In conversation with K Natarajan, Executive Director and COO of Galaxy Surfactants Ltd

Collectively, our products have a widespread impact, with at least 9 out of 10 consumers in India using a product containing a Galaxy ingredient at least once a day, asserts K Natarajan, Executive Director and COO at Galaxy Surfactants Ltd

Despite the volume growth surpassing the expected range, Q3FY24 experienced a fall of 13 per cent in revenue and 33 per cent in net profit. What were the reasons for this decline, and what strategies can be implemented to overcome them?

Revenue growth is closely linked to the cost of raw materials. This quarter, the correction in LA prices has negatively influenced our revenue for Q3. Our focus extends beyond mere revenue figures to include efficiency metrics such as EBITDA per metric tonne and overall profitability.

In Q3 FY23, we benefited from export incentives in Egypt, which are recognised on a cash basis. The absence of these incentives in Q3 FY24 resulted in a Rs 21 crore decrease in operational profitability. Additionally, normalized freight rates and delayed shipments due to tensions in the Red Sea contributed to a further Rs 7 Crore decline in operational profitability.

We firmly believe that volume growth is essential for our long-term success. In Q3 FY24, we achieved an 8.4 per cent increase in volume. Continuing to drive volume growth, along with enhancing our product mix through the introduction of masstige and premium speciality products, is crucial for maintaining and increasing our profitability in the future.

To what extent might the escalation in the Red Sea impact Q4FY24, and what measures is the company implementing to mitigate this impact on its business?

While the adverse impact of the Red Sea escalation was not felt in Q3FY24, a sudden surge in freight rates along with disruption in the supply chain did pose a slight challenge in the initial half of Q4. Usually, the impact lasts for one quarter, given the pass-through nature of our contracts. Having said that, the volume spillover on account of the Red Sea escalation from Q3 to Q4 will have a positive impact. Put together, as of now we do not see any major impact of the same.

Could you offer an overview of the various segments within the business, including their individual performance and contributions to revenue?

Our operations are structured into two primary segments: Performance Surfactants and Specialty Care Products. Performance Surfactants account for 62 per cent of our revenue, while the remaining 38 per cent comes from Specialty Care Products.

Performance Surfactants serve as essential components for various home and personal care products, including shampoos, toothpaste, body washes, liquid detergents, toilet cleaners, and dishwashing liquids. These surfactants are integral to the rinse-off formulations we use daily.

On the other hand, Specialty Care Products include ingredients that provide specific functionalities to home and personal care formulations, such as preservation, conditioning, and mildness enhancement.

Collectively, our products have a widespread impact, with at least 9 out of 10 consumers in India using a product containing a Galaxy ingredient at least once a day.

What are the company's top three strategic priorities at present? Are there any forthcoming plans for capital expenditure?

Our strategy is focused on outpacing market growth across various geographies while maintaining our leadership position in India and the Africa Middle East Turkey regions. We aim to secure sustainable operating metrics, driven by volume growth that fuels sustainable expansion, with EBITDA growth surpassing volume growth, and PAT (Profit After Tax) growth exceeding EBITDA growth, aiming for a ROCE (Return on Capital Employed) of over 22 per cent.

To achieve sustainable and structural growth, we emphasise talent development, implementing adequate and timely succession planning, alongside sustainable and ethical practices.

Regarding capital expenditures, our annual investment typically ranges between Rs 120 to 150 crore, supporting our strategic objectives and ensuring continued growth and leadership in our market segments.

What is your viewpoint regarding the future prospects of the household and personal products industry in India?

I would say - Bright, Growing and Vibrant. Bright implies bright prospects with respect to multiple categories given the under-penetration and growing awareness. Growing implies improving per capita consumption which is driven both by the rising consumption as well as improving quality of consumption (premiumisation).

Vibrant implies the emerging D2C brands, Private labels and E-Commerce platforms that are ensuring faster penetration as well as massive innovation across multiple Home and Personal Care categories.