Archean Chemical Industries (NSE:ACI) Q2 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to Archean Chemical Industries Limited Q2 and H1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in a listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Ram Praveen Swaminathan, Managing Director. Thank you and over to you sir. Good afternoon everyone and welcome to our Q2 and H1 FY 'twenty seven earnings call. Thank you all for taking the time to join us today.

0:46 On the call, as always, I'm joined by several members of our management team, including Mr. Archean, our CFO Sir Rajiv Kumar, Salisham and other members of our finance team and members of SGI, Investor Relations Advisors. I hope you all have had a chance to look through the results in the investor presentation, both of which are available on the website and on our website and the Stock Exchange website as well. In our pre commencement, I'll briefly provide a brief update on the overall marketing external environment, followed by an operating commentary on each of our businesses and some of our key initiatives. Our Q2 and H1 FY twenty twenty six, twenty seven financials, and a quick overview of where we are in terms of execution of our strategy. Starting with the external environment, and I'll just begin more the demand side.

1:34 The global chlor alkali industry continues to see some strong long term fundamentals. However, this quarter, this past quarter like the rest of the year has been marked with uncertainty and volatility. The price volatility has continued for caustic soda and chlorine with fluctuations in regional demand supply balance. There's been a sharp increase in ethylene prices and overcapacity in some regions. Now ethylene prices CFR prices in China have grown up as much as $11.40 dollars to $1,200 per metric ton. This kind of cost increase, sharp cost increase along with weaker demand for PVC has resulted in pressure on operating rates and reduction in production volumes, which obviously gets smidered on the caustic soda side as well. And we have seen evidence of that in some of the larger customers who procure salt from us.

2:24 These changes have resulted in continuing deferments in revenues of volume and demand, but we do expect that the rebound in this quarter in PVC pricing and that should help provide a full lift to the industry and should actually start helping see some more formulas in our order schedules. On the positive side, for long term perspective, the planned capacity of PVC in India all goes well in the long term for the industry and the sector as well. The agriculture sector, which is another big demand driver for us, continues to be very tickling demand due to the impact of the monsoons. This has impacted demand and production of several agrochemical products and some of the brominated derivatives and compounds which go into that segment. The oil and gas sector continues to demonstrate resilience despite the ongoing geopolitical conditions in The Middle East.

3:16 We are actually continuing to see a healthy inquiry level right from this segment, though it has been a drop from the prior year. Demand for specialty chemicals especially for semiconductor chemicals remains strong. So, on the supply side, we have seen strong inflation impact especially in the commodities which have a high impact on our business. HSE prices were approximately INR 67 per liter for industrial HSE in Q2 FY twenty twenty six, computerized sharply and in Q2 FY twenty twenty seven they averaged on INR 136. Prices of coal and ethanol have increased by around 40% year on year. Supply shortages due to the Middle East crisis, where prices were low sulfur gas manufactured, have also resulted in a sharp increase in sulfur prices, which have more than doubled.

4:06 In the past quarter, we continue to see increases in SO2 prices and of course sulphur prices and hydrated lime prices, which also have been impacted by the rise in pet coke prices. So all of this has contributed to a rise in manufacturing costs across several of our product categories and we expect in the near term this will continue for the rest of this year. Now providing operating commentary on our businesses and how we are working through external environment of opportunities in front of us. I believe first is industrial salt. Industrial salt revenue for Q2 FY twenty twenty seven was Rs. 161 crores, which is up 9% year on year. Volumes were down by 9% to around 812,000 tonnes for the quarter.

4:55 Despite the solid order board, shipments were impacted by deferrals of nature of multiple orders, largely due to the state of the overall PVC and caustic soda market. To mitigate the impact of this, we have continued to focus expanding our customer base in other regions. It's an initiative we started a couple of quarters ago and during this quarter we did see some success with some new orders from these markets, especially from Vietnam and Wuhan. The spike in ocean freight rates has also placed additional pressure on our realizations. But in this environment, we continue focus on ensuring our market share in all the regions we operate in remains robust and we kind of try to focus on growth from new customers in these markets. We remain optimistic that the environment will stabilize in H2, right, resulting in stronger volume in Q3 and Q4.

5:45 The the soil segment also continues to be in part of high logistics costs. Q2 generally has of quarter of higher costs because of the seasonal shutdown of the Jakaar Port and our volumes moved to other ports along the Gujarat Coast. During this quarter, we continue to see that with the shift to Mundra and Kandla, which of course has been further impacted by the road changes and the fuel price environment. We have managed to mitigate this partially with better route management, contracting and vendor changes and our cost per tonne actually has remained flat right, between Q1 and Q2. Other initiatives have continued to see some good on time execution in the quarter. We completed new log development at two out of the three ports.

6:32 We commenced operations in Kangala and we also expanded our company owned fleet by over 100 new traders to ensure that we have better control and leverage to optimize our logistics costs. A key challenge for us in the past few quarters has been was the completion of the new road construction in Haji period, which is where our plant is based and the ports especially Jakob and of course to some extent Kangla and Mingda as well. This road road construction has resulted in diversions that increased the distance per trip by around 15% to 30% and therefore increased the cost as well in a similar fashion. As reported earlier, we had expected the construction to be completed at end of September, which it has done, it has completed and we are now operating on the new roads effective early October and we expect to see better throughput of volume and kind of improvement in cost structures with the starting of this new road starting from this quarter onwards.

7:32 Moving on to bromine, bromine remains kind of a mixed bag. Our export order boards are very strong and we continue to see a pretty stable pricing environment there. The domestic demand though has been impacted by slowdown in agro and muted trends in pharma. Those demand trends along with higher competitive intensity has resulted in high pricing pressure in domestic markets. Despite that, we have kind of put a lot of focus on growing our export business where we added more accounts and we remain positive about our blended yield for the year, which has remained stable in the second quarter as well. The quarter was also marked by continued improvement in operations. We've had stable operations. Had some impact because of power shortages and power cuts during the month during the quarter and that had some impact on us.

8:23 But overall, we did continue seeing operational stability right across the board. Our dewatering program on roaming capacities continue to be as per schedule. We have given earlier guidance on the fact that we expect next year to be at around date around 25,000 tons and we are on schedule there. We had some minor delays, but we are confident about completing them in this financial year. In financial terms, roaming revenue for Q2 FY twenty twenty seven was Rs. 127 crores, up 76% from the same period last year. Boomerang volumes stood at around 4,100 tons, up 29% from 3,160 tons in Q2 last year. Our production during the quarter was impacted adversely by local power cuts.

9:09 We have seen a series of unscheduled power cuts in recent months and that has resulted in additional downtime for us, which is around 7% to 8% of additional downtime in the quarter. Realizations remain broadly stable to Q1 and are up 36% on a year on year basis. For the first half, roaming volumes were at 8,300 tons, up 18% year on year and revenue was INR2261 crores, up 66% from last year. The inflation in cost of sulphur hydrated lime and other elements has largely been mitigated through improvements in consumption efficiency and productivity and we'll continue to focus on those for the remainder of this year to ensure that we are operating at higher at optimum margin levels.

9:57 Moving on to the derivatives business or Archean as we otherwise call it, so during the quarter, Archean had a solid quarter, continued to kind of deliver what we had planned for it. Revenue for the quarter was INR36 crores, up 81 percent year on year. The volume for the quarter for fish derivatives stood at 2,115 tons, up 56% year on year and 44% sequentially. Our growth was high growth in clear brine fluids such as NABR and CABR, but organic compound volume was impacted adversely in the quarter by the slowdown in ag demand. During the quarter, we continued to expand our exports focus and we started shipments to Southeast Asia and East Asia, and the Asian exports comprise around 15% of our total volume.

10:47 While we had strong volume growth, we did have some unfavorable mix impact because of the lower demand for organic compounds from one time period costs and one time inventory evaluation, which had an adverse impact on earnings for the quarter. And for the quarter, we reported EBITDA loss of around INR1 crore. However, for the first half revenue stood at INR66 crores or 51% on a year on year basis and the business was EBITDA positive on a half yearly basis. We continue to remain focused on volume growth and profitability improvement measures. During the quarter, we have commercialized four new products including NPDR for pharma, IPBR and IPBR and eight new molecules are under further development, which should get released through the second half of this year and should also then be further attractive to volume growth.

11:41 And moving on to 6N, during the quarter we have obviously achieved a key milestone, the start of our civil work of the project in Odessa. Have, as we said earlier, we expect construction to be around eighteen to twenty four months and we'll keep you posted on progress there. In mid October, we also got the EC for the project and obviously first consignment of equipment have started shipping and from dispatch locations and should start arriving at our sites in due course. Year to date, we have invested around INR463 crores in Nguyen and 6N towards the project capital and related expenses. We'll continue to keep you posted on developments in this space. Some other key updates which I think are material or relevant, on SOP or sulphide potash, we are on track on the trials.

12:33 As I mentioned last quarter, we are delayed by around three months, but we are back on track. Pilot plant trials are completed fully and plant scale trials have been successful for the conversion of KTMF to shearnite. We are now working on fine tuning SOP production based on the system changes. Post that completion, which should be done somewhere in the middle of this quarter, we will start lining up feedstock development and also make changes and decide what changes are required on the plant in terms of full manufacturing position. Off grid energy, which is the investment we have in The UK, Off grid Energy Labs started zinc bromide battery pilot plant last quarter and we continue to work on supplying zinc bromide to them. We have worked closely with them to complete recertification for zinc bromide supplies as well.

13:23 Lastly, the land lease for the Harjipur side, we continue to work closely with the government of Gujarat to complete the lease extension. There's no material change from last quarter on this, but we continue to work with them and we remain confident about completing this in due course. As we have said earlier, we do not see any operational issues on account of the same right now. So with that, I'll move on to the financial performance. On a standalone basis, Archean Chemical ACI reported total income in Q2 of Rs. 305.4 crores, up 3132% year on year. Total income for Q2 FY twenty twenty six was Rs. 231.8 crores and total income for Q1 FY twenty twenty seven was INR $3.32 crores.

14:15 The business mix for the quarter was industrial salt was around 55%, roaming was 44% and SOP was around 1%. Exports comprised 79% of our revenue compared to 75% in the same quarter last year. Right, and obviously the domestic business was around 21% of our revenues for the quarter. EBITDA for the quarter was INR89.3 crores, up 6.4% sequentially and up 17.5% year on year. EBITDA for Q1 FY twenty twenty seven for reference was INR83.9 crores and for Q2 FY twenty twenty six was INR76 crores. Profit after tax in the quarter was INR43.2 crores, again up 6.7% sequentially and up around 12.2% from the same period last year.

15:06 Profit after tax for the quarter for first quarter was around INR40.5 crores and last year for Q2 FY 'twenty six, profit after tax was around INR38.5 crores. On a half yearly basis, total income was INR6737.4 crores, up 21.8% from last year, where our total income was INR533 crores. EBITDA was rupees for the first half was rupees INR173.2 crores, kind of pretty much flat to last year marginally, right, and obviously up from Q1 earlier from Q1 this year. On a consolidated basis, total income for Q2 was INR301.6 crores, up 26% year on year, and that's up from INR240 crores last year for the same quarter, and Q1 revenue was INR132.8 crores. EBITDA for the quarter was on a consolidated basis was INR74.5 crores, up 2.2% sequentially and around 8% last year compared to last year, Profit after tax for the quarter on a consolidated basis, right, was INR31.3 crores, up 3% sequentially and up around 8% on a year on year basis.

16:27 And on H1 basis, total income, as I said, on a consolidated basis was INR634.4 crores, up 17.4% from the comparable half last year, right, and total income was INR540 crores. EBITDA on a consolidated basis for the first half is INR147.3 crores, down 5.2% compared to last year, especially because of a weaker first quarter compared to last year. On the balance sheet front, our ROCE for the Chemical business remains pretty solid. ROCE for the Chemical business overall business grew from 11.1% in the first half of last year to 12.2%.

17:12 ROCE for the Chemical business alone grew from around 15.5% in H1 last year to 16.5% in H1 this year. As I look forward, I think our priorities for the rest of the year remain much of the same to what we have kind of said earlier. We remain focused on programs we started in Q4 of last financial year and our strategic platforms which is driving focused growth, expanding operational excellence, using the resources efficiently and driving technology adoption creation. Those platforms remain unchanged. For FY 2027, the priorities we shared earlier that we are focused on continuing to expand our market share in salt, developing systems to drive higher throughput in salt, debottlenecking bromine production, accelerating our clean and ensuring effective capital allocation and execution and success.

18:08 We have continued to execute these priorities in the first half of the year. The first half has been challenging with higher inflation, logistics challenges and variability in demand, But we believe we will execute the initial consistent deliberate rate providing traction in global and I believe we will see the full impact of it in the coming quarters. Overall, we remain confident about the second half of the year and into the full year going ahead. With that, I'll open the floor for questions and I'll come back at the end with some closing remarks. Thank you very much. We will now begin with the question and answer session. Session. The first question is from the line of Sanjeev Jain from ICICI Securities Limited. Please go ahead.

19:07 Hey, good afternoon. Thanks for taking my question. And to start with, happy Diwali to the entire team. First question on the volume front for the bromine. We were anticipating 18,000 to 20,000 metric tons for FY 'twenty seven in the first half, we have done close to 8,200 metric tons. That means in the next two quarters, we are looking at even to touch the lower end of the guidance, are looking at upwards of 5,000 metric tons per quarter. Given our run rate and how should we see the volume for this FY 'twenty seven? Do we see we will fall short of the guidance this year? No, as of now, we are expected to be at the guidance, Sanjay. I'll be at the lower end of the guidance.

19:56 Got it. Got it. That means we should ideally expect a sharper sales of bromine volume in the second half? Yes. I think production and sales as I mentioned, we lost around 7% this quarter because of the power shutdowns and the power cuts. We should see that getting restored. At least have worked out kind of a new model and got some better clarity from the government on how they will do the shutdowns. So we should start getting that upside from that alone, which is above 67% and then other things will flow through. But yes, we expect that to happen. Got it. Similarly, we were looking at 4,500,000 metric ton in salt. I know salt has been more challenging in the first half, I appreciate that. But do you see any probability of retouching 4,500,000 metric ton for this year or it looks a little stretched for at least this year given first half being very challenging?

20:57 Yes. So, the first half was close to 1,800,000, 1,900,000. And I think the order board is there, Sanjesh. I mean, we have the order board clearly and we have the ability to ship as well. I think some of the initiatives we've taken to ensure the supply chain is more robust is in place. I think a little of what's difficult to predict right now is just the way PVC works and some of the impact we've seen on operating rates and deferrals from customers. That is a hard one for us to cautiously predict. We are still pretty much working on on that number, right, because that's kind what we've given as an indication or we're still very much focused on getting that done. The order boards, if they hold, we allow that to happen.

21:42 So there is a degree of uncertainty in terms of able to predict that completely. So, as of now, we are probably we have a very high confidence of 4.2 to 4.3 and then we will then push to get to the path of 4.5. This quarter salt realization looks unreasonably high given what we have done in last four, five quarters. Anything which has changed is that we are focusing pricing over volume or it's just purely a mathematical number? No, I think it's a bit of a mixed number as well. I think as I mentioned earlier, Sanjesh, I think we work with a there's a range of mix between grades and also geographies and more different than some of the lower priced geographies.

22:28 I think that's probably just made the mix a bit more favorable in terms of price. Nothing is got nothing deliberate or nothing structural. No, that's clear. On the cost side, we said that Harjipreet Road is now fully operational. Now what should it provide us in terms of delta for the EBITDA in the Salt now that we will be running one volume, obviously, because that will ease some of the logistical bottleneck. But more from the cost perspective, how much benefit should it add in Q3? Yes, that's kind of a yes, so I think cost structure, there are two elements to it, mean, one is the cost per kilowatt which has gone up substantially. Other one is the impact of the distance itself.

23:16 So yes, I think we expect probably our transportation costs will have gone up transportation costs alone, which have probably gone up around 15% or 30% in the range based on which rule, court, etcetera, that should more or less get mitigated this quarter, right, because of the rule change. So this is not 15% of revenue or 15% of the transportation cost itself. Just wanted to point that out because I'm sure you guys will do some math on it, but the transportation cost number, which the 15% had gone up by around 15% to 30% in that range because of route changes, That should get mitigated almost. So very large projects will get mitigated. It. Ram, if I just reconcile what we have discussed, we are looking at bromine volume acceleration, we are looking at salt volume acceleration in the second half and hopefully derivative performs well and there's a cost reduction.

24:14 Are we looking at a significant jump in the EBITDA in the second half versus the first half? Don't Sanjeet, we don't give guidance on No, but structurally, what is the risk you see for this assumption? Are pricing stable? Or do you see pricing can be a spoil spot in the second half? Or you have enough visibility for the pricing? No, I think there are obviously risks which are there. I think first of all, I mean bromine, though as we get we will have operationally let me just use the operational list first, probably the biggest one is we get into winter and we do see some impact at times because of that on recovery across our entire system. So that is an operational risk, which is there. I think fuel costs could jump further.

25:03 As you know, I think this quarter we entered at 130, we exited at a much higher rate, depending on how the quarter averages went. It's a bit hard to predict it right now. Both WTI and Brent and D. Seem to be in upward direction. It's kind of hard for us to predict how it will land, but I think there's probably at this some amount of risk there which could eat away a reasonably large part of the savings on the location because that's a 10% fuel increase, it's it's kind of a secular increase. So those are definitely risks which are there, I think which are probably there. And then of course the volume piece you already spoke about in the range. But those I think are the bigger call outs there.

25:51 I won't comment on specific numbers. As you know, we don't give guidance financially in terms of earnings. But otherwise, we generally mean I mean those are the things that are be watch outs for us. Got it. Just one last question before I fall back to the queue. On the now that we have started the construction at the Odisha site, what is the timeline we are looking in terms of key milestone for the plan to commission from now to FY 2029? I think we will start construction now. I think overall at the headline level is probably twenty four months end to end, Sandvish. I think probably we'll work we'll see how we can give you a better kind of visibility in terms of what milestones to expect.

26:42 We're just kind of getting through some of that work. So at some stage, we'll come back and probably do a little bit more of what to expect on an interim basis and not just like a... I mean, twenty four months is like an end of the kind of window. We're trying to share with you some interim milestones as well. I mean, right now, we have shared an interim milestone in the earlier phase in terms of FSA approval, like getting the construction started, getting the done and so on. So a whole bunch of preconstruction, we've given some interim milestones of preconstruction. We'll try and share some construction milestones as well. It was a little bit of time on that. That will be helpful. Thanks Ram for answering all those questions and best of luck for the coming quarters. Thank you. The next question is from the line of Parita Khetan from Smiths Institutional Equities Limited. Please go ahead.

27:32 Thank you sir for the opportunity and wishing you a very happy Diwali. Sir, just a couple of questions. Sir, when I look in this quarter, this UGS again looks on the higher side because as we mentioned earlier also over the last two quarters, we were having high cost inventory of salt. Now with the load infrastructure work being completed, you see these additional salt volumes like which are stuck with now be shipped to the export market and that could lower your COGS and add some numbers to the EBITDA in the coming quarter? No, sir. Why don't you share the other questions, I can answer both of them together, so this is more efficient. Do you have any other questions? Yes, sir. Second was on to the other expense side. As you mentioned, like, because there was some loss of volumes in bromine because of the lower because we didn't have the power.

28:26 So this lower other expense slightly look because of the lower power cost only. Now with the road infrastructure work also being completed, we are anticipating that so the number to come down in Q3 also and Q4. And how much incremental number to EBITDA we see like from this COGS coming down and with these other expenses also come down the road infrastructure we are getting complete? So I think as I mentioned earlier to the comment, I think the question I said answered earlier kind of pretty much is holds to I think to your questions as well. I think our logistics cost logistics cost increased substantially obviously because of two reasons, route changes and the diesel cost increase.

29:11 The diesel cost increase is the larger part, the route increases was obviously smaller part but very significant. That was around 15 to 30% of our cost of logistics had gone up because of route change alone. That should largely get mitigated in the coming two quarters, right, assuming that they don't make any further changes, which we don't expect to happen. So with that, we should see that mitigation come through, right? And I think think I kind of concluded that dollar expense increases or reductions are because of same issues, so I won't get into that. But largely the fuel costs, the route changes should have that impact on our cost structure. Got it. Sir, my next question is on to the ore and hydrocarbon side. Sir, where are we standing in terms of customer approvals?

30:02 And any sort of top line numbers like we are building in for 2027 and how much we could make for 2028 and 2029? And about the product also like how well the product is being accepted by the market? Is it a good product or and the product market fit been already established or it is still in progress? Very wide question, but let me try and narrow it down a little bit. I think that there are bunch of products that we've made there and some of the plants actually couple of plants are really going through this releases from government in terms of licenses and carers and so on. The two plants are operating right now where we actually make starches and we make pregels and we make solvents to some extent.

30:50 Those plants, I think as I mentioned earlier, we have for several years those plants have not been operational, so we have the markets have changed, so we've been working on the new products. Products have actually had some fairly good feedback in terms of the customers we have given it to. It's just that given the state of the oil and gas market and lot of those products go into oil and gas, it's just been difficult to get order traction in a consistent way. We are largely getting a few campaign kind of orders that are coming in, but structured off take kind of through a rate contract or long term contract has been difficult to kind of work through given the uncertainty on the oil and gas side. Obviously, the primary oil and gas market for us remains The Middle East because these are volumetric products and therefore we get more easily shipped out in the Middle East region, but that uncertainty has been a problem for us. So but trials have been going reasonably well and I think we are for the rest of this year, we are not giving a volume guidance for the business because of this uncertainty, but we remain confident that by Q1 next year we should really be able to start ramping up the business, right? And I think we hope to kind of like we are ramping up in a few, hope to start an aggressive ramp up in that part of the business as well.

32:09 It. Sir, just one more bookkeeping question. I wanted the volume and the revenue numbers for SOP and also the captive consumption of bromine that they are using for bromine derivatives. Because I believe, sir, the manufactured volumes looks on the higher side, but the actual saleable volume looks lower because we are also using captive. If you could also provide the manufactured volumes also of bromine for the last two quarters? So out of the volumes, you should disclose on 30% of that goes to captive. 25% to 30% goes to capital, the remaining goes to market. Okay. So 30% means that 4,000 tonnes effectively or 30% means around 5,200, you are stating that number. No. The 4,100 tonnes is total roaming including the captive.

33:02 So market would be around INR 3,000 and captive would be around 1,000. Okay, okay. So this INR 4,100 also includes the captive unit. Okay, okay. Got it. And sir, on to the SOP volumes and... SOP, the charges... Yes, SOP FY twenty twenty seven Q2, we have done four forty four metric tons and the total value was 2.18 crore. Got it. Thank you, sir. That's it for now. Thank you. The next question is from the line of from RBC Investment Manager LLC. Please go ahead.

33:54 Hi, sir. Thank you for the opportunity. The first question was, sir, we have given the high cost of diesel price and uncertainty around it. And however possible in operations, does adopting electric tax make sense for us given we have fixed load operations? Yes. We're working on pilots on doing that. Right? I think to be fair, the challenge is for us to get... These are... There'll be 55 GVW trailers. And for us to get vehicles which can operate with charging, right, for that distance has been a challenge. We end up having a fair amount of downtime because of charging time and that actually ends up creating a very little increases, the turnaround time for truck quite substantially and kind of mitigate any cost benefit we'll get substantially.

34:46 We are working on it more from a system and we have multiple pilots going on both inside the plant and in terms of outboard movement. But to your direct question, saying that are we going to get huge cost benefit by going electric, it will hard to see that right now. Of course, it will happen over time as the vehicles get better, the power density and we actually can undone them for probably 300,400 kilometers without a recharge. But right now, we trying to we are going to recharge twice on a trip, on a two way trip today. The kind of the vehicles are available and that makes the downtime just way too high for us to run fleet properly. Okay. The second thing on this GM retirement project, is the industry conducive for us? Are we going ahead with the project or is it on hold currently?

35:34 No, it's still I think we've said that's a priority for next year. I think what we have laid out before is that the first phase of bromine expansion which remains focused to our current derivatives and market and other customers, Archean has captive demand for derivatives and other merchant volume and then we will line up the flame retardant and the next step up on bromine together. And that's very much still on the plan. We're just finishing first one and first one phase one by the end of this financial year and then we will start working on that. Obviously, we have to give it some time for us to stabilize operations and all that once the debottlenecking work is done for the first phase, but that's very much part of the plan.

36:22 The last one time stamp it specifically, but somewhere between, I'd say, 07/28 and 2829. Okay. And the last thing on the off grid side, given assuming the pallet dryers go as expected, when do you expect to commercialize the Gigafactory if there are any such? There's a fair amount to be done between just the pilot trial and that. So I think I don't have a really clear answer on that right now, but we'll try and get you an answer on that. If you can just drop us a note, there is very specific interest and I will provide share with more of an update on it. This stage, think it's still very early to get a put specific plans around that.

37:07 Okay. Okay. Thank you. Wish you all the best. Thank you. The next question is from the line of Rishabh Jain from Bajaj Finance. Please go ahead. Yes. Good afternoon, sir. Sir, this question is little broader in terms of your larger CapEx that you're looking at, at Bhubaneswar. Can you just help us understand in terms of say, for the next two years, how you're looking the overall CapEx, the quantum? And what's the kind of debt that you're looking at on that CapEx, Because we're specifically about the semiconductor project, you said? Yes. Semiconductor project. Yes. I...

37:52 Okay. Let me try and make it as simple as possible just as bit concise because we get... We spend a lot of time on it. But I think broadly we think that semiconductor project will be around $240,000,000 in terms of overall capital and obviously around a little bit less than half of that will come from the ISM and the FSA from the ISM, the rest of it will essentially be lifted by us. So those are two statements which we have kind of those are two things we have said in the past as well. We've already invested around INR $4.60 crores, 63 crores I think, right, or 62.8 crores is probably a specific number.

38:38 And we probably will look at probably investing another INR 1,000 crores to 1,100 crores over a period of time, not just to start not only to build the project, but also to set up operations as the project starts ramping up volume and so on, which will create its own pressure in terms of working capital and everything else. So somewhere in INR 1,100 crores range is what we probably do. Those include some investments that are not on the ISO as well. That is largely going to be funded through debt. Will as in Archean Chemical will take debt to fund a large part of that. Obviously, have our own internal projections about how the business will ramp up on the chemical side and therefore that will impact the specific level of debt we take and the time as we need to repay the debt which we take.

39:26 But broadly, the INR1000 crores plus of funding which we will invest into the business will largely come from debt on our balance sheet in the near term. Let me stop there and see if that kind of covers what you were asking or you want for something beyond... No, Maha. No, this is helpful. This is helpful. So this INR1000 crores of debt will be spread over next two years' time period, right, FY 'twenty eight and FY 'twenty nine. But as you know, you know, of these projects, Rishabh, it would be fair to assume that it's fairly front loaded, right, because that's the nature of the business. High cost capital items, so therefore we are in and it's fairly front ended in terms of kind of the cash flow curve.

40:12 Okay. And this will be all INR date or you're looking at foreign currency? We haven't finalized a specific instrument. When we do that, I'm sure we're going to probably report it out or share it with you at some stage. But at this stage, our team is still working on securing those things. And in terms of the core business, what's the kind of CapEx, capacity ramp up that you're looking at and kind of the rate that you're looking at? No, I think with the exception of the with the exception of the flame retardant project, I think the rest of it, our capital spend will be remained within our depreciation curve. And we we probably get point six to point seven debt. On... There's a bit of a front end to spend right now this year because we are doing a lot of debottlenecking.

41:01 For a three year window, it's probably gonna be at point seven depth, and that's something which we'll fund internally from a cruise... Operational cruise. Okay. All right, sir. Thank you, sir. Thank you. The next question is from the line of Darshita Shah from DSP Asset Managers Limited. Please go ahead. Yes. Hi, good afternoon. So I just wanted to check on the booming competition that you mentioned about in the domestic market. Are these newer facilities that have come up or was it always there? No, I don't think it's Sudarshita, not I won't say I would say not because of industry capacity being increased, I think largely because of dynamics within the existing industry structure.

41:54 Obviously, the requirements and the lead exports requires us to not players to have adequate transportation, logistics capacity. And based on how people's position are, they have different levels. Different players are differentially positioned there. And given bromine is not a shelf life product, right? There is always specialty back rate volume as we manufacture it. We've been in a good position and we continue to invest that in terms of our fleet sizes on ISO tankers that are really good and that puts us in a good position to get a follow opportunity. And so we've chosen except for obviously it's allowed us to serve our export market a lot better and to that extent even though we've seen higher intensity domestically, we've not been impacted by that. Our average yield has still been pretty stable compared to Q1. It's just been a bit of a lead to it in our business.

42:52 But otherwise, it's not materially altering anything in our business. And I think that will remain probably through the I definitely don't I think that things should be reasonably stable till Q1 of next year. I think we will obviously see post winter some of the manufacturing other parts of the world starts picking up a little And then the monsoons happen in India, we will obviously see some level of impact on that, could have some impact on the supply side. Otherwise, right now, we don't expect it to be a significant change. And if we make as we make more, are confident we will obviously we have strong customer partnerships, so we should always help us in additional production as well. Got it. And just secondly, based on the contracts that we have in place so far for the export market and then also taking into consideration the lower domestic market prices, 10, three twenty seems plausible for the first half, we are already almost there from bromine realization perspective.

43:52 Three ten, three twenty seems plausible for the rest of the year as well. Understand, we'll be boldly repetitive, but I think last quarter, as I said last quarter and the quarter before that, we kind of said that we expect the year to be at a INR300 average yield for the full year and at a minimum in three quarters and we still remain strong. I believe that we will hold that number. Got it. Perfect. Great. That's all from my side. Thank you. Thank you. The next question is from the line of Vinay Nandkarni from Hathaway Investments Private Limited. Please go ahead. Yes. Thanks for the opportunity. Just wanted some clarity on your SOP numbers.

44:38 For H1, how much have we dispatched so far? And are we sticking to our guided number of 9,000 to 10,000 tonnes for FY 2027? Yes, so I think SOP we it's a good question and I think SOP we are cutting down we are not going to be able to hold that earlier guidance we have given. We are indicated around 9,000 tons to 10,000 tons at the end of the first quarter And we are right now probably expecting to be around 3,005 tonnes for the year. There's a combination of factors that affected that. The first one I think one thing has been that as I said earlier last quarter, we've had a delay of a quarter in our trials, and that's obviously taken us some time off.

45:23 We've also had lower KTMS production, right, in the year, in the first half of the year. We are trying to ramp that up in the second half. I think in my opening comments also I said that after the trial is over, we have some work to do on regarding our stock operations. But free stock capacity, free stock throughput is right now behind plan. So overall, if I just wrap it all up and sum it up, we'll probably end up at around 3,500 to 4,000 tonnes for the year in terms of SOF. And how much have we done till now in H1? H1 is around 2,000 tonnes between H1. Q1 is around 1,500, Q2 is around four forty. So I think...

46:09 Yes. 2,000, Q1 is nineteen fifty two and Q2 was four forty four. So around 2,400 total, we should be at the 4,500 level for the full year as we stand now. That's a bit of a so that has been we have downgraded that number given our condition our feedstock condition and the one month, one quarter delay on the trials. And do you see any uptick in the realizations going forward on SOP or and how much would you expect in F28? No, so I think Q2 was a bit of an aberration for us, but I think we do expect generally that prices should be around $5,960,000 at a minimum, 50,000 to $60,000 or probably the eight let's put it more like $700 $600 to $700 A little bit of this is also a function of our ability to make to also have consistency in production.

47:04 We have in the past struggled with that as you can see and as you know probably from a historical data. So it's been difficult for us. I think as we become more consistent, dependable as a partner, I think you get to get better pricing with the right customer relationships. Right now because in the past our production has been fairly episodic. I think we've kind of been a spot player in the market, and that's something which we'll obviously fix as we start ramping up production as well. So next year, obviously, we expect to be able to get more throughput than what we gave as guidance this year, reasonably higher than that, and obviously we think pricing will settle at that $600 to $700 level to the extent we can basis how we see the market today, right. There's a cost actually earlier this year, it went above $700 also for a stretch of time, so there is some upside possibly there.

47:59 So for F28, shall we look at around 10,000 tonnes or more, your throughput? I think I shared with you twenty year period guidance or indication right now, we figure half a year left, I think but if I would I mean, I think what we we think this year, as I said, was a bit of a planning issue in this year, but next year, we are expecting to do significantly higher than what we gave as guidance this year. Okay. And, yes, thanks. That's that's all from me. Thank you. The next question is from the line of from Kapoor and Co. Please go ahead.

48:46 Yes. Namaskar, Hope I'm audible. Yes, yes, you're audible. Yes. Thank you. Yes, sir, regarding the capital work in progress closing balance of at INR120 crores. So if you could just provide to us, which are the key projects for which amount has been attributed to and when those are going to get commercialized? And sir, secondly, how are the operating ratios likely to improve for H2 in terms of the propylene derivatives? All put together, how are those scale up expected going ahead? And thirdly, regarding the industrial short part, so that what percentage of our...

49:36 The total quantity is... When I have a fixed price and what what are the other sports sports basis? If you could just give color and how do... Do we also look to... Look forward for vacuum salt as an option and as a category? Just please few odd processes. So the multiple questions, but just to make it simple, I will try and repeat them, right, so I don't miss anything. The first one I think was our CWIP level and how you would think the very thing you see will finish capitalizing. The second one is around operating rates in our derivatives business. The third one was very solid spot versus contract. I'll answer the first two and then I'll see if Sintrajeet wants to do the third one.

50:30 Second and third first, Sartaji can give the first one after that. I think most of our soil business is long term contracts. These are contracts which are essentially set up on an eighteen to twenty four months window. That's around 80% of our business, around 20% about generally around 10% to 20% is basically spot business, which comes in with the spot. In the current environment, our spot has gone up a bit higher than the 10% because of the reschedule which are happening, we're also going to try and get and win some new customers. Right? But generally, 10 to 20, it's a 10% range on average, sometimes goes to around 20%, but that's roughly the number. I think the other question which you did have was operating rates in derivatives business. So obviously, think the first half of the year, as you can see, our revenue was around INR66 crores.

51:25 It was out around 57% compared to last year's first half. We expect to further grow the business in the second half of the year. So obviously that is going to mean that our operating rates in terms of volume and operating leverage are going to improve. I think the challenge for us is the mix because of the tail off in the inorganic demand that our margin mix has changed a little bit, but we generally right now we are operating at around this quarter, the quarter which passes on 2,115 tonnes of finished production, which was close on 40% capacity utilization. So we are expecting to obviously continue to see that increase that over the next couple of quarters.

52:13 As far as CO2 is concerned, I'll let Mr. Nitra can answer. Yes. The CO2 is concerned mainly two things, one is brownfield expansion and the SOP plant modification. These two are main. That consists of nearly INR65 crore. Sorry? Please come again. Yes, please come again on the closing point. Two expansion, one is SOP, another one is brine field expansion. Okay. And when are those going to get commercialized and what would be the volume addition? Yeah, brine field expected in next couple of months. Okay. SOP current financial year, it will be up and running.

53:02 And the type of volume that will lead to? Me take that. I think so just let me before I'll answer the question, I think so obviously the Blankfeed expansion is something which feeds all parts of our products. So we are adding around 24,000 hectares of land, because I have 8,000 hectares of land which are expanding in right between now and early part of next year. The work has already been completed, which is phase one of it. That is actually what is sitting in the sea with right now. That will get that will go into production in the next couple of months because we are starting operating that we are in operations there.

53:48 And that will then basically add that will provide volume of additional salt and additional bromine. So, without increasing the circuit capacity, we can't actually feed higher level of operations of salt and bromine. The second part of this, the question is on the SOP trials, those are important. I think we had given guidance of 9,000 to 10,000 tonnes this year. We are expecting next year to make higher than that guidance. So this year we've had to cut it down for various reasons. Next year we expect it to make higher than that guidance which we've given. And SOP project is an important step in being able to do that. And so that should get capitalized by the end of this year as well. Now to just give you context, I think we have referred our total CWIP is INR120 crores, in which around for the large part only around INR80 crores is the Chemicals business and INR40 crores is really in six, seven and that in the Semiconductor business.

54:49 So that will obviously take a longer time to get capitalized, but that's a bunch of other things based on longer term semiconductor project. The 80 crores, which is in the chemicals business, most of that is basically the brine fuel expansion and the sulphide of potash expansion. Okay. And then my last point is on the industrial salt as well as the vacuum salt differentiation or whether we can move forward for reactors? There are multiple options. So obviously, the salt is a fairly easily large market, but I think we've laboring a larger public conversation, which is difficult to do on a call like this, but we really are pretty much focused on the industrial salt segments, which we are serving right now. We think that actually is a place that we have a very strong competitive advantage. So we are not looking at any immediate segments which are dramatically different. We're not looking at table salt and a bunch of other categories as well.

55:45 Finally, to I will share a little more than happy to share a little bit of our thinking around that if you just drop a note to us because it's probably the best forum target. Sorry to interrupt, Mr. Kapoor. Sorry to interrupt. Please join back the queue for more follow-up questions. The next question is from the line of Rohit Nagraj from three sixty one Capital Private Limited. Please go ahead. Good afternoon and thanks for the opportunity. Just one question. In terms of our silicon project, how are we placed from the availability of professionals in terms of operations, QC and business development? Thank you.

56:32 Yes, it's a good question. Think it's so profitable. I think what we're trying to do, Rohit, is use the time we have. We have a couple of years before we go live to actually start building the organizational capability and and and then build capacity ahead of demand. So there's a very detailed plan where we're actually hiring people in waves of talent over the next twenty four months. So this site now we're obviously putting a lot of our basic organization structure in place. We are also in the process of hiring talent for the construction work at the site and the project management team. So those are getting staffed. And that will be followed by investing in our GTM teams and our design teams as well. So there is a plan which we have designed to kind of be able to do that.

57:22 I think there is always a challenge in terms of getting the right balance of talent because the industry is still fairly nascent and we are trying to ensure we are bringing the talent on quickly, and we are looking at sourcing talent pretty broadly as well from different areas. So I think right now it's WIP, so I can't tell you how successful we are, But we have a fairly robust plan, we will do that. We are cognizant that there isn't it's not an oversupplied market in terms of talent, so we are designing systems and processes in line with that. Sure. That's helpful. Thanks a lot and your value wishes to the entire team. You.

58:10 Due to time constraints, we take that as the last question from the participants. I now hand the conference over to the management for closing comments. Yeah. I think before I before I just close, I just want to make, think early I think to the first shift, which I think Mr. Kapoor asked earlier on the brine field expansion, I think we had mentioned or even the last one on the Ctrip, our total brine field size is 24,000. So you won't read through the numbers, so there's no confusion. Our total brine field when it's fully expanded will be 24,000 hectares. We have 16,000 developed, we have developed and the expansion is about developing another 8,000 in two phases, 4,004. So the first 4,000 has more or less been completed and that is the work which is Amol which is in CEWIP and that will get into operation by the end of this quarter or early next quarter.

59:00 I just want to restate those numbers because I might have jumbled them up a little bit when I was talking or may not have been clear enough in my comments. Okay. So with that, I think let me just quickly wrap this up. First of all, thank you all for joining us here today and your continued interest in Archean. I think as we enter the second half, we believe that we have good momentum. The bromine business a little bit solid base, the bromine business has gained some momentum as all of you have probably picked up, the road corridors are a little bit opened up, so they should favor us both in terms of logistics and costs. And I think our newer businesses have started accelerating the way we wanted. So we feel pretty good about where we are in the midpoint of the year and think there's a lot more to build on as we go forward. I think some of you had some more queries about the business and for those who haven't, please get in touch with us or the SGI Investor Relations advisors and we'd be happy to kind of respond to you in person. Lastly, wishing you all and your families a safe and happy Diwali.

59:59 Thank you all and stay safe. Thank you. On behalf of Archean Chemical Industries Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.