Balaji Amines and Alkyl Amines- Q4FY19 analysis

Balaji Amines and Alkyl Amines- Q4FY19 analysis

May 29, 201912:19 pm

Tracking the Indian Amine Industry, Q4 FY19, both the companies i.e. Balaji Amines and Alkyl Amines gave a contrasting performance.

While Balaji Amines faced with capacity constraint reported degrowth in revenue(Both YoY & QoQ) but there was a handsome increase in margins. Coming to its closest competitors Alkyl amines gave a robust growth in revenue, thanks to the additional capacity the company had. While things were quite positive on the revenue front, the margins  drop was quite significant.

Balaji Amines and Alkyl Amines- Q4FY19 analysis

Balaji Amines and Alkyl Amines- Q4FY19 analysis
Alkyl Amines- Q4 FY19 performance analysis
Balaji Amines and Alkyl Amines- Q4FY19 analysis
Balaji Amines- Q4 FY19 performance analysis

Balaji Amines and Alkyl Amines- Q4 FY19 analysis : The Raw material factor

Alkyl Amines’ raw materials: Ethanol, Methanol, Ammonia & Acetic Acid 

Balaji Amines’ raw material: Methanol & Ammonia

While the key raw material for Alkyl Amine is Ethanol whereas that of Balaji Amines is Methanol.

Methanol is derived from crude oil while Ethanol is made from sugarcane waste.  

Ethanol prices have surged in India due to the Govt’s push to support the sugar industry as well as to curb the import bill. Because of which Indian companies have been importing ethanol. With surging oil prices last year, almost all oil importing countries are providing incentives for ethanol which is taking the prices higher.

https://www.reuters.com/article/us-brazil-ethanol-insight/betting-on-ethanol-brazilian-mills-turn-sour-on-sugar-idUSKBN1O20L7

https://www.agriculture.com/markets/newswire/brazil-ethanol-prices-soar-on-harvest-delays-strong-demand

 https://www.spglobal.com/platts/en/market-insights/latest-news/agriculture/121418-argentina-hikes-december-sugarcane-ethanol-price-for-refiners-by-42-on-month

https://oilprice.com/Alternative-Energy/Biofuels/China-Aims-To-Boost-Ethanol-Production.html

Assuming, there was no similar increase in Methanol prices have contributed to the margin difference.

Acetonitrile Prices

Balaji Amines and Alkyl Amines- Q4FY19 analysis
Acetonitrile Prices
Balaji Amines and Alkyl Amines- Q4FY19 analysis
Acetic Acid prices

Towards the end of the fourth quarter, the acetonitrile prices have seen sharp jump, multiplying almost 3 times from a level of ₹150 per kg to ₹450 per kg.

Along with it, the raw material used which is Acetic acid have seen drop in prices. 

Balaji Amines and Alkyl Amines- Q4FY19 analysis

Alkyl Amines- Q4 FY19 Updates

Alkyl Amine was able to grow primarily because of the additional capacity. Of the 40% growth in revenue, two-thirds was due to volume growth compared to one third in value growth. The management gave the explanation as the increase in raw material costs as well as sell of lower value product( more of amines sales rather than its derivatives) was the primary reason for the drop in margins.

On being asked if Alkyl Amines will be able to take advantage of the increase in acetonitrile prices, the management said they will be able to take partial benefit given the nature of their contract.

An added benefit on the margins would be the drop in acetic acid prices.

To take advantage of the acetonitrile prices, the company is debottlenecking to increase its capacity.

Balaji Amines- Q4 FY19 Updates

In terms of the improvement in margins, the management did not give any specific comment.

Balaji Amines after a long wait has got the clearance on commissioning of its plant for 3 products i.e. morpholine, acetonitrile, DMA HCL.

The company has already started producing morpholine. With respect to acetonitrile, while the company was waiting for environmental clearance, they started trial production for Tetra Hydro furon(THF), a solvent and will continue doing so for the entire Q1 FY20. But they are not producing acetonitrile. Hence, won’t be able to take advantage of the increased acetonitrile prices in the next quarter. 

Due to the subdued price of  DMF, the company is utilizing a very small capacity. Balaji’s application for Anti Dumping Duty on DMF was rejected, for which they have appealed again.

Balaji Speciality chemicals which was expected to contribute ₹350 cr of revenue for FY20 is awaiting clearance from Govt. Since, it has not got the clearance yet, the target is reduced to ₹100-150cr.

Methanol which was being sourced from Iran will now be sourced from a different country at a fixed price(lower than that of Iran).DMF

The product of both these companies  are basically intermediates and caters to Pharma(60%) and Agribusiness(40%). So, the fortunes will be dependent on these 2 industries. Since these are commodity chemicals, a lot depends on the global business environment.

Amines since contain Nitrogen are quite hazardous and are transported in a water-based solution.

Balaji Amines and Alkyl Amines- Q4FY19 analysis

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Shekhar Yadav

I am a full time stock market investor. The blog is an extension of my research, thoughts & opinion. Please don't consider anything on this website to be an investment advise.

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