Dear Fellow Shareholders
I am delighted to share my thoughts on the performance of your company during FY 2018-19. Amid external challenges we reported satisfactory outcome built on strong fundamentals and optimised business operations.
The first half of the year witnessed a notable recovery of investment and private consumption in the country. On the structural reforms front the implementation of Goods and Services Tax (GST) and Insolvency & Bankruptcy Code (IBC) continued to evolve during the year. However the economic growth moderated in the second half owing to fluctuating crude oil prices depreciating currency and liquidity concerns amid a global slowdown. With sluggish growth in the agriculture and manufacturing sectors the country grew at 6.8% in the FY 2018-19. Despite the headwinds India remained one of the fastest growing economies in the world. The country's long-term growth potential stands undisputed backed by a host of reforms undertaken recently which have laid down a strong foundation for the economy. I am optimistic that the new Government will provide further impetus to the growth story of the country.
The global PA market spans across five regions namely Asia Pacific North America Europe Latin America and the Middle East & Africa. Asia Pacific region is the major producer of PA followed by Europe and North America. The PA market is expected to reach US$ 9.61 billion globally by the end of 2020. Asia Pacific is likely to emerge as the fastest growing as well as the largest PA market by the end of 2023. The year 2018 was marked by volatile crude oil prices which inflated the raw material prices for PA as well. However with crude prices stabilising in 2019 the PA industry is expected to recover margins. The market size of domestic PA industry stands strongly at 375000 MTPA in 2018 and is expected to grow faster by 7-8% annually. We expect demand to get a thrust from the growing end-user industries like construction automobile electronics paints & coatings among others. The new Government's rising focus on structural reforms infrastructure and housing development will further fuel the demand for PA.
In terms of financial performance the Company delivered a healthy performance in FY 2018-19 on the back of sustained efforts to improve operational efficiencies. The Company's revenue increased by 14% during the year to 1311 crores. EBITDA and PAT stood at 234 crores and 116 crores respectively. Volatile crude oil prices and geopolitical issues in global market led to a significant rise in the prices of raw material. As a result the overall EBITDA Margins and profitability of the Company were impacted to some extent. However with recent stability in crude oil prices and a sharp decline in PX prices (a co-product of OX) we expect the margins to improve going ahead. Our Directors have recommended a dividend of 40% i.e. 4 per equity share of 10 each.
Expanding and Evolving
Our sustainable growth in FY 2018-19 was supported by some key strategic decisions taken two years back with continuous focus on innovation. We initiated capacity expansion anticipating rising PA demand in the industry. The brownfield expansion of PA4 is in final stage and is expected to come on stream by the end of 2019. Further we plan to introduce advance plasticizers by FY 2020 in order to diversify our existing product mix. The PA4 expansion will result in additional wash water which will be used to generate MA capacity for the Company. Higher MA capacity will further support our strong position in the industry. Overall our holistic strategies will lead to greater visibility across geographies and better value for the customers.
We made considerable progress in building a firm base to support our focus on achieving a sustainable growth. The year ahead will certainly be more exciting as we reach towards the completion of our expansion initiatives and derive the desired benefits.
Before I conclude I appreciate all our employees who have played a great role in the Company's growth. I thank our Directors for their invaluable inputs and motivation which has been instrumental to our growth journey. I also extend my gratitude to our customers bankers suppliers Government authorities and the growing fraternity of shareholders for their continuous trust and support in our vision.
Yours sincerely Nikunj Dhanuka
Managing Director & CEO