Highlights of the Concall

• The company believes that there has been a structural shift towards larger & mid-sized players, leading to a notable decline in smaller accounts. Its revenue base has already been reset in FY19, and is witnessing healthy traction in mid & large customers, with stronger focus towards enhancing the company's business share in these accounts.

• Q4FY19 revenues from operations stood at Rs. 268.6 crore from Rs. 282.7 crore, lower by 5%. EBITDA stood at Rs. 36.0 crore as against Rs. 42.5 crore. Gross margins significantly improved to 42%, higher by 317 bps. PAT stood at Rs. 19.6 crore as against Rs. 21.03 crore

• FY19 revenues from operations stood at Rs. 1,041.2 crore as against Rs. 1,019.3 crore, higher by 2% YoY. EBITDA was at Rs. 160.0 crore as against Rs. 183.8 crore. PAT stood at Rs. 88.5 crore as against Rs. 93.9 crore

• The demand environment witnessed a slowdown across the fragrance and flavours divisions in FY19 led by multiple macro-headwinds that impacted performance, especially in the domestic market

• The Company's fragrance division, domestically, witnessed a structural shift towards larger & mid-sized players, leading to a decline in demand from smaller customer categories. So, while the company gained a higher wallet share in the mid and larger customer categories, sales from the smaller accounts saw a significant impact

• Pricing pressures on key raw materials continued to impact profitability margins on a YoY basis

• Gross margins stood at 43% vs. 45% in FY18 due to the change in customer mix.

• Fragrance division delivered a steady topline growth of 3% in FY19. Domestic revenues were lower by 2% led by a slowdown in the demand environment in certain customer categories. Overseas revenues marked a healthy growth of 14%. Operating profit margins stood at 14% in FY19 vs 15.4% in FY18 while 11.3% in Q4 FY19 vs 12.8% in Q4 FY18

• Flavour division reported subdued performance during the period with a decline in domestic revenues. Overseas segment continued to report healthy sales during FY19. Operating profit was at Rs. 15 crore with margins at 14.4%

• The company established a Creation and Development Center (CDC) in Singapore to sharpen focus on certain categories and strengthen foothold in South East Asian markets. The CDC centre in Singapore will help the team to carry out local market and consumer research, thereby enabling stronger knowledge of local preferences that will help SHK to develop innovative products and further enhance its presence in South East Asia. In addition to this centre, SHK operates three other CDC in India, Netherlands and Indonesia wherein new products are constantly under development in conjunction with customer requirements

• The company has reached optimal utilization levels at our Greenfield manufacturing facility at Mahad. Operationalization of this facility will help improve availability of key raw materials, leading to increased cost efficiencies for SHK, going forward. The state-of-the-art facility at Mahad manufactures Tonalid and other key raw materials used in the fragrance industry.

• The company looks forward to deliver steady growth in its financial and operating performance in FY2020.