Camlin Fine Sciences Ltd Q4 FY2024 Concall Summary

Key Takeaways

• A kitchen-sink quarter clears the decks: FY24 absorbed a cascade of one-time hits — inventory markdowns (₹36.8 cr), Italy plant provisions (₹22.8 cr), and a JV impairment (₹24–27 cr) — that management says are now fully behind the company.
• Blends is the real business today: The blends segment generated all of FY24’s EBITDA (~₹146 cr at ~20% margin) and is guided to grow from ₹780 cr to ₹1,000 cr+ in FY25, driven by market share gains in North America and Brazil.
• Vanillin is the FY25 swing factor: A new Methyl vanillin campaign has begun, targeting 2,500 tons of production and sales, which would turn a ₹100/kg catechol loss into an ₹80/kg positive margin and add ~₹45 cr in EBITDA.
• Europe and China remain a drag: Combined EBITDA losses from Italy and China are guided at ~₹25 cr for FY25, with Italy’s repurposed MEHQ/Guaiacol plant not contributing until FY26.
• What to watch next quarter: Vanillin sales phasing (only 25–30% in H1), any green shoots in agrochemical demand, and whether TBHQ/BHA prices hold the $8.5–9 floor that management calls the viability line for diphenol producers.

The Clean-Up: One-Time Hits in FY24

• Inventory mark-to-market: A ₹36.81 cr prudential provision was taken on catechol and downstream inventory as falling prices overshot raw material cost relief; adjusted gross margin was 44% vs the reported 34.9%.
• Italy plant shutdown provision: The plant has been idle since August 15; internally manufactured catalyst for Diphenol became unusable when the decision was made to repurpose the site, triggering a one-time ₹22.8 cr exceptional charge.
• CFS Wanglong impairment: A ₹24–27 cr provision was recognised on exposure to the JV as “abundant caution” after the partner settled an IP infringement case, clearing the path to produce Heliotropin by repurposing the China plant.
• Legacy vanillin inventory: ~₹17.5 cr of old vanillin stock was liquidated in Q4, with continuous price falls forcing a further mark-to-market provision.
• Management’s line: All write-offs and legacy issues related to FY24 have been accounted for; no further write-offs are anticipated in Q1 or Q2 FY25.

Santosh Parab: “This is a net impact of whatever initiatives are there and these negatives and other things. And this, of course, is as of today because the unprecedented economic something happens, which US can do war in Iran, then we can't do anything so.”

Blends: The Earnings Engine

• Scale and profitability: Blends revenue reached ₹730 cr in FY24 with EBITDA margins in the high teens (~20%), contributing ~₹146 cr in EBITDA — the only segment in positive territory for the full year.
• Volume growth masked by price: TBHQ/BHA volumes grew 10–15%, but revenue was flattish because TBHQ prices fell 20–25% YoY (from $13+ to $8.5–9.5) and BHA from $13–13.5 to $9–10.8.
• North America breakout: Revenue grew 200% to ₹255 cr on market share gains; the subsidiary is EBITDA-positive and a key driver of the FY25 blends target.
• Brazil scaling: Revenue rose from ₹112 cr to ~₹150 cr, also EBITDA-positive, with further growth expected.
• FY25 guide: Blends revenue guided to at least ₹1,000 cr+, with EBITDA in the high teens (₹180–190 cr at ₹1,000–1,100 cr revenue).
• Price floor argument: At current TBHQ/BHA prices of $8.5–9, the diphenol business is near breakeven; below this, producers would exit, putting a floor under the market.

Nirmal Momaya: “Anything below this would mean that Hydroquinone prices will have to go down further, which would mean that diphenol business is not viable. I don't think producers will continue to produce it. That is the situation.”

Vanillin: The Margin Reset

• Production underway: The Methyl vanillin campaign started in the current market month; production has stabilised and quality now matches the main competitor.
• Customer validation in progress: Product has been approved with significant customers in flavours and fragrances and foods and beverages; further validation is ongoing.
• The margin math: Catechol currently sells at a ~₹100/kg loss. Converting that same catechol into vanillin at a $9 selling price and $7.5–8 cost yields a ~$1/kg margin, turning a ₹100 negative into an ₹80 positive.
• FY25 target: Management is “very confident” of reaching 2,500 tons of production and sales this year, at 40–50% capacity utilisation, contributing ~₹200 cr in revenue and ~₹45 cr in EBITDA after absorbing the catechol cost.
• India market entry: The company will address the Indian vanillin market in FY25, targeting 400–500 tons, now that SEZ-related restrictions have been overcome (import duty applies on domestic sales from SEZ).
• Phasing risk: Only 25–30% of vanillin sales are expected in H1, with 70% in H2, so the margin uplift is back-end loaded.

Nirmal Momaya: “if you look at what we are doing with catechol, we have a negative of almost Rs. 100 per kilo on catechol. When we convert it to vanillin and we typically end up at a $9 selling price at 45% capacity utilization, the cost should be around $7.5 to $8, so we have a 10% margin there, it's about a dollar there and Rs. 100 negative turns into Rs. 80 positive there.”

Europe and China: The Persistent Drag

• Italy EBITDA loss: Europe lost ₹63 cr at the EBITDA level in FY24; the plant remains shut and is being repurposed to produce MEHQ and Guaiacol.
• Repurposing timeline: Basic engineering is complete and financial closure is near; stabilisation and commercialisation are expected at the fag end of FY25, with sales only in FY26. A loss of minus €2–3 million is possible in FY25.
• China JV: The plant is contemplated for refurbishment to manufacture Heliotropin in the next financial year; an EBITDA loss of ~$3.5 million is guided for FY25.
• Combined FY25 drag: Europe and China together are expected to lose ~₹25 cr at the EBITDA level.
• Inventory largely cleared: All Hydroquinone and catechol inventory from Europe has been liquidated; only very small inventories (a few hundred tons) remain.

Performance Chemicals and the Catechol Problem

• Revenue collapse: Performance chemicals revenue fell from ₹688 cr to ₹400 cr, primarily because the European plant stopped producing Hydroquinone and catechol for external sale after its August shutdown.
• Dahej capacity constraint: The HQ plant operates at 80% capacity not because of HQ demand but because catechol, the joint product, has limited market absorption. Production cannot increase without creating excess catechol.
• Catechol drag quantified: The catechol overhang is limited to 2,500–3,000 tons sold, creating a drag of roughly minus ₹25 cr; vanillin production absorbs catechol cost, so no further mark-to-market is expected on that inventory.
• Price outlook: No significant price improvements are expected in the next two quarters; some improvement is possible towards the end of FY25, with Hydroquinone and derivatives likely to recover faster than catechol and downstream.
• Green shoots in agrochemicals: The agrochemical sector is showing signs of a turnaround, with companies clearing old stocks and building new ones; activity is expected to start in the next month.

Nirmal Momaya: “It's not driven by hydroquinone market. It's more driven by the catechol market because since the joint product, we have to curtail the production.”

Negolyte and Other Optionality

• Lockheed Martin milestone: A large commercial lot was supplied for Lockheed Martin’s first battery; it shipped in Q4 FY24 and will be installed in Q2 FY25 (July/August).
• Next step: Discussions on a bigger facility will begin only after the battery installation is complete, making this a FY26 story at the earliest.
• Heliotropin: The CFS Wanglong settlement clears the path to repurpose the China plant for Heliotropin production; contribution is expected only in FY26.
• Italy new products: MEHQ and Guaiacol from the repurposed Italy plant will be in the validation phase towards the end of FY25, with contribution in FY26.

Guidance & Commitments

Key Metrics