenues of Rs. 433 crores, and EBITDA of Rs. 42 crores in Q2 FY27. During the quarter, home care sales volume increased by 7% on year-over-year basis. Both the water solution and oil & gas segment reported a 20% year-over-year decline while remaining steady sequentially. Application specific solutions posted strong double-digit growth of 15%. Green chelates continue to do well and remain an important area of growth. We are progressing customer engagement and commercial opportunities in this portfolio, gaining customer qualifications, especially in the US and Europe. At the same time, we are experiencing very strong demand for our PBDC product room and working to increase its contribution to the business. On the raw material front, we have expanded our critical raw material inventory coverage to protect our supply chain against ongoing market volatility. While proactively managing input risk is vital to prevent operational disruptions, we have preserved our margin profile through rigorous price realization and commercial discipline. Moving forward, we will maintain a disciplined balance between robust supply security and optimal working capital efficiency. Concurrently, we are conducting a comprehensive pricing review across our portfolio and regional markets, executing rationalization measures where necessary. Our objective is to ensure swift pass-through of input cost dynamics, protecting product margins, and enhancing overall revenue quality. Driving higher plant capacity utilization remains a core operational priority, enabling us to unlock greater operating leverage and efficiency as volume momentum builds. Our strategic focus on innovation is beginning to deliver tangible results, highlighted by our first commercial order for synthetic thickeners. Concurrently, we are actively advancing customer qualifications for our biocides and corrosion inhibitors with key US and key with key US oil and gas operators. We are systematically expanding our advanced products pipeline and collaborating closely with customers through trials and technical approvals to accelerate market adoption, drive profitable growth across our applications-led portfolio. In Saudi Arabia and the wider Gulf, we continue to position ourselves for shifts from thermal desalination to seawater reverse osmosis technology.
Rohit Narang (Aquapharm Chemicals): known as FWRU technology. We are accelerating our account approvals and building out our auto-focused portfolio consistent with the progress we reported last quarter. Our actual focus and priorities are scaling green pellets, ramping up PBTC, improving utilization and strengthening raw material security. With that, I'll hand back to Nilesh for the outlook and closing remarks. Over to you, Nilesh.
Nilesh Koul (PCBL Chemical Ltd): Thank you, Rohit. Looking ahead, we remain constructive on the medium term opportunity. The structural tailwinds, India's expan- -ding markets and the contraction in refining and carbon black exports from Russia, continue to play directly to PCBL strength. Scale, reliability, a global supply chain and an expanding speciality portfolio. In the near term, we expect buying patterns to improve gradually as customers gain greater clarity on prices. Continued disruption to Russian refining operations is expected to keep global CBFS availability relatively tight, supporting a more balanced industry environment and healthier spreads. We remain constructive on a strong and strong second half while recognizing that the timing of recovery will depend on market conditions. To sum up, Q2 was shaped by geopolitical disruptions and cautious customer buying. But our focus on pricing discipline and cost optimization delivered improved financial performance despite volume headwinds. We optimized our cost, product and geographical mix to manage the margin portfolio effectively. On the cost front, we continue to drive efficiencies across our operations through targeting cost saving measures and yield improvement with a focus on improving overall cost competitiveness. We continue to focus on a disciplined core carbon black business, diversifying our specialty portfolio, and progressing our advanced battery materials platform. Thank you fo- for your continued interest and support. We'll now be very happy to take any questions from you.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question may press star and one on their touchstone telephone. If you wish to remove yourself from question queue, you may press star and two. Participants are requested to use handsets for asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rohit Sinha from Sunidhi Securities. Please go ahead.
Rohit Sinha (Sunidhi Securities): Yeah, thank you for taking my questions first and congratulations for good set of numbers. As we have indicated in Q1 call also that lot of inventory where we are in Q1 and Q2 there would be some bit of inventory built up. So, just wanted to understand how has been the inventory situation for us in this quarter and considering the rising price in China how how much we have been passed on in this quarter and how much we will be seeing the impact in the coming quarter?
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