Highlights of the Concall

• Revenues from operations higher by 27.7% to Rs. 282.1 crore in Q2FY19 from Rs. 220.8 crore in Q2FY18 led by 36% growth in domestic fragrance business while overseas segment grew by 20%. EBITDA was at Rs. 42.8 crore as against Rs. 36.6 crore. EBITDA margin stood at 14.8% vs 16.4%. PAT stood at Rs. 28.8 crore as against Rs. 18.9 crore

• Flavour division reported a subdued performance during the period –domestic revenues came in lower by 20% in H1Fy19 as a result of supply-side disruptions which led to increased pricing pressures in the domestic market

• H1FY19 revenues from operations were higher by 14% to Rs. 518.1 crore from Rs. 454.8 crore. EBITDA was at Rs. 79.0 crore as against Rs. 83.1 crore. EBITDA margin stood at 14.9% vs 18.0%. Cost pressures on key raw materials impacted profitability on a YoY basis. PAT stood at Rs. 47.5 crore as against Rs. 45.7 crore

• The company has undertaken price increases of about 10% in H1FY19 to partially cover the unprecedented raw material inflation. It expects to take further increases to normalize gross margins over the long-term.

• SH Kelkar cost basket increased 30% YoY in Q2FY19. Certain raw materials that were imported from China are now being produced in-house at the Vapi facility to ensure stable supply and cost benefits

• The company is witnessing the initial signs of normalization of business growth and believes the core business is performing in line with market. Accordingly, the company expects business performance to gain strength in H2 FY2019

• The company has formally inaugurated aroma ingredients manufacturing facility at Mahad which will manufacture Tonalid and other key raw materials used in the fragrance industry. With a total installed capacity of 1,200 MTPA, the facility is one of the largest manufacturing facilities for Tonalid, worldwide. This is in sync with a previously announced strategic investment plan to shift production of aroma ingredients from Barneveld, Netherlands to a high quality & operationally efficient center like India

• Following the acquisition of a majority equity stake in Anhui Ruibang Aroma Chemical Co. in May 2018, the company has optimized the capacity at its Tonalid manufacturing facility in China at nominal capex. The installed capacity is now optimized to 400 MTPA

• The company is hopeful of gradual improvement in margins led by inhouse production of a key RM Tonalid, pickup in volumes, and further price increases in view on ongoing price discussions

• The company expects tax rate of 30% in FY19