GHCL’s FY19 numbers should be better than FY18’s: RS Jalan

Talking to ET Now, RS Jalan, MD, GHCL, says overall the growth in the soda ash industry should be around 6% to 7%. In 2019-2020, GHCL is expanding capacity by around 10%.

Edited excerpts:

The IHS report that has been released just a few weeks ago suggest that caustic soda and related prices are expected to be higher for rest of the year, even after the rally that we witnessed in the first half. As industry experts do you believe that India has received soda ash imports in February and March which will keep prices in check?

We are in the business of soda ash and not in the caustic soda. Our understanding about the soda ash business is in 2017-2018, the volume growth in the industry as a whole is around 10%. Historically, growth in soda ash industry has been around 5% CAGR in the last 10 years. So, 10% definitely indicates that soda ash business is growing.

So far as we are concerned, our volume growth during this nine months is around 20% and overall our revenue has grown by around 26% in nine months. If I look at next year, I would say overall the growth in the soda ash industry should be around 6% to 7%. We are expanding our capacity and in 2019-2020 our capacity will grow by around 10%.

Given that many of China’s small soda ash producers had shut down due to pollution norms, how do you see international price faring?

Definitely, the realignment which is taking place between China, US and Turkey, has come with a new capacity. All the realignment that is happening will make sure that the prices of soda ash will remain stable going forward.

Your inorganic chemical segment also saw strong growth thanks to better capacity addition. Is there more momentum in sight?

Yes, surely, that is the thing we are always doing if you look at this year. In nine months, our capacity utilisation is around 95% which has gone up from 85% a few years back.

This effort of the management continues and expansion is also going as per schedule. We believe that we will complete our expansion well in time and that will give us a good volume growth next year in 2019-2020.

Despite the elevated coal prices, you have also enhanced your margins in soda ash. Can we continue to see a strong margin range? What is it that you are looking to maintain?

As you rightly said, all the energy prices have gone up phenomenally in the last one and a half years and we have been able to maintain our margin in spite of high energy prices. This we have been able to do because of better efficiency utilisation of our plants. We believe that we will be able to continue this and we should be in a position to maintain this current margin.

The home textile segment has been a little bit disappointing on the nine months financial year due to sluggish demand in the US. What kind of growth and EBIT performance are you foreseeing here in the near future despite the higher cotton prices?

The home textile industry is passing through a headwind and that headwind is primarily because of that realignment of the supply chain which is happening in the US. From brick mortar stores it is going to the discount stores as well as e-commerce.

The second is primarily the oversupply situation globally and more particularly in India. All of us have expanded our capacity and this has given an oversupply situation. My belief is that this headwind will continue for a few more quarters. Of course, as an organisation, we have recently launched a product in association with Reliance and also one of the research companies which is a very well-known company in the US, ADNAS which is a product based on recycled polyester.

As an organisation, we are very careful about the environment and this product is fitting with our strategy or protecting the environment. 10,000 bedsheets if it is being sold, makes a huge impact on the environment in terms of the landfilling, in terms of the petroleum consumption and in terms of the overall emission.

All this put together, this product is getting launched in the market starting 18th March. We believe that that product should definitely give us a leeway in the next year. So, our belief is that next year will be better than this year at least.

Given the consolidated FY19 growth and EBITDA margin outlook, could could see a better bottom line improvement compared to your top line? What is your internal assessment for your financials?

Yes, we are working towards that and we believe definitely our numbers should be better for this year, FY19 should be better than FY18.