Archean Chemical Industries Limited (ACI) Q4 FY23 Earnings Concall Transcript

Archean Chemical Industries Limited (NSE:ACI) Q4 FY23 Earnings Concall dated May. 29, 2023

Corporate participants:

Ranjit Pendurthi — Managing Director

Raghunathan Rajagopalan — Chief Financial Officer

Rajeev Kumar — Deputy General Manager, Finance

Analysts:

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Sanjesh Jain — ICICI Securities — Analyst

Krishan Parwani — JM Financial — Analyst

Amar Maurya — AlfAccurate Advisors — Analyst

Pritesh Chheda — Lucky Investment Management — Analyst

Amish Kanani — JM Financial Services — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Archean Chemical Industries Limited Q4 and FY ’23 Earnings 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 the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]

I now hand the conference over to the management team for opening remarks. Thank you and over to you.

Ranjit Pendurthi — Managing Director

Thank you. Good afternoon, ladies and gentlemen. Wish you all a warm welcome to our Q4 FY ’23 earnings call. I hope you’re all keeping safe and healthy. On this call, I’m joined by our CFO, Mr. Raghunathan; Mr. Rajeev Kumar, DGM, Finance; Mr, Daxesh Mankad, our Executive Director; and SGA, our Investor Relations advisors.

I hope everyone had an opportunity to go through the financial results over the weekend and investor presentation, which has been uploaded on the stock exchange and our company website as well. I’ll give you a quick snapshot of the industry overview and Company’s recent developments. And then, Mr. Raghunathan, our CFO, will walk you through the operational and financial highlights of the Company.

So, starting with the industry as such, we are happy to say that we have closed the financial year on a positive note. It has been an eventful year for the Archean team where we got listed on the BSE and NSE exchanges, and we redeemed the entire NCDs and reported a strong business performance for the full financial year. On this occasion, I would like to thank all the stakeholders for their trust and support and for our own team at Archean who have held the hand and supported the journey to get listed.

We all have been a spectator of many uncertain events during the year and have curtailed the growth momentum of many industries across the globe, and the chemical industry, in which we are, was no exception. China, the world’s largest producer and consumer of various goods has been facing multiple hiccups due to restrictive COVID-19 policies in the last couple of quarters, and that has disrupted the overall supply chain as well across industries, resulting in a demand-supply mismatch and instability in the prices.

Coming to our own Company performance, we are glad to inform you that the Company was able to report a healthy performance for the year, registering a revenue of INR14,852 million or INR1,485 crores for FY ’23, a growth of 30% year-on-year basis. Yes, to reiterate, we are the leading manufacturer of marine chemicals from India and specialty marine chemicals from India. Bromine, industrial salt and sulfate of potash are the key products in our portfolio. We are majorly export-oriented, and the key geographies which we export to are Japan, China, South Korea, Qatar, Belgium and the Netherlands and many of the geographies, both in the Middle East as well as Far East.

Coming to the segment-wise updates, to start with the bromine, bromine is our primary product and contributes nearly half the total revenue. As you are all aware, we hold the leadership position in India’s bromine merchant sales and are the largest exporter from India. We continued to hold that position as of FY ’23 as well. It is important to note that bromine is widely used in pharma, agrochemicals, water treatment, flame retardants, additives and oil and gas segments. These industries — only a handful of companies manufacture this product in India. Demand continues to be strong for bromine in the first half of FY ’23, which has been partly negated, no doubt, by staggered shipment in second half of FY ’23. Due to the large client base that we have, we were able to divert the business to the domestic market, which continues to witness a healthy growth.

We witnessed some aberration in the bromine price for the last couple of quarters, as we discussed even during the June — the January call. We believe the spot prices of bromine have been normalized to pre-COVID levels. Any sharp volatility in the price of bromine will have minimal impact on us due to contract-based business that we have engaged in, and this varies from client the client based on size and scale of business of particular clients. For FY ’23 overall bromine business grew by 17% on year-on-year basis and production volumes stood near 19,000 metric tons.

Moving onto industrial salt, industrial salt is another main product, and nearly another half of the total revenue comes from this product. Industrial salt, as you again maybe aware, primarily finds its application in caustic soda and soda ash on a global basis. The year gone by, industrial salt has performed well compared to the other segments due to higher volumes and improved contracted prices. Volume offtake of salt has been strong from all existing customers. We’ve also added a few customers in FY23, thereby increasing the volume vis-a-vis FY ’22 notably. And we have received quite a few new inquiries as well. The capacity utilization for salt has been more than 100% for FY ’23 and is expected to sustain the growth momentum in coming quarters, given the order book.

Sulfate of potash, we’re the only manufacturers of sulfate of potash from natural sea brine in India. We are negotiating with a few customers and expect to increase production, which will reflect in next year’s business performance.

On the capacity expansion, we continue to invest in expanding our capacity and capability. We are pursuing an existing plan and expect to commence the set projects within the planned timelines. We will be expanding our product portfolio of bromine performance derivatives like flame retardants, clear brine fluids and bromine catalysts at Jhagadia. This greenfield site and expansion at Jhagadia is on track and expected to commence production by the end of FY ’24. Coming to industrial salt, we will be adding additional capacity on the washing lines and increase by another 250 tonnes per hour capacity and is expected to commence in the latter part of FY ’24.

That’s it from my side. Now, I’d request our CFO, Mr. Raghunathan to run through the financial performance.

Raghunathan Rajagopalan — Chief Financial Officer

Thank you, sir. And a very good afternoon to all the participants on the call, as I’m pleased to report a notable performance for the quarter that has ended and also for the full year FY ’23. Both bromine and industrial salt have reported reasonably a good performance during the period, as our MD said.

To give a summary on the performance of Q4 of FY 2023, total revenue for the quarter was at INR3,909 million, and that’s around INR391 crores, a growth of 4% on year-on-year basis for the quarter. Export market contributed around 70%, and the remaining 30% is from the domestic market. To say about the business mix, bromine contributed around 45% and industrial salt has contributed around 55%. EBITDA for the Company for the quarter of FY ’23 was at around INR2,031 million. That’s around INR203 crores, giving a growth of around 24% on YonY basis. EBITDA margin stood at 52%. That 52% is higher due to better realization in industrial salt as well as in bromine. Net profit after tax for the quarter was around INR1,368 million, a growth of 67%. Higher growth in PAT when compared to EBITDA growth is due to a reduction in interest cost as a result of redemption of NCDs.

Moving to the full-year performance, total revenue for FY ’23 was at INR14,852 million, a growth of around 30% on a YonY basis. Export market contributed around 73%, and the remaining 27% is [Technical Issues] domestic market. To give you the business mix for the full year, bromine contributed around 49% and industrial salt around 51%. EBITDA for the Company for the full year stood at stood at INR6,785 million, a growth of 41% on a year-over-year basis, and the margin was at around 46%. Net profit after tax for the year stood at INR3,837 million, a growth of 103% on a YonY basis. Net profit growth is almost double due to reduction in interest cost, coupled with better realization in liquid bromine as well as in the industrial salt.

If we move onto the other updates, the net debt to equity stood at zero for the period as a result of the execution on [Technical Issues] and return on equity was 45%, and ROCE stood at 39% for the financial year FY ’23.

[Technical Issues] the speech and open the floor for Q&A session. Thank you.

Questions and Answers:

Operator

[Operator Instructions] The first question is from Sudarshan Padmanabhan of JM Financial PMS. Please go ahead.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Yeah. Thank you for taking my questions, and congrats on a great set of numbers. So, I have three questions. The first question — I mean, the first two questions will be in a kind of a circular reference. The first question is, you made — we talked about the bromine prices being lower and that was primarily stemming from the higher BFR inventory is what I’ve heard from the industry sources. What I would like to understand from you is, we have a long-term contract, which is helping us today. But as we move towards newer contracts, do we see the risk of prices being much lower than what it is today? And second is, since our derivatives capacity is coming in later on this year in the third quarter, do we have visibility in terms of offtake? Or do we see risk on that side?

Ranjit Pendurthi — Managing Director

Thank you for the question. So I’ll take it. So, I think you’re right in your observation. The results obviously were coming from a better prices of bromine. But having said that, the reality also is, as I mentioned, there are headwinds across the entire chemical industry, so I think bromine is no exception. There is a large amount of destocking that is going on in the overseas market, and I believe that will continue through the next three to five months. So — now, having said that, I think the domestic market continues to be firm. Yes, there is some pricing pressure on the product. But nevertheless, I think we’ve always maintained that our focus continues to be on maintaining the EBITDA margins. And at the moment, we don’t see a problem with volume.

On the second question regarding the derivatives, we have started addressing the market from a customer perspective on the offtake of derivatives. The plant is still in early stages of construction. So, it will gather momentum, the marketing of these products, I think towards September-October of this year. So, that will be at least give us four to five months before we start commercial production. So, that would give us enough time to do that marketing.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Sure, sir. So, one question from my side before I join the queue. Two [Indecipherable]. One is, clearly, we’ve seen the margins going up substantially, and I think we are seeing transportation costs, which is very critical for us, and power costs coming down. So I would assume that partly your guidance of margins being healthy is also because of that. And second is on the SOP side. While the outlook looks quite encouraging, we have hardly been able to book anything this year. Is there anything that is going to be visible in the first quarter and what would be the quantum one can expect in the second half of this year?

Ranjit Pendurthi — Managing Director

So I think margin — just to reiterate, I think we’ve always said this in the past and we continue to maintain that. I think our margin target earlier has been in the 40%, 45% range, give or take, so that I think will continue to aim to maintain that. Regarding sulfate of potash, the market continues to be firm on the product demand side. We do have about 8,000 odd tonnes in stock that we will look to liquidate ASAP. We’re in touch with a few customers. And I think [Indecipherable], we will pick up the production again.

Sudarshan Padmanabhan — JM Financial PMS — Analyst

Sure. Thanks a lot, sir.

Ranjit Pendurthi — Managing Director

Thank you.

Operator

The next question is from Sanjesh Jain of ICICI Securities. Please go ahead.

Sanjesh Jain — ICICI Securities — Analyst

Good morning, sir. Thanks for taking my questions. I’ve a few questions. First on the volume, can you give us the FY ’23 as well as Q4 volume for all the three segments?

Raghunathan Rajagopalan — Chief Financial Officer

Yeah, Sanjesh, I’ll take this question. Bromine production for Q4 was at around in 5,078 tonnes versus 5,121 tonnes in the Q4 of the previous year. And for the full year, total [Technical Issues].

Sanjesh Jain — ICICI Securities — Analyst

Sir, we cannot hear you. I think your voice is actually going low.

Raghunathan Rajagopalan — Chief Financial Officer

For the full year, bromine production is at around 18,950 tonnes as against 20,200 tonnes in the previous year. And for industrial salt, for Q4, total production is at 1.2 million tonnes versus 1.12 in the — 1.01 million tonnes for the previous quarters — previous year’s quarter. And for the full year, it’s 4.02 million tonnes versus 3.5 million tonnes.

Sanjesh Jain — ICICI Securities — Analyst

And for SOP, this quarter [Indecipherable]?

Raghunathan Rajagopalan — Chief Financial Officer

SOP for this financial year, we produced around 8,840 [Phonetic] tonnes.

Sanjesh Jain — ICICI Securities — Analyst

And no sales, right?

Raghunathan Rajagopalan — Chief Financial Officer

Versus 2,400 tonnes in the previous year. Got it. Thank you. That’s first on the number. Second, on the salt side, phenomenal performance I think. The realization is upwards of $22 now. Ranjit, how should we see the salt demand and the growth? With the new washery, we can achieve, what, 5 million metric tons per annum. That should be doable in FY ’24, or it will take more than that? Sorry, that should be achievable in FY ’25 full year because I think in ’24, it will start at the end of ’24. And what is driving this realization and how sustainable is it?

Ranjit Pendurthi — Managing Director

So, thank you for the question, Sanjesh. So, I think as you rightly said, our capacity expansion will come on towards the end of FY ’24, so the benefits of that will probably accrue in FY ’25. The intention is, the capacity should match the demand at that point in time. And given the fact that a very strong position in that segment in the Asian market, we’d like to see that we’re able to utilize it again at a 100% in terms of sales — production and sales.

The second part of your question, I think the market is strong because the end-user industries I think continue to perform. As you know, caustic has a wide variety of uses, some major ones, some minor ones. But across the board, I think there’s a good offtake because of the chlorine byproduct use in the Far East and Middle East. Chlorine, as you know, is the basic building blocks for a lot of the downstream pet-chem products and plastics. So I think that’s primarily the driver there. And the fact that we have long-term relationship with many of the clients, I think you’re able to see us perform both on delivery and on quality on a consistent basis. So our market share with each customer is something that we are trying to increase as we go forward.

Sanjesh Jain — ICICI Securities — Analyst

Fair enough. No, I was more concerned from the realization because if we look at the caustic, caustic prices are down from INR60 to now INR35 a kg. And if you look at soda ash also, there are multiple news in multiple locations. There is a pressure on the soda ash prices. Considering that the end-market is seeing the huge pressure on the realization, do you expect salt prices to sustain at the levels they are today?

Ranjit Pendurthi — Managing Director

I think more than half the volume is contracted out. So I think the realization will hold. The other half, where we have shorter-term nature contracts, as has been typical in the past, I think again the chemical industry itself is facing some headwind on the prices. So there would, I suspect, be some sort of a moderation. But nevertheless, I think one point to keep in mind is, what drives the requirement for our business in Asia, primarily the Far East, is the use of chlorine. I think that’s the driving factor here. So, you have a lot of these guys who have expanded capacities on the downstream side. So I think we don’t see too much of a challenge on that front.

Sanjesh Jain — ICICI Securities — Analyst

Got it. Even there, I think PVC prices are [Indecipherable]. But, point taken. Second, on the bromine side of it, when do you see — because your peers have really not changed materially their guidance on the bromine for this calendar year, so how should we see for us in terms of bromine prices? Because they have an advantage of selling downstream. There the prices are less volatile, while we are largely into two the elemental bromine. How should this year end for us? Are we confident that we will be a flattish realization versus last year? Or do you think our realizations will come down to $4 or some $4? And what is the anticipation on the new contract signings for the long term in the bromine?

Ranjit Pendurthi — Managing Director

I think a fair question. There is a — like we said, I think in the last couple of quarters, we have seen a fair amount of volatility, as I mentioned during my introduction. I think that headwind we’ll continue to face. But I think the good thing is, again, it’s all about managing the customer and expectations on one side domestic, and the other one is the export market. The export market will, I suspect, will take at least four, five months to pick up. We will be doing some reasonable volume. But having said that, I think on the domestic front is where we’re focusing more of the bromine volume at the moment. The average realization, I think we expect it to be — I think what we have said during the investor presentations in the past, it should be in line with that I think what you’ve indicated.

Sanjesh Jain — ICICI Securities — Analyst

Got it. One last bookkeeping question. Raghu sir, this employee cost, I think that is a same bit of mix in that in terms of the ESOP and Chairman commission and all. So can you just report and tell you what is the recurring part of the employee cost? And this ends this year? Or this elevated employee cost will also be there for FY ’25?

Raghunathan Rajagopalan — Chief Financial Officer

The employee cost, as you said, yeah, we have ESOPs and MD commission also coming into it. And ESOP as a provision will continue for next couple of years. So if we look at it as an average cost, it will be closely around INR75 crores per annum.

Sanjesh Jain — ICICI Securities — Analyst

So that INR75 crore will be continuing, which we should build in the model, right?

Raghunathan Rajagopalan — Chief Financial Officer

Yes.

Sanjesh Jain — ICICI Securities — Analyst

Got it. That’s it from my side. Thank you for answering all the questions, and best of luck for the coming quarters.

Operator

The next question is from Krishan Parwani of JM Financial. Please go ahead.

Krishan Parwani — JM Financial — Analyst

Hi, sir. Thanks for taking my question and congrats on a good set of numbers. So firstly, on — a couple of clarification on the salt business. I think we mentioned more than half of our business is contracted. So just wanted to check whether this realization jump that you’ve seen in salt, so this contracted part has also seen a jump? And so, that means for the — because I think you have two years’ contract, right? So should we see a higher realization for this part for the next two years?

Ranjit Pendurthi — Managing Director

I think — thanks for the question. I think the prices that I mentioned that we have contracted I think have kicked in only this past quarter, in the fourth quarter of this year because the prices have been contracted on a calendar year basis. So yes, if you take two years, it would be two years from then.

Krishan Parwani — JM Financial — Analyst

Okay. So basically, your long-term customers have agreed for the price hike. Great. And for the other half, you have taken any price cuts? Or what have you done there?

Ranjit Pendurthi — Managing Director

Not yet. I think we have some ongoing contracts which are still being executed over the next quarter or so. And then, I think, like I said, some of these are long-term customers. So broadly, we don’t see the variation being too much on those contracts vis-a-vis the long-term contract agreed.

Krishan Parwani — JM Financial — Analyst

Okay, great. So, that was on salt. And on bromine, just couple of clarifications. So I think — so we wanted to understand as in, let’s say, if the spot price of bromine is $4, right, and when you are renewing a contract, let’s say, what discount you would be kind of getting into the contract? Not the specific, but just a ballpark number should do.

Ranjit Pendurthi — Managing Director

Ideally, I think our Executive Director doesn’t like to give any discounts. But having said that, I think at the moment, we’re not seeing a pressure for people to discount beyond the range I’ve indicated. I think, of course, as any business would have, you’ll have certain larger customer with longer offtake. So I think for them, there may be something given there. But I would imagine it’s not — I would imagine all of it to be within a single-digit range.

Krishan Parwani — JM Financial — Analyst

Okay. Fair point. Got your answer there. And just one clarification in terms of the volume front of bromine. So you mentioned 5,078 tonnes for this quarter, right?

Ranjit Pendurthi — Managing Director

Yes, that’s the production number.

Krishan Parwani — JM Financial — Analyst

And the sales number?

Ranjit Pendurthi — Managing Director

Sales number is 4,400 tonnes.

Krishan Parwani — JM Financial — Analyst

And what was it in the previous quarter, like 3Q ’23?

Ranjit Pendurthi — Managing Director

Q3 of this financial year, 4,000 tonnes.

Krishan Parwani — JM Financial — Analyst

4,000 tonnes. So basically, you have seen a jump in roaming volumes, and that’s entirely because of the domestic volumes you’re seeing?

Ranjit Pendurthi — Managing Director

Primarily.

Krishan Parwani — JM Financial — Analyst

Yeah. Okay, got it. And so, what was it in the 4Q ’22, the same number, just so that it’s comparable?

Ranjit Pendurthi — Managing Director

So. 5,500 tonnes.

Krishan Parwani — JM Financial — Analyst

Okay, 4Q ’22 sales volume was 5,500 tonnes. Got it. Yeah, thank you so much for answering all of my questions, and all the best.

Ranjit Pendurthi — Managing Director

Thank you.

Krishan Parwani — JM Financial — Analyst

Thank you.

Operator

The next question is from Amar Maurya of AlfAccurate Advisors. Please go ahead.

Amar Maurya — AlfAccurate Advisors — Analyst

Yes, thanks a lot for the opportunity. Am I audible?

Ranjit Pendurthi — Managing Director

Yes, you’re.

Amar Maurya — AlfAccurate Advisors — Analyst

Sir, if you can help me with the yearly sales volume for FY ’23 for bromine and FY ’22 for bromine, as well as for the salt?

Ranjit Pendurthi — Managing Director

For FY ’23, bromine sales is around 18,700 tonnes. Do you want in terms of tonnes or in terms of value?

Amar Maurya — AlfAccurate Advisors — Analyst

Tonnes.

Ranjit Pendurthi — Managing Director

Okay. So 18,700 tonnes is the sales volume as against 20,250 tonnes in the previous year. And coming to salt, yeah, it’s around 3.75 million tones for FY ’23 as against 3.58 million tonnes in the previous year, for 12 months.

Amar Maurya — AlfAccurate Advisors — Analyst

Okay. So basically, sir, how do we see the volume offtake basically in FY ’24? Is it going to remain flat? Or do we see some growth in the bromine part of the business?

Ranjit Pendurthi — Managing Director

I think we will see growth. I think we’re hopeful that the current trend will continue. But maybe, we hope, like I said, post four, five months, it should pick up.

Amar Maurya — AlfAccurate Advisors — Analyst

Okay. So full-year basis at least high-single digit kind of a growth possible or…

Ranjit Pendurthi — Managing Director

I think we would possibly be looking a little bit more than that.

Amar Maurya — AlfAccurate Advisors — Analyst

Okay. So you’re saying more than high-single digit? Okay. And sir, in terms of the volume — in terms of the pricing of the bromine, at what prices we had contracted, let’s say, for next one year, if you can give?

Ranjit Pendurthi — Managing Director

I think since you’re asking us to talk about our forward-looking listing [Phonetic], I would possibly say that I think — and the earlier gentlemen who asked the questions, I think the price indication that’s given, I think those ranges are probably what you’re looking at going forward for the next 12 months.

Amar Maurya — AlfAccurate Advisors — Analyst

Okay. And sir, how about the salt value we see next year?

Ranjit Pendurthi — Managing Director

Same. I think the volume growth should be in more than a single digit.

Amar Maurya — AlfAccurate Advisors — Analyst

More than a single digit.

Ranjit Pendurthi — Managing Director

We will continue to be quite aggressive on that front.

Amar Maurya — AlfAccurate Advisors — Analyst

Okay. And we are confident that pricing will remain at this level for the salt?

Ranjit Pendurthi — Managing Director

Sorry, were you asking a question? Or I thought you were saying — you’re making a [Speech Overlap].

Amar Maurya — AlfAccurate Advisors — Analyst

I’m saying, the pricing for the salt will largely remain at this level?

Ranjit Pendurthi — Managing Director

Yeah, I think so. I believe as we spoke about a few minutes ago and I think we talked about longer-term contracts, so I think the prices will be visible on that front.

Amar Maurya — AlfAccurate Advisors — Analyst

Okay. And sir, the sulfate of potash is 8,000 metric ton, which we are talking about, will we be able to sell that in FY ’24 on a full-year basis?

Ranjit Pendurthi — Managing Director

Yes.

Amar Maurya — AlfAccurate Advisors — Analyst

And on a overall basis, what should be the volume we are looking for sulfate of potash on total basis?

Ranjit Pendurthi — Managing Director

I think that should also possibly — apart from this 8,000 metric tons, I think we’re hoping for in the — if not similar quality, at least a bit higher.

Amar Maurya — AlfAccurate Advisors — Analyst

Sorry, I didn’t get it. If not a…

Ranjit Pendurthi — Managing Director

If not the same volume of 8,000 metric tons, I think we’re looking at, at least, a bit higher.

Amar Maurya — AlfAccurate Advisors — Analyst

A bit higher. Okay. Perfect, sir. Thanks a lot.

Ranjit Pendurthi — Managing Director

Thank you.

Operator

The next question is from Pritesh Chheda of Lucky Investment Management. Please go ahead.

Pritesh Chheda — Lucky Investment Management — Analyst

Sir, can you tell what is the value addition of bromine derivatives over base bromine?

Ranjit Pendurthi — Managing Director

Thank you for that question, but can you maybe help clarify what exactly you mean?

Pritesh Chheda — Lucky Investment Management — Analyst

So, if bromine is $4, then some of these products and derivatives, what is their range of prices?

Ranjit Pendurthi — Managing Director

Okay. So, Rajeev will take the question.

Rajeev Kumar — Deputy General Manager, Finance

Thank you. So, to answer your question on the market prices of bromine, we expect to make an EBITDA between 25% to 30% in derivative segment.

Pritesh Chheda — Lucky Investment Management — Analyst

Sorry, I didn’t understand your answer.

Rajeev Kumar — Deputy General Manager, Finance

So, whatever is the market prices of bromine, if you take that as your input cost, we will be making 25% to 30% of margin.

Pritesh Chheda — Lucky Investment Management — Analyst

And what will be the realization of those products?

Rajeev Kumar — Deputy General Manager, Finance

It depends because there will be different derivatives that which we’ll be making, and input of bromine is different. So it will all depend upon what kind of product mix we are selling, that will determine the end-product value.

Pritesh Chheda — Lucky Investment Management — Analyst

Any range you want to share? You, any case, have three products, right, which is the PPT.

Rajeev Kumar — Deputy General Manager, Finance

So, for example, flame retardants will have between 0.6 to 0.65 [Phonetic] bromine input. So, you can take that as a reference point. 30% plus on bromine prices, you can do EBITDA there. Similarly, for brine fluid, it will be 0.25, 0.3 bromine. And for other PTA catalyst synthesis, it will be around 0.45 to 0.5.

Pritesh Chheda — Lucky Investment Management — Analyst

Okay, understood. And second, you mentioned that half of your bromine is long-term contractual and the other half is spot. So, at least on the half — and on the other side, you mentioned that you expect prices to sustain for your business. But these two things don’t match, right? So if half of it is contractual and half of it is spot, at least on the spot, you will see lower bromine prices flowing through, right?

Ranjit Pendurthi — Managing Director

So I think this goes back to a question that was asked earlier in the call.

Pritesh Chheda — Lucky Investment Management — Analyst

Yeah, there were two different questions, and you answered on these two ways. So, I’m just confused.

Ranjit Pendurthi — Managing Director

Sure, let me clarify that for you. So I think the contracted prices are that have come over the last quarter or so, a couple of quarters. So there has been I think revision in the pricing. And the spot contracts are pretty much mostly domestic, which are holding firm compared to the export market. So, I think what we mean is that — I don’t recall the analyst who had asked the question, but he had given an indication of, is it going to be around the $4 mark? I think we said that’s a reasonable assumption.

Pritesh Chheda — Lucky Investment Management — Analyst

So, you had a $4 realization last year, and you see a $4 realization this year. And what is the spot selling at currently?

Ranjit Pendurthi — Managing Director

I don’t think we sell spot in the typical nature of spot, like for example, I think if you’re asking me somebody wants one tank of bromine, which is let’s say 20 tonnes tomorrow, we don’t do that. So I think when we say spot, it means a bit different. Spot means, you know what, someone who has asked for the next four months.

Pritesh Chheda — Lucky Investment Management — Analyst

So you’ll have a three monthly spot nature. That three monthly or a four monthly spot nature, which gets reviewed every three or four months, what is that selling at? $4 level?

Ranjit Pendurthi — Managing Director

The same range, yeah, that we have indicated, yes, on average.

Pritesh Chheda — Lucky Investment Management — Analyst

Okay. Thank you very much.

Ranjit Pendurthi — Managing Director

Thank you.

Operator

[Operator Instructions] The next question is from Amish Kanani of JM Financial Services.

Amish Kanani — JM Financial Services — Analyst

Yeah. Hi, sir. Sir, if you can give us a flavor of why the market is so volatile and who is destocking? I just wanted to understand whether there are new producers from China was coming kind of back to the market and clients are destocking because they were earning higher than usual inventory. And if you can give us some flavor of the market, why it’s changed and why it’s so volatile.

Ranjit Pendurthi — Managing Director

Thanks for the question. So I believe that it’s a combination of factors, but primarily it’s got do with destocking. I think we had a team out in China last month. That’s the first visit that anyone’s managed post the lockdowns have been lifted. So, on the one hand, we have an industry that’s a downstream industry that’s slowly picking up post these lockdowns, etc., being lifted, returning to normalcy. So, that’s the good part. But also having said that, they have procured bromine at very high prices. In fact, during my Investor roadshows last year, we had said that those prices are not sustainable, the $7, $8 prices. We said that’s not normal. And I think it’s happened across lot of industry groups, not just bromine, not just the chemical industry, across everything like auto, etc. So people have stocked or possibly even overstocked in many cases, simply because of the supply chain disruption. So I think it’s just a matter of time where this destocking is a natural process, and people are not used to situations that have happened in the last couple of years. So it’s just a returning to normalcy. I don’t see it as abnormal, which is why I used a specific in my introduction as it is an aberration. So we just have to wait for that evenness to come out over the next four, five months. The industry fundamentals still remain strong. I think that’s important to note. The flame retardants, for example, not going away anywhere. Electronics are not going away anywhere. The car tires are not going anywhere. So I think some of the use of these products will continue. And so far as the Indian industry is concerned, I think you all are more aware than I am about the strength of the agrochemical industry. Some headwinds will always happen, but I think the ultimate focus is on how the demand growing. As an overall industry, I think that usage of bromine still continues to be strong. That’s our view.

Amish Kanani — JM Financial Services — Analyst

Sure. sir, That helps. And sir, in terms of understanding the nature of spot versus long-term contract, and what I understood based on your response also was, there are some few short-term contracts, which you said three months, which you might consider to be spot from your perspective. But if you can give us some sense of how — globally, how the spot price influences our realization?

Ranjit Pendurthi — Managing Director

I think spot price, unfortunately, gives a knee-jerk reaction, and I think that’s something we have to be careful of. So, the customers, generally we have the smaller ones do — or are more sensitive. The larger ones have a much larger timeframe of outlook. So I think it is only fair to expect the small ones to have lot more pressure on price and the longer ones possibly will have a little bit less pressure on price but look to a more even pricing over the course of six months or even up to a year.

Amish Kanani — JM Financial Services — Analyst

And sir, I understand that we are a cost leaders globally. But are other players [Indecipherable], are they making money at these prices? Or you think it is really not sustainable and hence these pressures will die down quickly?

Ranjit Pendurthi — Managing Director

I would hope that they are doing business and making money. And I think everyone is probably making money, would be my best guess, the reason being that I think margins are there. The market is there. Again, it’s not about having a one-quarter or two-quarter outlook, but I think fundamentally, industry needs to be seen in that context. So I think people are making money. Now, how much money, I think that’s everyone’s choice about how they do the pricing or what kind of strategy they use.

Amish Kanani — JM Financial Services — Analyst

Sure, sir. That helps. And sir, one last question before I go back to the queue. It’s absorbing the technology. We have not been into manufacturing of chemical and plus one stage. So, if you can give us — and you did mention about we are making the markets ready about three, four months advance by doing some work. But if you can also give us some sense of how well are we positioned to quickly absorb the technology? Because it’s new for us in a way. And how is our technology partners helping us to do that quickly?

Ranjit Pendurthi — Managing Director

No, fair question. I think whenever you start a business, I think will be likely have an entrepreneur starting a product for the first time. So I think we’re comfortable with doing something the first time. And the reason we are comfortable is, one, I think we have the right team. I think we have good R&D team. Like I mentioned on the call earlier, we have Executive Director, Mr. Daxesh, who has come on board in January. He comes with a hardcore agrochemical background. So I think in terms of chemistry, we are well equipped to handle the technology. And also from I think a market perspective, I think we have all the right places that we’ve been in business with already. So it’s little bit more of an extension of the market we are in. And I think we continue to discover that there is enough and more interest in these products that we’re going to make, and comfortable in seeing the progress on ground. And I think from a marketing perspective, I think we don’t want to put the horse before the cart too much in advance. I think we need to wait until the plant can see some readiness in terms of structure, etc., so clients also have not only visibility, but have comfort that you are promising them some products, four months or five months down the line, and that’s fairly visible to them. So I think we’ve got time in that way and which is why I said September-October is when will start on a serious marketing effort. But at the moment, we are already in touch with potential customers.

Amish Kanani — JM Financial Services — Analyst

That helps. All the best, and looking forward to a good year.

Ranjit Pendurthi — Managing Director

Thank you. Thank you very much.

Operator

The next question is from Rohit Nagraj of Centrum Broking. Please go ahead. Yeah, thanks for the opportunity. Hope I’m audible.

Ranjit Pendurthi — Managing Director

Yes.

Operator

Yeah. Thank you. Sir, first question is that, as I understand, and please correct me if I’m wrong, globally, there are limited number of producers for bromine. So structurally, how the pricing is decided? Except for the last couple of years, where there had been an aberration? Prior to this, what were the the variables which were used in terms of pricing bromine? And generally, those prices go up with inflation-adjusted basis or probably the largest player usually dictates the prices and others will follow. Just wanted some dynamics from the pricing perspective. Thank you.

Ranjit Pendurthi — Managing Director

That’s a good question. I think there is no one who really sets the price. As you yourself mentioned, it is a restricted commodity and trade. It’s only done between — sold by a handful of people, especially at the volume that we kind of do. So in that context, I think no one really fixes a price and expects everyone to follow it. Everyone fixes the price depending on the customer that they have and the volume that each one buys. So, I would say it’s not an established benchmark or index like the more commonly traded chemicals or hardgoods.

Operator

Sure. And just then a light question to this. In terms of margins, so bromine margins usually are higher than salt margins or vice versa, given that probably there would be players who are just producing bromine and not salt. Thank you.

Ranjit Pendurthi — Managing Director

Are you asking that people who produce bromine and salt, the salt has a lower margin than bromine?

Operator

Yeah. Is there any difference between the margins of bromine and salt? For a pure bromine player who is not producing salt, the margins would be higher and vice versa?

Ranjit Pendurthi — Managing Director

Understood. Our strength has always been as a specialty marine chemicals company to be an integrated producer of bromine, salt and potash. So that’s how we see our strength, being able to supply three products from our asset. So, I believe that the margins that you’re talking about, which is why we have a composite margin, I think the 40%, 45% range margin. I think that’s sustainable because there are quarters where we have bromine doing better. There are quarters where you have salt doing better. And in the near future, we have SOP also comes on stream in terms of contribution. So, I think that makes a lot of sense from a company perspective, having three products instead of just one.

Operator

All right. Got it. Just one last question on the contract, which we have spoken earlier. So currently, for bromine and for salt, if I’m not wrong, it is almost half of the quantities or volumes are being contracted. Can you just give us the timeline till when both these volumes have been contracted for the next 1.5 years or two years, anything on that? Thank you.

Ranjit Pendurthi — Managing Director

So, for bromine, it is for the next one year. For salt, we’re contracted for next two years.

Operator

Sure, that’s helpful. Thanks a lot for answering all the questions, and best of luck.

Ranjit Pendurthi — Managing Director

Thank you.

Operator

The next question is from Agam Shah [Phonetic] as an Individual Investor. Please go ahead. Majority of my questions are answered. Just a quick question on the lease pond [Phonetic] renewal on the Rann of Kutch, the government, you have. So anything on the — are you renewing your contract?

Ranjit Pendurthi — Managing Director

Thank you for the question, sir. I think it’s under progress.

Operator

Nothing that [Indecipherable]. It’s going as per process, right?

Ranjit Pendurthi — Managing Director

Yea, it’s going as per process, as we’ve indicated in the past, yes. Thank you.

Operator

Okay. Thank you. The next question is from Yash Dantewadia of Dante Equity Research. Please go ahead. Hi. Am I audible?

Ranjit Pendurthi — Managing Director

Yes.

Operator

What I understand from your greenfield expansion is, the bromine derivatives are obviously downstream products, right, high-end flame retardants [Technical Issues].

Ranjit Pendurthi — Managing Director

Sorry, you’re audible but not clear. Can you repeat the question?

Operator

Yeah. I’m saying, the greenfield expansion of INR250 crore is basically a downstream derivative expansion, right?

Ranjit Pendurthi — Managing Director

Yeah.

Operator

Yeah. So what kind of asset turnover are you expecting from that particular plant?

Rajeev Kumar — Deputy General Manager, Finance

So, we had indicated it in our last call also. We’re expecting it to be in the range of 3 times.

Operator

3 times. And also, what percentage of your production is going to be used in the greenfield expansion? Basically what I’m asking you is, what percentage of your bromine production will be used in the downstream production for this greenfield plant?

Ranjit Pendurthi — Managing Director

So, peak capacity utilization, we expect about 40 odd percent to be used captively.

Operator

Okay. And also just — I know you’ve explained it, but I’m a fairly new investor, so I just want to understand, if you have the patience, is, how are you able to maintain these margins even when bromine has declined by 30, 40 odd percent? Question number one. And second part is, could you give a short-term guidance at least? I know it’s difficult to give a long-term guidance for chemical margins. If you could give — maybe give a guidance for the next quarter or what — where do you see your OPM?

Ranjit Pendurthi — Managing Director

So I think, one, the reason why we have good margins I think is, we managed to get the best prices, given our performance and our delivery and quality with customers over a long period of time. And second is, we are very efficient in what we do. I think someone referred to this in the earlier conversations about us being the lowest-cost quartile. I think we’ve been able to maintain that position where we are in terms of cost of manufacturing. And I think the third question is, I would — at this point, I would like to refrain from giving you a short-term guidance because it becomes a guidance. And I would be happy if you could infer some of the conversations in the past hour or so. I think we’ve indicated where we would be in the next 12 months.

Operator

Yeah, the 12-month guidace that you’ve given basically — not guidance, you’ve indicated is that being around 40 to 45 odd percent, if I’m not wrong. So, yeah, thank you. What, sorry?

Ranjit Pendurthi — Managing Director

We’d like to maintain at that range, yes. You’re right.

Operator

So also, if the odd 40% is going in the derivative — in the bromine derivative productions, then how do you — after the greenfield expansion comes online, do you see your OPMs expanding?

Ranjit Pendurthi — Managing Director

They should ideally, yes, because as my colleague mentioned on the call, when the derivative project is up and running, we are expecting 25% to 30% margin there, but that takes into account the market price of bromine as an input cost.

Operator

Yeah. So, I’m just contemplating that basically what you’re telling me is that if you look at the Company from a two-year three-year perspective after this greenfield expansion comes online, would it be safe to say that your OPMs won’t decline at least?

Ranjit Pendurthi — Managing Director

That is our endeavor, sir, to make sure that it doesn’t decline. We need to maintain that robustness in both cost control as well as product pricing.

Operator

And also just confirming this [Technical Issues] terms of the INR250 crore odd, so we are expecting sales close to INR700 crore, which basically means it’s highly possible for you to two times, three times your sales in the next two to three years, right?

Ranjit Pendurthi — Managing Director

Apologies, I did not follow the question clearly.

Operator

I’m saying, your asset turnover for the greenfield expansion is basically 3 times, right?

Ranjit Pendurthi — Managing Director

Yes, that’s 3 times.

Operator

Yeah. So you’re basically expecting sales close to INR600 crore to INR700 crore from that plant?

Ranjit Pendurthi — Managing Director

Yeah, that would be a fair assumption, yes.

Operator

Yeah. So would it be safe to assume that in the next two to three years or so, your overall top line should grow by at least two times?

Ranjit Pendurthi — Managing Director

It should, yes. That’s the aim.

Operator

Yeah, okay. Thank you so much for taking my questions. I will get back in the queue. The next question is from Jenam Gilani [Phonetic] of Swan Investment. Please go ahead. Hi, sir. All my questions have been answered. Thank you.

Ranjit Pendurthi — Managing Director

Thank you.

Operator

The next question is from — a follow-up from Amar Maurya of AlfAccurate Advisors. Please go ahead.

Amar Maurya — AlfAccurate Advisors — Analyst

Sir, in terms of this sulfate of potash, what kind of pricing we should assume?

Ranjit Pendurthi — Managing Director

I think we had modeled $450 as the price during our roadshows, and I think we’re maintaining that as a same assumption.

Amar Maurya — AlfAccurate Advisors — Analyst

Okay. Thank you, sir.

Ranjit Pendurthi — Managing Director

So, thank you, everyone, for joining us in this earnings call. We appreciate your time and showing interest in our company. And we hope that you continue to report [Phonetic] faith in our company and us. In case of any queries, you can get in touch with us or SGA, our Investor Relations advisors. We look forward to meeting all of you over the next call, and have a good day. Thank you.

Operator

[Operator Closing Remarks]