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Analyst Meet / AGM
01-Aug-15
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Conference Call
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Adi Finechem
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Margins to improve in Q3FY'16
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Adi Finechem held a conference call to discuss the results for the quarter ended June2015 and way forward. Senior Management of the company addressed the call
Highlights of the Concall
- Total income from operations fell9.7% on a YoY basis in Q1FY'16 to Rs 38.83 crore while EBITDA fell 57.7% to Rs 3.88 crore. Bottomline of the company decreased 88.2% to Rs 0.62 crore.
- On a QoQ basis Total income from operations rose5% while EBITDA fell30.9% while bottomline fell 79.7%.
- EBITDA margin of the company was 10% in Q1FY'16compared to21.3% in Q1FY'15 and 15.2% in Q4FY'15
- PAT margin of the company was 1.6% in Q1FY'16 compared to 12.1% in Q1FY'15 and 8.2% in Q4FY'15
- The last phase of on-going expansion programme from 25,000 tonne to 45,000 tonne has been accomplished and commercial production started in July 2015.
- Unforeseen situations impacted margins in Q1'FY16, which are unlikely to occur from Q3'FY16
- Globally, there are four customers of tocopherol and AFL sells to two of them currently. To tackle the current weakness in tocopherol, AFL plans to increase its customer base. For this purpose, it has appointed an US-based consultant. The process to get new clients is lengthy including auditing of plant etc. Currently, a new client is close to the end of due diligence process and will start buying tocopherol after 15 days, the benefit of which will be visible partially in 2QFY16 and fully from 3QFY16.
- To comply with the requirement of new clients, AFL incurred additional expenses to upgrade its plant, which impacted production in 1QFY16. The exercise started in May 2015 and is expected to get over by mid-August 2015. With production being lower and AFL incurring additional costs, margins were very low in 1QFY16. A significant portion of the costs has been booked in 1QFY16 and the remaining will be booked in 2QFY16. Margins are expected to return to their normal range of 15%-18% from 3QFY16.
- Expenses incurred in Q1FY'16 and likely in Q2FY'16 will be one-time in nature and won't increase manufacturing costs. Hence, AFL is expected to achieve steady-state margins in the range of 15%-18% from Q3FY'16.
- Price of tocopherol bottomed out in Q4FY'15 and did not decline further in Q1FY'16. For AFL, a few orders in Q4FY'15 were at a higher rate because of an old contract, which was not the case in Q1FY'16 and therefore it witnessed around 20% QoQ fall in realisation.
- Total volume was up 18% from 6100 tonne to 7201 tonne because of a 46% volume growth in oleochemicals from 4367 tonne to 6370 tonne in Q1FY16
- Oleochemical plant operated at its full capacity and margins were stable even in Q1'FY16.
- Following weak demand, volume in tocopherol declined 50% from 1,732 tonne to 864 tonne in Q1FY'16. With lower volume and lower realisation in tocopherol, export revenue declined 77.3% to Rs3 crore in Q1FY'16 from Rs13.2 crore on a YoY basis while it fell 66.6% on a QoQ basis.
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