Vinati Organics says second quarter will be weak but expects recovery in most product segments from October

Specialty chemical maker Vinati Organics on August 14 said that customers globally are destocking goods and that ATBS chemical is seeing the biggest impact of inventory destocking. Vinati Organics CEO Vinati Saraf Mutreja is of the view that the second quarter results will be similar to the first quarter as destocking will continue till September.

Most chemical companies globally have announced a soft year going ahead and the firm is seeing softer demand from the US and Europe, she said, noting 70 percent of the company’s sales come from export markets.

“We were well aware in March itself that for the next six months, most of our major customers would be destocking high inventory levels. What had happened last year, in quarter three and quarter four, most customers purchased too much product, in fact, more than we had anticipated, and hence the second half of last year was very good," she said.

Mutreja also said that in the beginning of this year, they realised they're sitting on too much inventory, maybe they were scared because of COVID and high costs, which has all come down and everything is normalized. "Expect recovery in most of our product segments starting October onwards,” she added.

Her remarks come after the diversified chemicals manufacturer reported a double-digit fall of 27.6 percent on a year-on-year basis in its consolidated net profit at Rs 83.2 crore in the June ended quarter compared to Rs 115 crore in the same quarter last year. Its revenue from operations declined 14.4 percent YoY to Rs 431 crore in Q1FY24, as opposed to Rs 503.4 crore recorded in the corresponding quarter a year ago.

Vinati Organics Ltd is a specialty chemical company which manufactures and distributes organic intermediates, monomers and polymers. The product portfolio of the company includes aromatics, industrial monomers and industrial polymers.

Reflecting on products, Mutreja said, IBB remains a stable business and so do other niche products. “Butyl Phenol is seeing a slight growth, starting now we are able to penetrate better into the market,” she said.

She added that for her firm pricing hasn't had a big impact. Most raw materials are falling but for Vinati Organics, while some have fallen, some have also remained the same such as Methyl tert-butyl ether (MTBE), which is the biggest raw material from which it makes IB.

“So prices have remained more or less stable. It's the volume that has dropped. I see similar trends in quarter two. Butyl phenol there is some softening in pricing, but not in other segments like IBB, etc,” she said.

Mutreja also said the Veeral Organics and Vinati Organics merger is awaiting approval from National Company Law Tribunal (NCLT). The company has already gotten shareholders and lenders approval.