Specialty chemical manufacturers such as Galaxy Surfactants continue to benefit from strong demand, but challenges posed by supply chain issues are limiting profits. The same was evident from the September quarter performance.
However, the company’s overall revenue grew 22% year-on-year during the September quarter, aided by better realizations. Galaxy share prices were up more than 3% in early trading on Thursday.
Volumes remained weak across all segments, including surfactants and specialty care products. The supply chain of key raw materials posed challenges and the high cost cost also affected the operational performance. Volatility in feedstock prices, non-availability of critical feedstocks and extended lead times led to supply-side shortfalls. The company’s Ebitda fell 39.8%. Ebitda means earnings before interest, tax, depreciation and amortization.
The company said that Q2 began with availability issues with respect to lauryl alcohol (sourced from Southeast Asia that was majorly closed due to the pandemic) and ethylene oxide, the two major feedstocks used to manufacture our performance surfactants. are used for. Rising input prices, and rising freight and logistics costs impacted operational performance.
However, the positive is that demand remained strong, and there was a temporary inability to meet it due to supply-side constraints hindering the company’s performance. As the situation improves in a few quarters, the company will continue to make gains. Hence, analysts have a positive outlook on the stock.
Analysts at HDFC Securities Ltd said their positive recommendations are based on the viscosity of the business, as 55% of the revenue mix comes from multinationals. The company has the ability to maintain margins as the volatility in raw material cost is easily passed on to the customers. A strong return ratio is also keeping analysts positive on the stock.
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