AS SOON AS THE PRICE PRESSURE OVERHANG IN THE GLOBAL MARKETS BEGINS TO
EASE, THE COMPANY'S CAPACITY UTILISATION, REALISATIONS AND SURPLUS SHOULD REBOUND,
ENHANCING STAKEHOLDER VALUE.
Overview
It is a challenging time to be communicating with stakeholders. Even
though the Company delivered a sustained performance during the last financial year with a
profit of H57.55 Crore before tax corresponded by a capacity utilisation of about 70%, the
reality is that the Company encountered declining realisations every single quarter
(extending into the first quarter of the current financial year).
This decline was on account of falling input costs and realisations
precipitated by large insoluble sulphur manufacturers with surplus capacities due to their
recent capacity expansions. To justify their expansion at a time when the industry
suffered an excess of capacity over demand, these manufacturers began to dump their
products in the markets. This was done largely with the perspective of making an entry
into countries and customers, then holding on to them across time, in the hope of gaining
sustainable market share.
The additional volumes were targeted at specific markets. The Chinese
and Japanese manufacturers found the Asian and Indian markets a soft target, considering
that India did not have any deterrent customs duties on the one hand and is the fastest
growing insoluble sulphur market on the other. The world's largest insoluble sulphur
manufacturer also aggressively started targeting the Indian market from its Malaysian
plant. Since OCCL has for long been the largest Indian insoluble sulphur manufacturer and
provider, its domestic sales were under pressure during the year under review. The Company
yielded marginal market share; its India realisations were lower than its average global
realisations. As a company seeking a level playing field, we petitioned the Indian
government for the imposition of a deterring anti-dumping duty on the rampant dumping of
insoluble sulphur into the country (presently under examination).
At OCCL, we recognise that realities may get even more challenging
before they bottom out and improve. The next couple of years could be challenging for the
sector. Your Company's principal objective will be to resist the brunt of the
industry cycle by staying innovative, remaining nimble, while staying liquid and
profitable.
Strengthening our strategic directions
During the foreseeable future, the Company seeks to strengthen its
strategic direction through the following initiatives.
One, the Company will seek to increase sales to the extent
possible; its supplies to newly acquired customers, including an international tyre major
that commenced from CY2024, represent the validation of a commitment to seek new long-term
customers across market cycles. The increase in sales, production and capacity utilisation
could help counter pricing pressures and strengthen profitability. Two, the Company
will seek to moderate costs with the objective to remain lean and competitive during the
challenging end of the downcycle in order to gain an effective edge against competing
companies possessing larger manufacturing capacities. The Company right-sized talent,
prepaid debt, and replaced conventional electricity with renewable alternatives during the
last financial year. This exercise will sustain into the current financial year as the
management questions every cost with the objective to graduate to a lower break-even
point.
Three, the Company will continue to pursue its long-term
sustainability programme. This is not just a cost of staying in business; this is a
license for the Company to operate in India and market products to some of the most
demanding customers the world over. The Company will seek progressively
environment-friendly processes and practices, marked by the optimised consumption of gas,
water and energy coupled with a moderated carbon footprint. By moderating the consumption
of non-renewable resources with a lower environment load even as we increased
manufacturing capacities, we decoupled economic growth from our carbon footprint. The
result of this long-term commitment was that our Dharuhera operations turned water-neutral
in FY 2023-24 through a ground water recharge that was more than what we consumed. Your
Company intends to become a net zero carbon emission company by 2050. Your Company is
engaged in the manufacture of new insoluble sulphur grades with superior characteristics,
helping customers reduce greenhouse gas emissions. Your Company was accredited by credible
certifications (Responsible Care and Eco Vadis Gold), enhancing our ecological commitment.
Four, your Company will continue widening its CSR commitment around
its manufacturing facilities. Your Company invested H134.35 Lakh in social responsibility
initiatives in FY 2023-24; the aggregate spending in the five years ending FY 2023-24 on
this account was H818 Lakh.
Conclusion
By the virtue of taking a long-term perspective of enhancing our
competitiveness, I am optimistic that the Company will weather the recent downtrend . Your
Company encountered sharp declines in sectorial fortunes in the past that were
successfully weathered; it will weather this one as well.
My confidence comes from the fact that the Company is more competitive
today than ever, marked by a lower break-even point and low long-term debt. As soon as the
price pressure overhang in the global markets begins to ease, the Company's capacity
utilisation, realisations and surplus should rebound, enhancing value in the hands of
stakeholders associated with our Company.