Highlights of the Concall

• Q3 FY18 revenues from operations were higher by 22.2% to Rs. 281.8 crore from Rs. 230.6 crore in Q3FY17. EBITDA was higher by 40.6% at Rs. 58.2 crore from Rs. 41.4 crore. EBITDA margin stood at 20.5%. PAT (excluding one-time exceptional expense) was higher by 33.1% at Rs. 33.8 crore from Rs. 25.4 crore. Exceptional one-time expense of Rs. 10.1 crore was on account of operational reorganization of PFW in Barneveld, Netherlands. PAT was higher by 7.2% to Rs. 27.2 crore from Rs. 25.4 crore.

• Topline came in higher led by robust volume growth reported during the quarter

• Gross margins were impacted during the quarter due to certain raw material disruptions in the global fragrance and flavor industry.

• Despite volatile raw material prices, the company's inventory management strategy enabled it to sustain supplies and gain market share across customers

• Strong uptick in demand from the FMCG sector and stabilizing scenario post GST supported a healthy performance on the domestic front during the quarter

• Fragrance division contributed 88% to Total Revenues and contribution of Flavours division stood at 12%

• Strong recovery in demand seen across all key customer categories – witnessing normalization of consumer demand in the domestic market in a post GST environment

• International business reported stable performance amid a challenging macro-environment prevalent in the Middle East

• 9M FY18 revenues from operations were higher by 1.1% to Rs. 736.5 crore from Rs. 728.9 crore in 9MFY17. EBITDA was higher by 3.6% to Rs. 141.3 crore from Rs. 136.4 crore. EBITDA margin stood at 18.9%. PAT (excluding one-time exceptional expense) was higher by 2.8% to Rs. 79.4 crore from Rs. 77.3 crore. PAT was lower by 5.7% at Rs. 72.9 crore from Rs. 77.3 crore.

• Fragrance division delivered strong performance during the quarter. Operating profit was at Rs 107 crore, higher by 5%. Operating profit margins were higher at 16.5% in 9M FY18 vs 15.8% in 9M FY17

• Flavour division reported a stable performance during the period. Domestic segment grew 10%, while overseas business reported de-growth of 12%. Operating profit margins stood at 20.5% in 9M FY18 vs 25.3% in 9M FY17. Challenging operating environment in the Middle-East region led to subdued performance in the overseas segment

• SH Kelkar acquired 51% of Italy-based Creative Flavours & Fragrances S.p.A (CFF) to strengthen global product offerings particularly in Fine Fragrances and Fabric Care segments. The company would be acquiring 100% of share capital over two to three years of which 51% share capital to be acquired upfront for approx. Euro 12 million (CFF's revenue from core fragrance business in calendar 2016 was Euro 13.4 million). Remaining stake shall be acquired within three years, consideration for which shall be paid based on the acquired company's performance. The company proposes to fund the entire investment through internal accruals

• The earnings accretive acquisition is in-line with the Company's growth strategy to expand its international footprint, extend its presence and build talent particularly in the focused categories of fine fragrance and fabric care as well as enhance premium clientele

• Headquartered in Milan, CFF is a leading Fragrance Company in Italy and its products are sold in over 32 countries worldwide with reputable presence in Europe

• The company launched first collection of perfumes from recently established Fine Fragrance Development Centre in Amsterdam, Netherlands

• Rationalization of Netherlands manufacturing operations is progressing as per plan. The cost-saving initiative in the overseas Fragrance division will allow greater flexibility in backend manufacturing operations leading to better profitability going forward

• The company expects business momentum to remain steady in Q4 which would further enable it to end year in a healthy note.