Highlights of the Concall

• Q2FY18 revenues from operations fell 9.4% to Rs. 220.8 crore from Rs. 243.8 crore in Q2FY17. EBITDA was lower by 17.7% at Rs. 36.6 crore from Rs. 44.5 crore. EBITDA margin was at 16.4%. Profit After Tax lower by 22.4% at Rs. 18.8 crore from Rs. 24.3 crore.

• H1FY18 revenues from operations decreased 8.7% to Rs. 454.8 crore from Rs. 498.2 crore in H1FY17. EBITDA was lower by 12.5% to Rs. 83.1 crore from Rs. 95.0 crore. EBITDA margin was at 18.0%. Profit after Tax was lower 11.8% at Rs. 45.7 crore from Rs. 51.8 crore.

• Lower consumer offtake and slower re-stocking resulted in a sluggish performance on the domestic front during H1FY18

• Fragrance division contributed 87% to Total Revenues and contribution of Flavours division stood at 13% in H1FY18

• Fragrance division delivered slower growth during H1FY18 as domestic revenues declined by 13%, overseas revenues reported de-growth of 3%

• Export performance in the Fragrance division was subdued owing to a challenging geo-political environment prevalent in the Middle East

• Flavour division reported a steady performance during the period. Domestic segment grew 11%, while overseas business reported de-growth of 12%

• Q2FY18 performance was subdued during the quarter as GST related challenges impacted its domestic business. While the company was anticipating demand to slowdown in Q2FY18 owing to GST implementation, the recovery was much slower than it anticipated earlier especially in the months of July and August.

• The company saw demand stabilizing in September and it recorded healthy sales growth in the month of October itself. The company expects the momentum built in October to continue in the upcoming months.

• The company executed Share Purchase Agreement to buyout 100% share capital of VN Creative Chemicals (VNCC). With the acquisition, it will acquire full control of land and manufacturing facility (including plant and machinery) in Raigad, Maharashtra, owned by VNCC. The company expects to execute this initiative by end of this fiscal and showcase higher earnings in the International Fragrance from second half FY19 onwards.

• The company expects 13-15% revenue growth in the fragrance business and 17-20% growth in flavors business, on an organic business.

• The company continues to explore inorganic opportunities as well especially in flavors business.

• The company has established Fine Fragrance Development Centre in Amsterdam, Netherlands during H1 FY18. Fine fragrance is less than 2% of it fragrance business (typically large companies get 20-25% revenues from fine fragrances) and the company longer-term ambition is to derive around 10% of revenues from fine fragrances

• The company has incurred Rs 60 crore of capex in H1FY18 including Rs 30 crore for acquiring additional space for its development center in Mulund and Rs 14.5 crore in acquisition of VNCC. The company shall invest Rs 55-60 crore over the next 12 months to relocate its international ingredients manufacturing setup in India