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Analyst Meet / AGM
19-Aug-19
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Conference Call
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Aarti Industries
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Expects capex of Rs. 1000-1200 crore in FY20
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Aarti Industries conducted conference call to discuss the financial results and performance of the company for the quarter ended June 2019. CMD- Mr. Rajendra Gogri, VC & MD- Mr. Rashesh Gogri and CFO- Mr. Chetan Gandhi of the company addressed the call
Highlights of the Concall
- Gross Income from operations rose 0.7% in Q1FY20 to Rs 1086.1 crore compared to Q1FY19. Adjusted for the demerger of the HPC business, revenue up 8.8% YoY. Exports as a percentage of sales rose to 41.9% from 36.7% in Q1FY19. PAT rose 53.9% to Rs 137.4 crore.
- EBITDA margin improved to 21.8% from 17.4% on account of expanding contribution of higher value products
- The company had entered into forward contracts as part of its strategy to safeguard business against currency risks to hedge its exports contracts. In Q1FY20, positive impact on such contracts was Rs 1.2 crore.
- Domestic realizations are typically higher than those in exports. There have been price corrections in a few of the company's top 20 products in the export market; however, there is no significant impact seen yet in the domestic market
- Specialty Chemicals revenue up 6% YoY to Rs 895 crore led by volume spurt, higher share of value-added products and price benefits. Revenue share of products in Chlorination and Nitration chemistries reduced to 28% in Q1FY20 from over 30% in FY19 and earlier periods.
- Pharma business delivered strong revenue growth of 28% YoY to Rs 191 crore led by new intermediate launches and better demand for Xanthene derivatives as well as The company expects revenue growth of 20-30% in FY20 led by visible opportunity from disruption in China and capacity expansion in caffeine as well as other intermediate products.
- The company expects to commission the new plant for supplying agro-intermediate product under its first multiyear supply deal by end of FY20 and commercialize in FY21. It further expect the second multiyear supply contract to commercialization in FY21.
- The company has ramped-up its R&D activity in order to grab the visible opportunity from China supply disruption and import substitution and is working on 15-20 potential intermediate products.
- The company has revised down FY20 PAT guidance from the broad 12–20% PAT growth range to 12% or lower as the company expects impact of slowdown in agrochemicals (20-25% of total revenue) and automotive (20% of total revenue including aerospace & other related segments) segments to impact the company's performance. Agrochemicals slowdown is more prominent is the US market, where corn and soya acreages have dipped. The impact is likely to be more prominent from Q2FY20 end. However, management maintained long-term growth outlook of 15% plus.
- The company did capex of Rs 2380 crore in Q1FY20 and has planned capex of Rs. 1000-1200 crore in FY20 for capacities expansion in NCB ( Nitro Chloro Benzene), new chlorination complex, capacity for long-term supply contracts, and pharma capacity expansion.
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