VICE CHAIRMAN’S MESSAGE
Dear Shareholders,
When we look back on 2021, we will recall the impressive rebound of the global economy following months of lockdowns and slowdowns during the first year of the COVID-19 pandemic.
Revenue of ` 145,268 Mn represented a 38.8% increase compared with ` 104,647 Mn in 2020. Moreover, we finished the year with six consecutive quarters of increased revenues.
The first quarter of 2021 onwards, pent-up demand spurred robust sales of nearly all of our products, helping drive stronger revenues and EBITDA at RAIN. By the fourth quarter, with COVID-19 waning, the biggest challenges ahead of us seemed to be whether an overtaxed global supply chain could keep up with rising demand and our ability to source key raw materials such as green petroleum coke (GPC) and coal tar in an increasingly tight market.
By December and into early 2022, however, other challenges emerged with the potential to be even more disruptive – namely, soaring energy costs in Europe and the global implications of the rapidly evolving conflict between Russia and Ukraine.
In terms of potential fallout from the conflict, Russia contributes about 8% of RAIN’s consolidated revenue, so we anticipate that any direct impact should be limited. That said, we are taking nothing for granted, which is why we have implemented proactive measures to minimise the risk to our production facilities in the rest of Europe in the event that the conflict disrupts natural gas and/or petroleum flows. We have also responded to high energy prices by implementing new purchasing and sales price strategies, and we are pursuing measures to reduce the energy intensity of our plants and preserve the margins in our business to the extent possible in these extreme conditions.
Despite these challenges, barring any widespread repercussions in the markets we serve, we anticipate robust sales of our carbon and advanced materials products to continue as the global economy rebounds from COVID-19 – especially for calcined petroleum coke (CPC) and coal tar pitch (CTP), which are benefitting from strong output by the aluminium industry that is enjoying LME prices that have been well above US$ 3,000 per tonne. Simultaneously, we are looking for higher growth in our cement business, driven by the Indian government’s strong focus on infrastructure development.
Against this backdrop, we are reasonably optimistic that our 2022 performance can mirror 2021 that included:
While we are pleased with the year’s results, we are fully aware that there are some areas where we can further improve our performance in 2022. At the top of the list is the need to monetise the investments we have made on our major expansion projects, which are part of our strategy to meet and exceed the market’s need for cleaner and more sustainable materials produced with minimal impact on the environment.
During the past few years, we have made a cumulative investment of more than US$ 225 Mn on the hydrogenation hydrocarbon resins (HHCR) plant in Germany, the vertical-shaft calciner in India and the anhydrous carbon pellet (ACP) production facility in the United States. In 2022, we are expecting that each of these plants should begin to provide a return on investment. Moreover, the fact that each facility has been commissioned will greatly reduce our CAPEX spending in the coming years. Those savings, in turn, will be available for debt reduction.
A particular focus in the coming year will be on optimising the productivity of our HHCR facility. If you recall, the second half of 2020 was devoted to providing customers with our new ‘water-white’ resins for technical evaluation and confirmation. Much of early 2021 was spent stabilising the plant, which then allowed us to operate the facility at ~40% of capacity during the second half of 2021. During the fourth quarter, we also found an opportunity to upgrade the productivity and reliability of the plant with a more efficient reactor design. These new reactors will eliminate unnecessary production bottlenecks and reduce the need for future maintenance outages, positioning the plant to operate at 75% of capacity by the end of 2022.
In terms of ACP, we believe that this proprietary and value-added calcinable product has a promising future, thanks to its energy-saving and emissions‑reduction potential as well as its ability to improve our GPC utilisation. At the same time, we recognise that commercialisation of this new material will be a process. By the end of the first quarter of 2022, we expect to ship a trial blend of calcined ACP and CPC from the new production facility in the US to certain global aluminium smelters.
Finally, we have been working on ramping up CPC production at our newest and most environmentally friendly calcination plant, the vertical‑shaft calciner in India – albeit slowly due to the limited availability of feedstock for the plant. Nonetheless, we are thus far pleased with the quality of the CPC produced and the superior density that the vertical-shaft technology provides. In the coming months, we expect to export our first shipment of shaft CPC, and we are continuing to work with Indian authorities to secure a separate GPC import allocation for the vertical-shaft calciner.
Looking ahead, 2022 will be yet another year when we continue to make measurable progress on our sustainability journey. At RAIN, we understand – and our employees have embraced the fact – that we live in a society where sustainability has become a licence for companies to do business. We know that nothing will have a greater impact on the success of our business than our sustainability efforts and ability to meet the related needs of our customers. In fact, given the importance of sustainability, we have recently initiated a structured process for developing a sustainability strategy, which aims to determine mid- and long-term targets with respect to our sustainability journey.
As you review this integrated financial and sustainability Annual Report, I hope that you will feel a greater appreciation for RAIN’s part in meeting the evolving expectations of society. RAIN plays an indispensable role in transforming industrial by‑products into essential materials for faster, cleaner and lighter products that enhance the quality of life for people around the world and contribute to a circular economy.
The many activities described in this Report are the latest examples of our on-going and long-standing ability to proactively adapt and pivot as a business. As the world has evolved since the days of Julius Rütgers in the 19th century, so too has RAIN. In doing so, we have demonstrated that 'sustainability' refers to even more than our strong environment-related and CSR-related activities.
After more than 150 years as an evolving, adapting business, ‘sustainability’ also describes the longevity of our Company. With our investments in 21st-century technologies and processes such as HHCR and our proprietary ACP to meet growing demand for greener products, RAIN is well positioned to continue to make meaningful and sustainable contributions for our customers, communities and investors for decades to come.
On behalf of our employees around the world, thank you for your ongoing support. In return, we will continue to produce raw materials that make 21st-century life possible in a more sustainable way, enhancing the quality of life in the communities where we operate and creating the shareholder value that you expect from RAIN.
Sincerely,
February 25, 2022
