Analyst Meet / AGM - Analyst Meet
Current growth momentum will continue
The company conducted an Analyst Meet on 5th May 2014 to discuss the financial performance during the quarter and year ended March 2014. It was addressed by Mr. Sandeep Engineer MD and the CFO Mr. Hiranand Savlani
Key highlights
The net sales for March 2014 quarter has increased by 29% to Rs 336.96 crore. The OPM has declined by 265 bps to 15.2% due to rise in raw material cost. There was a forex loss of Rs 2.16 crore. The net profit decreased by 5% to Rs 27.78 crore due to decline in margin and increase in interest cost & tax rate.
For Q4, there was a strong volume growth of 18% to 17962 M.T. This was led by new product launches (namely column pipes, solvent cement, CPVC bendable) gaining traction and CPVC pipes portfolio continuing to grow at an impressive pace.
For Q4, the decline in OPM was due to additional discounts offered to achieve year end targets. This was on account of a change in accounting policy for FY14, wherein discounts offered have now been offset against sales instead of reflecting the same in other expenditure.
The net sales for year ended March 2014 have increased by 31% to Rs 1073.21 crore. Volumes grew 22% YoY to 60400 M.T.. During the year, the company has increased its production capacity from 77212 M.T. to 97164 M.T.. The capacity utilization stood at 62%. Effective capacity utilization in FY14 stood at 75%. A large part of the capacity addition fructified in Q4 FY14. The OPM increased by 68 bps to 14.5% There was a forex loss of Rs 26.9 crore towards loss on foreign exchange fluctuation which includes Rs 1.09 crore towards unrealized loss on outstanding foreign currency liabilities. The net profit increased by 30% to Rs 77.21 crore.
For FY14, revenue mix was CPVC pipes - 58%, PVC pipes - 41%, and others -1%.
The recently commissioned Hosur plant has initially started selling agriculture and column pipes. Plumbing pipes would soon be rolled out, while CPVC pipes would take 6 - 8 months to be launched once the ISI approval is in place. The capex incurred at Hosur plant was Rs 93.7 crore which includes Rs 24.3 crore for land, Rs 27.7 crore for building and Rs 43.7 crore for plant & machinery. Hosur plant would help in logistic cost saving upto 7%-8% in PVC pipes and 3%-4% in CPVC pipes, which would enable the company to price its products competitively in South India and thus gain market share
The mgmt said that with the existing capacities, the company can generate revenues of Rs 1700 crore.
The mgmt said that under utilization of the recently doubled capacity and higher overheads resulted in muted EBIDTA growth. The margins are expected to gain traction from FY15, with incremental capacity set to get utilized over the next two years
The company focus on plumbing pipes segment to remain despite increasing presence in the recently launched agricultural pipes. Agricultural pipes to gain traction with strong demand drivers, including plumbing applications in rural areas
CPVC Bendable pipes have witnessed traction in exports, particularly with these pipes now being exported to the US
The mgmt said that BlazeMaster CPVC Fire Sprinkler pipes to remain the focus area. For the current year, it will emphasis towards spreading awareness of the product and its applications. From next year onwards, we can expect contribution from it to the company.
Advanced Adhesives, the company's subsidiary, has achieved revenues of Rs 12.4 crore, growth of 86% for FY14.
The company will introduce electrical conduit pipes under the brand 'WireGuard' by June 2014. The company expects it to contribute around Rs 30 - 50 crore to the top-line. There is only one player in this segment at Pan India level.
New technology tie-up with First Plast for trading in channel drains, which are used inside and outside buildings
The company has recently tied-up with Axis Bank for channel financing arrangement with their sizeable Dealers.
At present, the company has over 400 distributors and 18,000 dealers
The mgmt said that logistic cost to reduce substantially as two of its Gujarat plants would be in close proximity to the Lubrizol unit. This will also help it from currency volatility risk. The currency risk to be mitigated from H2 FY16. With Lubrizol plant coming up in Gujarat, inventory levels in CPVC compounds to reduce drastically from current 2.5 months to a mere 7-10 days.
The mgmt said the current growth momentum will continue for the company with new product launches in BlazeMaster fire sprinklers, conduit pipes to be rolled out soon, and the recently launched products -column pipes, solvent cement, CPVC bendable pipes, and agricultural pipes gaining further traction.
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