Volumes in all segments including surfactants and specialty care products remained subdued. Supply chain of key raw materials posed challenges and also higher input costs impacted operating performance
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Specialty chemical manufacturers such as Galaxy Surfactants continue to benefit from strong demand, but challenges posed by supply chain issues are limiting the gains. The same was evident from the September quarter performance.
The company's total revenues though jumped 22% year-on-year during the September quarter, aided by better realisations. Galaxy’s stock prices saw gains of more than 3% in early trade on Thursday.
Volumes in all segments including surfactants and specialty care products remained subdued. Supply chain of key raw materials posed challenges and also higher input costs impacted operating performance. Volatility in feedstock prices, unavailability of critical feedstocks and increased lead time caused supply-side constraints. The company’s Ebitda declined 39.8%. Ebitda stands for earnings before interest, tax, depreciation and amortisation.
The company said Q2 began with availability issues with respect to lauryl alcohol (sourced from South East Asia which was majorly shut due to the pandemic) and ethylene oxide, the two key feedstocks used for manufacturing our performance surfactants. Rising input prices, and increasing freight and logistic costs impacted operating performance.
However, the positive is that demand remained robust, and it was a temporary inability to service the same due to supply-side constraints that impinged the company’s performance. As the situation improves in a few quarters, the company will continue to reap benefits. Analysts thereby maintain a positive view on the stock.
Analysts at HDFC Securities Ltd said that their positive recommendations are premised on the stickiness of business, as 55% of the revenue mix comes from MNCs. The company has the ability to maintain margins since fluctuations in raw material costs are easily passed on to customers. The strong return ratios too are also keeping analysts positive on the stock.