Aarti industries Ltd. Profit Magnifies by 96%, Volumes Recovery in Nitro Chlorobenzene observed in Q1 FY24-25

Aarti industries Ltd. Profit After Tax zoomed by 96% YoY reaching INR 137 crore in Q1 FY24-25. The company posted a revenue growth of 28% YoY in both core and contracted products driven by volume gains. The company agreed that global overcapacities like in China affected supply demand dynamics with Chinese suppliers dumping significant volumes into the global markets at relatively lower prices, especially of Nitro chlorobenzene (NCB). On the other hand, the company is proud to present the commercialization of their NCB capacities from 75kT to 107kT. This strategic move aims to integrate Indian NCB supply into the Western Hemisphere. However, seeing the price levels of NCB, spread margins over CFR Benzene have remained relatively weaker for Q1 FY2024-25.

Financial information provided by the industry revealed that raw material costs for Q4FY23-24 and Q1 FY24-25 remained at par. However, Q1 FY24-25 revenue performance gained edge over the previous quarter’s revenue performance indicating higher volume sales, especially NCB was being undertaken. This movement was also guided by movement in PI industries, revenue growth. PI remains a major consumer of NCB for building its agrochemical stocks. PI industries revealed that growth in revenues were driven by growth in volumes, especially export after El-Nino year ended by late April. NASA and Copernicus center have forecasted for La Nina or normal monsoonal event this year. The markets, previously guided by gradual recoveries in agrochemicals, saw suppliers going bullish and raising their product cost amidst higher demand projections. In China, however, newer capacities of NCB and increased investments in agrochemicals has brought down the pNCB prices down to as low as EXW Qingdao to as low as USD 1120/MT assessed on 26th July 2024. Higher production and operating rates were observed since the beginning of Q2 FY24-25 in NCB output. Moreover, major challenges for Chinese volumes have been ban on certain agrochemical formulations derived out of NCB in Europe in this fiscal. The overcapacities have kept the regional market players, where Aarti industries is one of the largest players globally, from keeping their margins at ease to gain volumes. Price differential between Indian and Chinese Ex-factory levels were favorable for Indian markets to gain domestic market shares, however as Q1FY24-25 ended, gains in prices in India for pNCB as robust demand for agrochemicals as well as other segments like dyes, pulled the differential down. On the other hand, Chinese plants coming online after severe downturns in Q1 2024, saw higher volumes of NCB being produced to be dumped into the regional markets of APAC as their prices have largely remained stable. Indian players have also been facing accessing good carriers and freight spots for their deliveries which has also impacted significant volumes keeping their prices down, revealed a market participant.

NCB’s capacity expansion from 75kT to 107kT in 2024 has been a strategic move to become a global leader in NCB and other Nitro aromatics product line. Both India and China have been adding significant capacities in their domestic territories for Benzene downstream to serve different markets. However, the high feedstock cost has been keeping their margins down. The suppliers, however, continue to be guided by optimistic sentiment for the next two quarters.