Q1 FY25 Earnings Call Summary: Strong Performance and Strategic Expansion for Pondy Oxides and Chemicals Limited

Pondy Oxides and Chemicals Limited (POCL) is a leading manufacturer and recycler of lead and lead alloys, as well as a significant player in the production of specialty chemicals and plastic additives. With a strong presence in the global market, POCL is recognized for its commitment to sustainability and innovation. The company has been expanding its operations and capacity to meet the growing demand for its products, particularly in the energy storage and automotive sectors. On 24 July 2024, the company conducted its Q1FY25 concall. The details of it are mentioned below:

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Q1 FY25 Concall Highlights

Global Market Overview

• The global lead acid battery market is growing at a compound annual growth rate (CAGR) of 6% to 7%, driven by the increasing demand for energy storage solutions.
• The Asia Pacific region dominates the lead acid battery recycling market, holding over 50% of the global market share.
• India is at the forefront of this growth, establishing itself as a major hub for automobile manufacturing and related industries, including lead acid battery production and recycling.
• The global shift towards sustainability and circular economy models is enhancing the demand for products designed for reuse and recycling, particularly in the energy storage sector.

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Financial Performance

Consolidated Revenue:

POCL reported a significant increase in consolidated revenue from operations, reaching INR 445 crore. This represents a 37% increase compared to the previous year and a 23% rise quarter-on-quarter.

EBITDA:

The company’s Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) grew by 76% year-on-year, totaling INR 24 crore. EBITDA margins improved to over 5%, up from 4% in Q1 FY24, reflecting better operational efficiencies and cost management.

Finance Costs:

Finance costs decreased by INR 1.44 crore, a 38% reduction compared to the same period last year. This reduction contributed to an improved net profit.

Consolidated PAT:

Profit After Tax (PAT) increased by 216% year-on-year, reaching INR 13 crore. The PAT margin improved to 3%, indicating enhanced profitability.

Standalone Performance:

On a standalone basis, POCL’s revenue from operations increased by 36%, while EBITDA and PAT grew by 70% and 141%, respectively.

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Operational Highlights

Lead Production and Sales:

Lead production increased by 38% to 20,692 metric tons, reflecting the company’s expanded capacity and improved efficiency. Lead sales saw a 46% increase, totaling 20,699 metric tons. The sales mix consisted of 35% domestic sales and 65% exports, indicating strong international demand.

Value-Added Products:

The proportion of value-added products in the lead segment remained consistent at 60%, highlighting the company’s focus on higher-margin products.

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Strategic Developments

Capacity Expansion:

POCL has commenced the construction of a new facility at Thervoykandigai, Tamil Nadu. This expansion aims to increase lead production capacity from 132,000 metric tons to 204,000 metric tons per annum, to be completed in two phases.

The capital expenditure (capex) for this expansion is being funded through proceeds from a preferential issue and internal accruals. The construction and erection of plant and machinery are expected to be completed for trial runs by the end of the calendar year 2025, with production starting in Q4 2025.

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Positive Outlook

The company’s positive outlook is supported by several factors:

1. Ongoing capacity expansion and improved operational efficiencies.
2. An optimal capex strategy and a shift towards using alternative fuels instead of furnace oil, reducing costs and environmental impact.
3. Strong management practices and robust stakeholder support.
4. The favorable market environment driven by the growing demand for sustainable and recycled materials, particularly in the automotive and energy storage sectors.

These strategic initiatives and strong financial performance underscore POCL’s commitment to growth and sustainability, positioning it well for future success.

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