ASTECNSEQ4 FY2022May 3, 2022 Astec LifeSciences Limited
7,734words
100turns
13analyst exchanges
7executives
Management on call
Aniruddha Joshi
ICICI SECURITIES LIMITED
Nadir B Godrej
CHAIRMAN – GODREJ AGROVET LIMITED & ASTEC LIFESCIENCES LIMITED
Balram Yadav
MANAGING DIRECTOR – GODREJ AGROVET LIMITED
S. Varadaraj
CHIEF FINANCIAL OFFICER – GODREJ AGROVET LIMITED
Anurag Roy
WHOLE – TIME DIRECTOR & CHIEF
Saurav Bhala
CHIEF FINANCIAL OFFICER – ASTEC LIFESCIENCES LIMITED
Aditya Desai
HEAD – INVESTOR RELATIONS - GODREJ AGROVET LIMITED
Key numbers — 40 extracted
8.9%
the adult population vaccinated with both the doses. India’s GDP growth rebounded to an estimated 8.9% in fiscal year FY2021-22 from the contraction in the previous year. India’s merchandize exports r
418 billion
from the contraction in the previous year. India’s merchandize exports reached a record high of $418 billion in fiscal year FY2021-22 of 40% growth over the previous year. The agriculture and allied sectors
40%
ar. India’s merchandize exports reached a record high of $418 billion in fiscal year FY2021-22 of 40% growth over the previous year. The agriculture and allied sectors have remained resilient through
3.9%
ctors have remained resilient throughout the COVID lead disruption and it is estimated to grow by 3.9% in fiscal year FY2021- 22 as per the latest estimates by the Central Statistical Office. At the sa
60.7%
r quarterly as well as annual performance till date. The growth in total income was phenomenal at 60.7% in Q4 and 22.1% in the full year 2022 over the corresponding previous period. T
22.1%
ell as annual performance till date. The growth in total income was phenomenal at 60.7% in Q4 and 22.1% in the full year 2022 over the corresponding previous period. The topline growt
79.7%
pline growth was strongly supported by margin improvement. The consolidated profit after tax grew 79.7% year-on-year in Q4 fiscal year FY2022 and 38.1% for the full year 2022 over the corresponding pre
38.1%
provement. The consolidated profit after tax grew 79.7% year-on-year in Q4 fiscal year FY2022 and 38.1% for the full year 2022 over the corresponding previous period. Robust topline performance in Q4 f
127.3%
racting and manufacturing business. Exports more than doubled in Q4 fiscal year FY2022 growing by 127.3% year-on-year. The share of domestic business declined during the Quarter as we allotted more of t
44.4%
le capacity to fulfill our export commitment. For the full year 2022, the export business grew by 44.4% driven by both realizations as well as volume growth. Domestic sales were marginally up by 0.5% o
0.5%
44.4% driven by both realizations as well as volume growth. Domestic sales were marginally up by 0.5% over the previous year. The gross profit margin improved to 40% in Q4 fiscal year FY2022 from 39%
39%
.5% over the previous year. The gross profit margin improved to 40% in Q4 fiscal year FY2022 from 39% in Q4 fiscal year FY2021. For the full year FY2022, the gross profit improvement was substantial
Guidance — 20 items
“For the next year, we will continue to work towards expanding the contract manufacturing business and also focus on diversification into other chemistries.”
“We plan to launch two new contract manufacturing products.”
“While input raw material prices remain volatile, we expect our margins to sustain in the coming quarters and we believe that we will be able to successfully execute our fiscal year FY2023 profitability target.”
“With this, I end my opening remarks and we will be happy to take your questions.”
“So, your question on herbicide plant, as you are aware, we commercialized our herbicide plant last year in June and July and as we move forward, for the herbicide plant in the first year we are expecting that we will be reaching almost 30% of the utilization.”
“We have a very healthy pipeline of products coming into the herbicide plant and we expect to take it to almost 90% to 100% utilization in year three so as we get on to FY2023 we are expecting to take the utilization rates to almost 70%.”
“So once that R&D centre is up and running, we will be able to establish our specific key technology platform.”
“We will be able to put in lot more pipeline products into it which eventually we could commercialize and can give a big boost to our CDMO business as well as the existing triazole and enterprise business, so going forward R&D is a critical piece in our entire growth strategy and we are very excited to have that commissioned and come on board by the end of this year.”
“I was expecting it to be closer to between Rs.150 Crores and Rs.200 Crores so is project execution completely on track or are we lagging behind in any of the projects?”
“Obviously, the CRAMS projects go from say nearly 30% utilization to be 70% next year, but besides that what other growth drivers to be seen for the business overall and what is the full revenue potential of the herbicide plant that you are envisaging at full year utilization?”
Risks & concerns — 4 flagged
While input raw material prices remain volatile, we expect our margins to sustain in the coming quarters and we believe that we will be able to successfully execute our fiscal year FY2023 profitability target.
— Nadir B Godrej
If that announcement goes through there will be oversupply situation and hence the pressure on prices so we are constantly monitoring those macro situations.
— Anurag Roy
Sir, my question is with respect to the 500 basis point gross margin expansion that we see this year so if I recall a year back we had a pricing pressure on the Triazole so is it that pricing pressure eased and we are seeing the margin expansions going through and how much would be the CMO mixage that you would have experienced in FY2022?
— Pritesh Cheddha
One was like you said to the last participant that enterprise business was large contributor to the share of performance, so I understand that the market dynamics beside the pricing for the molecules but do we have any pricing power in those, because it is very difficult to predict how this thing of those molecules will move so anything on the pricing power, if we have any?
— Aman Vora
Q&A — 13 exchanges
Q
Thanks for the opportunity and many congratulations to the Management on a great performance. I like to let you know like we have been investors in the Company for the last five years and when we first invested, the total profit for the full year was about Rs.14 Crores to Rs.15 Crores and this Quarter, the Company has done a profit of Rs.40 Crores to Rs.45 Crores, so extremely proud of the Management and the work that you guys have done. I would also like to welcome Roy to the team. So, I had basically three to four basic questions. One was on the herbicide plant and the capex we had done. We
Anurag Roy
This is Anurag Roy. A very good afternoon to you and thank you for your kind words. So, your question on herbicide plant, as you are aware, we commercialized our herbicide plant last year in June and July and as we move forward, for the herbicide plant in the first year we are expecting that we will be reaching almost 30% of the utilization. We have a very healthy pipeline of products coming into the herbicide plant and we expect to take it to almost 90% to 100% utilization in year three so as we get on to FY2023 we are expecting to take the utilization rates to almost 70%. Right and as we get
Q
Good afternoon, gentlemen. Congratulations on a great Quarter and thanks so much for taking my questions. I just had a couple of clarifications to seek. The first one was on a couple of numbers in the results. The other income seems a bit on the higher side this Quarter so just wondering what might have led to? Is there any one-off element in that? And also the capex for the full year was a bit on the lower side compared to my expectations. I was expecting it to be closer to between Rs.150 Crores and Rs.200 Crores so is project execution completely on track or are we lagging behind in any of t
Anurag Roy
I will ask Saurav to answer these two questions for you. Thanks for the questions. On the question number one, regarding the other income for the current Quarter, you are right. There were some exceptional items in the current Quarter. First thing, our insurance claim for the loss of profit due to the March flood that got accounted in the current Quarter and also our foreign exchange gain. Since our hedging policy was much better in the current Quarter, so those two were the primary reasons of other income looking higher in the current quarter. To reply to your second question, capex, we are e
Q
Congratulations for a great set of numbers, Sir. My question was, what is our percentage dependent on China for raw materials, because I think we have done a lot of backward integration projects in the last one or two years?
Anurag Roy
So if you look at our total revenues and amount of spend on raw materials and key starting materials coming in from China, we roughly stand at 65% to 67% and for some of the key starting materials or some of the key intermediates; for our AIs, we are more or less 80% to 90% backward integrated so we continuously evaluate the make versus buy decision as we deal with the supply chain disruptions and some of the shifts in the macro and hence have the overall control on the product lifecycle as well as the value chain. To answer your question, yes, we have around 65% reliance on import from the Ch
Q
Thank you for the opportunity. Sir, if you can give more details about the FY2023 capex. You mentioned about Rs.350 Crores to Rs.400 Crores so where it will be spent and more details on the fungicide plants which we highlighted in the Q2 call?
Anurag Roy
To answer your first question on the capex of Rs.350 Crores to Rs.400 Crores, I believe, Saurabh, earlier mentioned that the R&D capex was expected to fully realize last year. Some of it is getting into this year, so in that Rs.350 Crores to Rs.400 Crores, we estimate roughly Rs.110 Crores to Rs.120 Crores as against the R&D centre capex. Then as I was mentioning earlier, we are also expecting very good pipeline products for our existing herbicide plant so as our goal would be to fully utilize the existing herbicide plant we will also concurrently start investing for further expansion of the f
Q
Good evening and congratulations on good set of numbers. Sir I was asking for a couple of clarifications. First is on our herbicide plant on full utilization what can be the revenue potential from that plant if you can give some numbers on that?
Anurag Roy
Yes, so as I was mentioning two to three years’ time frame is when we are seeing full utilization of that particular plant and we are looking at asset turnover of 1.5 to 1.7 from that particular plant so anywhere from Rs.230 Crores to Rs.270 Crores is the revenue which we are targeting to come at full utilization. Sir, you just mentioned that in the current year in FY2023, you are planning to put another capex on this plant only of Rs.50 Crores to Rs.70 Crores so that will also drive the incremental revenue in the same ratio of 1.3 to 1.5 x or one can expect because of the better utilization a
Q
Good evening. Can you please quantify the revenue that was contributed from the new herbicide plant in the last financial year FY2022?
Anurag Roy
So, the revenue from the new herbicide plant since it was running only for five months or so, it was close to Rs.25 Crores.
Q
Good afternoon, everyone. So my question is basically on Triazole fungicide, what is our current contribution from Triazole fungicide coming and what is the diversification plan there, so we are about to launch a few products in the same category and I guess few Quarters ago there was some over capacity coming in from China, so we are facing some price issues over there, so what is the current situation?
Anurag Roy
First and foremost, we operate in multipurpose plant multiple products. Obviously Triazole chemistry is what we deal for the most part, but we normally do not give out any individual molecules or platform-based margin indications so that is one. On the overall Triazole chemistry space at an overall level actually what we are seeing over the next five to 10 years we are still seeing 3% to 4% growth rate in this particular segment and last year for some of the molecules, we had actually also seen some of the supply shortages because of the supply chain disruptions in China and some of the input
Q
The question was what will be the capex in FY2022 and I wanted to understand with the growth that you are getting in the last quarter and in Q3, was this driven primarily because of price increases, because of the disruption in China and do you see FY2023 as China normalizes even your pricing will normalize and margins will come back down or do you see this sustaining at the Q4 levels in FY2023?
Anurag Roy
So Q3 and Q4 results were clearly impacted by the disruption in the supply chain and the crisis in China which obviously led to escalation of prices on the finished product. But couple of things from the business decision perspective which went really well were some of the strategic sourcing which we did at the right time which gave us fair differentiation over the competitors in terms of preserving our margins despite the volatility in the market and second thing which I was talking about earlier, continuous improvement manufacturing efficiencies also helped us. So those were the two business
Q
Sir, my question is with respect to the 500 basis point gross margin expansion that we see this year so if I recall a year back we had a pricing pressure on the Triazole so is it that pricing pressure eased and we are seeing the margin expansions going through and how much would be the CMO mixage that you would have experienced in FY2022?
Anurag Roy
So clearly those growth margins or profitability increase as the pricing has a huge contribution there, but as all of you would appreciate that there is a huge amount of volatility in this product portfolio which we currently have and that is why it becomes increasingly imperative or important for us to continue to derisk, expand our portfolio products and get into the CMO business and that is what we are precisely doing it. There will be some Quarters wherein you would see less margins. There will be some Quarters like the last two wherein the margins will be on the higher side. From driving
Q
Thanks for the opportunity again. Couple of questions. One was like you said to the last participant that enterprise business was large contributor to the share of performance, so I understand that the market dynamics beside the pricing for the molecules but do we have any pricing power in those, because it is very difficult to predict how this thing of those molecules will move so anything on the pricing power, if we have any?
Anurag Roy
I keep going back to the points which I was mentioning. One is obviously the relationships you have with some of the key customers so there also we have the deep relationship with the customer wherein this volatile markets there are times when we support customers and vice versa so that is one thing but two critical key which are very important to drive for this kind of volatile business is taking the right business decisions around strategic sourcing and continuously working on life cycle of the product as well as manufacturing efficiencies so there will be Quarters wherein we might be taking
Q
Thank you so much. In the previous call you have mentioned that the capex for the CMO plant was about Rs.100 Crores to Rs.110 Crores and the turn is about 1.5 to 1.7, which gave us a revenue of about Rs.170 Crores at full potential but this time you mentioned about Rs.230 Crores to Rs.270 Crores at full potential so what I am missing here?
Anurag Roy
Yes, one obviously for our capex and earlier projection was Rs.110 Crores to Rs.120 Crores. Those projections went up because of the input price increases on steel and other raw materials for the capex so that is one. But having said that, as I was mentioning earlier, we are seeing a healthy pipeline of herbicide products coming into this particular plant. We are the only company who also has a set up for high potent facility which is also being of a good interest to some of the innovators and CMO players and with that we could tie the business to some extent and choose some of the molecules w
Q
Thanks for giving clarity on the merger decisions with Astec with Agrovet and the thought process behind it. This is really appreciative, Sir and I am sure this will prove value accretive for all stakeholders going forward. Sir, another suggestion we have is like why not rebrand Astec of the lead focus CDMO/CMO entity named as Godrej Green Chemical or Godrej Advance Science or likewise that is one suggestion and we need your inputs on that and question number two is any plan to get into biochemical or biological formation?
Balram Yadav
Thank you very much for your appreciation. I think the purpose of the merger as I said was to give this business an opportunity to grow exponentially and I think we have demonstrated that without doing that and the balance sheet can support further expansion in the plans Astec LifeSciences has. I think those suggestions for rebranding is under consideration because I think Astec LifeSciences more than 65% business is exports and registration, etc., in the name of Astec LifeSciences so we have been receiving your suggestions and we are studying that and very soon we will take a decision either
Q
Thank you. I hope we have been able to answer all your questions. If you have any further questions or would like to know more about the Company, we will be happy to be of assistance. Stay safe and stay healthy. Thank you once again for taking the time to join us on this call.
Opening remarks
Aniruddha Joshi
Thanks, Nirav. On behalf of ICICI Securities, we welcome you all to Q4 FY2022 results conference call of Astec LifeSciences Limited, a subsidiary of Godrej Agrovet Limited. Now I hand over the call to Mr. Aditya Desai, Head of Investor Relations from Godrej Agrovet Limited as well as Astec. Thanks, and over to you Sir.
Aditya Desai
Thanks, Aniruddha. Good afternoon, everyone and thank you for joining us on the earnings call of Astec LifeSciences Limited for Q4 FY2022 and full year ended FY2022. We have with us today, Mr. Nadir Godrej, Chairman of Godrej Agrovet Limited and Astec LifeSciences Limited. From Godrej Agrovet Limited, we have with us, Mr. Balram Yadav, Managing Director and Mr. S. Varadaraj, Chief Financial Officer. From Astec LifeSciences Limited, we have, Mr. Anurag Roy, Whole – Time Director & Chief Executive Officer and Mr. Saurav Bhala, Chief Financial Officer. We would like to begin the call with brief opening remarks from the Management, following which, we will have the forum open for an interactive question and answer session. Before we start, I would like to point out that some statements made in today’s call may be forward looking in nature and actual results may differ from those expressed or implied. I would now like to invite Mr. Nadir Godrej to make the initial remarks. Over to you, Sir.
Nadir B Godrej
Good day, everyone. I welcome you all to the earnings call of Astec LifeSciences. I hope you are doing well. The Financial Year FY2021-22 was the year of revival for the Indian economy from the COVID induced disruption. The country made rapid progress in vaccination and closed the year with a majority of the adult population vaccinated with both the doses. India’s GDP growth rebounded to an estimated 8.9% in fiscal year FY2021-22 from the contraction in the previous year. India’s merchandize exports reached a record high of $418 billion in fiscal year FY2021-22 of 40% growth over the previous year. The agriculture and allied sectors have remained resilient throughout the COVID lead disruption and it is estimated to grow by 3.9% in fiscal year FY2021- 22 as per the latest estimates by the Central Statistical Office. At the same time, the international prices of multiple agricultural commodities, NHEL, agrochemical inputs have risen sharply during fiscal year FY2021-22. The significant i