IOLCPNSEQ4 & FY22June 01, 2022

IOL Chemicals and Pharmaceuticals Limited

8,831words
161turns
14analyst exchanges
4executives
Management on call
Sanjay Chaturvedi
EXECUTIVE DIRECTOR & CEO
Pardeep Khanna
CFO
Abhay Raj Singh
VP & COMPANY SECRETARY
Monish Shah
ANTIQUE STOCK BROKING
Key numbers — 40 extracted
20%
fen pharma business has performed well compared to the prior period and is now contributing about 20% to the quarterly revenue for the company and overall, about 35% of the revenue in the pharma segm
35%
iod and is now contributing about 20% to the quarterly revenue for the company and overall, about 35% of the revenue in the pharma segment. During the Q4, we filed one DMF with the USFDA, whereas for
11%
performance of the non-Ibuprofen business compared to Q3. On an aggregate basis, our revenue grew 11% for the year. However, the margins had been under stress account of continued volatility in the
3%
ghts for the quarter four and financial year 2022. The total revenue for the quarter increased by 3% to Rs. 573 crores as compared to Rs. 555 crores in quarter three of financial year 22. In quart
Rs. 573 crore
the quarter four and financial year 2022. The total revenue for the quarter increased by 3% to Rs. 573 crores as compared to Rs. 555 crores in quarter three of financial year 22. In quarter four of financia
Rs. 555 crore
ial year 2022. The total revenue for the quarter increased by 3% to Rs. 573 crores as compared to Rs. 555 crores in quarter three of financial year 22. In quarter four of financial year 22 the EBITDA stood at
Rs. 50 crore
s in quarter three of financial year 22. In quarter four of financial year 22 the EBITDA stood at Rs. 50 crores and for full financial year 22 it was at Rs. 288 crores at a revenue to Rs. 221 crores. Similarl
Rs. 288 crore
r of financial year 22 the EBITDA stood at Rs. 50 crores and for full financial year 22 it was at Rs. 288 crores at a revenue to Rs. 221 crores. Similarly, EBITDA margin in quarter four of financial year 22 wa
Rs. 221 crore
DA stood at Rs. 50 crores and for full financial year 22 it was at Rs. 288 crores at a revenue to Rs. 221 crores. Similarly, EBITDA margin in quarter four of financial year 22 was at 8.6% and 13% for financial
8.6%
a revenue to Rs. 221 crores. Similarly, EBITDA margin in quarter four of financial year 22 was at 8.6% and 13% for financial year 22. Depreciation for the quarter was Rs. 11 crores and Rs. 43 crores f
13%
to Rs. 221 crores. Similarly, EBITDA margin in quarter four of financial year 22 was at 8.6% and 13% for financial year 22. Depreciation for the quarter was Rs. 11 crores and Rs. 43 crores for the f
Rs. 11 crore
of financial year 22 was at 8.6% and 13% for financial year 22. Depreciation for the quarter was Rs. 11 crores and Rs. 43 crores for the full year. Profit after tax for quarter four of financial year 22 stoo
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Guidance — 20 items
Sanjay Chaturvedi
opening
“Our IBU business is expected to see volume uptick in 2023 and that will be stable pricing.”
Sanjay Chaturvedi
opening
“With improved business mix with the pharma segment, we expect our growth margins to improve hereon.”
Dhaval Shah
qa
“Also, your outlook going forward over the next two quarters on the chemical side.”
Sanjay Chaturvedi
qa
“The first one was about what happened to the profitability level and what is the view going forward?”
Dhaval Shah
qa
“And this ethyl acetate is completely sold out, so that will be consumed within the company, what percentage would be that?”
Sanjay Chaturvedi
qa
“I think the two points I will highlight here; one is my existing capacity is about 1 lakh tons of ethyl acetate and over the next couple of years, I will have marginal expansion of this by maybe 20%-25%, and that will be all through minor modifications of the plant.”
Sanjay Chaturvedi
qa
“Second, we are in the process of identifying new products where for which we will be adding capacities and that should come online sometime around next year.”
Sanjay Chaturvedi
qa
“So, I think you can expect commercial activity by the end of this financial year or early next year.”
Sanjay Chaturvedi
qa
“So, between the two activities, you can expect a double-digit top line growth with enhancement in bottom line as well, because needless to say, the new products that we launch will have EBITDA number that are certainly higher than 6% to 8%.”
Sanjay Chaturvedi
qa
“It would be preliminary for me to say whether we will be back to 6% to 8%, but we will certainly be in the positive single digits.”
Risks & concerns — 15 flagged
However, the margins had been under stress account of continued volatility in the chemicals pricing and on account of higher input costs in raw materials and energy for the pharma segment coupled with lower volumes in our flagship product of Ibuprofen.
— Sanjay Chaturvedi
And that is the reason for the decline in profits that you see.
— Sanjay Chaturvedi
But needless to say, we have set up capacities and we are ready to break that challenge.
— Sanjay Chaturvedi
I think the availability of raw materials was never a challenge.
— Sanjay Chaturvedi
The challenge was in timely deliveries and the pricing.
— Sanjay Chaturvedi
The pricing has been volatile for quite some time even in the last year also.
— Ranveer Singh
And the way to mitigate this risk is by having an assurance of demand.
— Sanjay Chaturvedi
And what kind of decline that we saw approximately?
— Chirag Fialoke
And then the prices that have come down would, while they have challenged me and put a pressure on my business, they put a lot more pressure on other businesses that are not backward integrated.
— Sanjay Chaturvedi
If you could help understand the bridge between the two, how much of this I think you mentioned volume decline was about 10% odd, just correct me if I got that understanding or maybe slightly higher.
— Jaspreet Arora
Basically, how much was it by volume decline, how much cost push and how much was the price realization factor, which I believe would be very large part.
— Jaspreet Arora
Then the additional impact of this is because your asset utilization has gone down, your average cost of manufacturing goes up, so you get a further hit on your bottom line and then your input costs have gone up, your energy costs have gone up.
— Sanjay Chaturvedi
They are looking at not just reducing their costs, but actually, minimizing the risk.
— Sanjay Chaturvedi
So, in the coming quarters, you will hear about the new products that we will be launching, and they will de-risk the entire chemicals business, a) because I will be adding more products beyond my current portfolio and the products that I add will be at higher profitability levels than what is I last stated.
— Sanjay Chaturvedi
So that’s how I hope to de- risk the division of chemicals.
— Sanjay Chaturvedi
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Q&A — 14 exchanges
Q
Sir, a couple of questions from my side. First being, could you explain us what happened on the chemical business which led to report a loss on that the EBIT level? Also, your outlook going forward over the next two quarters on the chemical side. What expansions are we having there and what sort of growth can we see? And also how is situation in terms of the raw material which will impact the margins on the chemical front? And secondly, on the drug side, you had shared in our last conversation, you had shared about the non-IBU business progressing well. And also, you had shared some overall EB
Sanjay Chaturvedi
So, let me first address Dhaval your query on the chemical side and within chemicals you had two queries in there. The first one was about what happened to the profitability level and what is the view going forward? So, in terms of profitability as you know that our primary product ethyl acetate depends on acetic acid which comes entirely from exports. Now, there has been a lot of volatility in the acetic acid pricing and really it comes down to at what price do you book your import. So, rather than look at profitability for the chemicals business on a transaction-by-transaction basis or a mon
Q
Yes, I will join the queue.
Management
Q
I just had a couple of questions on IBU. The first one was if you could highlight how is the demand in the regulated markets? I understand you said for the previous question, in the previous question you said that the volumes have bottomed out. But if you could just indicate over the next one year, how do you see the volumes in the regulated market?
Sanjay Chaturvedi
So, I think the volumes, I don't want to talk about only the regulated markets, let me give you a broader picture of where the volumes are. So, if you look at our assets were running roughly at about 70% or so asset utilization, slightly higher, we should add a few percentage points to it certainly in these coming quarters. So, if I look at, do I predict that we will sell to full capacity? Perhaps not, but certainly at a higher capacity and asset utilization than what we sold in the previous year. Sir, and my second question was on the BASF facility that they had announced couple of months bac
Q
Just wanted to check in non-IBU business which products are contributing to the growth, if you can highlight a couple of names.
Sanjay Chaturvedi
So, Metformin, Clopidogrel, Pantoprazole, Levetiracetam these are some of the products that continue to be from products in our portfolio. Okay. Understood. And given that we have good capacities in Metformin, do you think the realizations have improved and you have been able to take some price increase as well this fiscal? So, there are two ways to look at this Monish. One is there is certainly a distinct difference in pricing between the export market and the Indian market. And when there was a unique situation earlier this year where the India prices were actually higher than export prices,
Q
My question was related to acetic acid procurement. The pricing has been volatile for quite some time even in the last year also. So, what is our strategy to hedge this? Whether we are accumulating inventory at a particular price or for a period, so if you could give more detail on it.
Sanjay Chaturvedi
So, this is a very tricky question, Ranveer, because if I look at acetic acid sourcing, number one, there aren't too many options to get into formula-based pricing, as is typically done in several chemicals. Second, our volumes of manufacturing are significantly high, and we need to carry slightly larger inventories than other of our competitors primarily because we are slightly removed from the port. So, if I factor all of those things in, we try to carry inventories that are slightly higher than industry averages. So, this does two things for us. Number one, a) the amount of working capital
Q
Just wanted to understand, could you share broadly what volumes we did for Ibuprofen this year? And what kind of decline that we saw approximately? Can you give us a broad ballpark number?
Sanjay Chaturvedi
You are talking about how much Ibuprofen we did at FY 21-22 versus the previous year? Yes, sir. So, I would say we declined by a few hundred tons or so, maybe almost 1000 tons for the year. Almost 1000 tons. So, if my calculation is correct that probably we were closer to say 8000-8300 tons? Yes. In that range. Absolutely. Okay. Great. Sir, forgive me if this is repetitive, but in terms of pricing, we have been talking about the pricing floor for a last few quarters now, and I understand that is little bit of an external circumstance for the company, given that it's an issue related to over- s
Q
Can you give us some clarity on the Paracetamol press release that came out a few months back, if you can help us understand the kind of capacity we are putting in and what is the kind of volume and pricing we anticipate?
Sanjay Chaturvedi
Okay. We've currently put in a capacity of around 1800 tons a year and we expect to take this to about 3,600 tons by the end of this year. Have you started the running this plant already sir? Yes. We are running this plant, but that's at the 1800 tons capacity level. All right. I mean, have you booked any sort of revenue in 4Q from Paracetamol? Yes. We started to book revenue for Paracetamol. Understood. One question on the balance sheet, there's a Rs.185 crores jump in the other non-current assets. Can you help us understand that figure? Could you repeat your question please? On the balance s
Q
My question was around the profitability swings that has happened in the last financial year in the pharmaceutical division. If you could just, so I'm referring to as a mental break up Rs.460 crores in F21 dropping to Rs.160 crores in F22. If you could help understand the bridge between the two, how much of this I think you mentioned volume decline was about 10% odd, just correct me if I got that understanding or maybe slightly higher. If you could help understand the bridge. Basically, how much was it by volume decline, how much cost push and how much was the price realization factor, which I
Sanjay Chaturvedi
Okay. Broadly you're talking specifically on the pharma side Jaspreet. Yes, correct. Pharma I'm taking the full financial year, so that takes into account all that monthly, quarterly variation. Okay. So, couple of things, number one, if I look at my pricing in Ibuprofen, there was a significant difference in the weighted average price for the two years. The way to think about that is let's say I do 9,000 tons and the price difference is, let's say Rs.50, right there you have a Rs.45 crores impairment sitting on about 8 to 9,000 tons. All of it is coming not only from your top line, but signifi
Q
Just one quick question I had on the expected margins on the API non-Ibuprofen business. Sorry if I missed, I am not sure if you have answered that?
Sanjay Chaturvedi
My current margin in the non-Ibuprofen business are actually in the single digits and that's primarily because while I have set up the capacities, my asset utilization still continues to be low. As I improve that asset utilization and as I get approval for regulatory authorities, as well as customer audits into the export markets that EBITDA margin will improve. Any expectations let's say on a consistent level, three years out, or maybe two, three years out what it is, and also what is the utilization level currently and let's say last year? In terms of the asset utilization, I would say we br
Q
Just two questions. One is, can you share any outlook on exports and domestic mix in pharma business?
Sanjay Chaturvedi
Okay. In terms of exports, we are currently at about between 25, 30% of our revenue comes from exports and with a focus of growing the export market, both for chemicals and pharma, our intent is to take that to 35% level. Okay. Any guidance that you would like to give for EBITDA margins or EBIT margins for pharma business once your Ibu volumes pickup and also non-Ibu contribution improves, so anything for FY24, 23, you would like to share? You know if you look at our EBITDA margin that we delivered in this previous financial year, it was at 13% for the year. Our intent is to take that to 15% p
Q
Just one question regarding the profitability point of view, previous year the profit of the company was 445 crores. Now the profit has been decreased to 166 crores. So just wanted to know whether like FY22 would we be able to achieve 445 profitability or so?
Sanjay Chaturvedi
Your question is, will we be able to achieve the profitability level that we got in the year prior to this one? Yes, exactly. The short answer is no. Before I just say no, I want to give you a little bit of background and a flavor of where the industry is. Okay. As an average API industry and I mean API industry will operate at an EBITDA margin of the median number is around 15%. Okay. There will always be lean seasons and there will be periods of excesses, profitability that come from one-off. If you look at a lot of the companies that enjoy high levels of profitability, because they had favi
Q
Thank you for the opportunity, sir. I've heard a few interviews of yours on CNBC TV18, in that you told that we are going to deliver 15 to 20% of margins. What was in terms of pharma and chemical or pharma and chemical both or in terms of pharma only?
Sanjay Chaturvedi
Our intent was to deliver overall 15 to 20% margin for the company as a whole, because on a lighter note I am the CEO of the company and not the CEO of the pharma division. We like to look at the company overall as a whole. What happened was you know, we did not achieve that 15% number because of all the reasons that I outlined earlier in the call, but that is our intent. We have a path forward to deliver that number. But in that same call, the anchor also asked you whether you are going to return to single digit return or not. You told no, we are going diverge to 15% to 20% margins in the EBI
Q
On the other APS, like clopidogrel, pantoprazole and levetiracetam, you mentioned you'd be manufacturing or intermediate as well. Like for paracetamol, you started manufacturing pap, and it created that you have achieved a stabilization of the quality, while many others were trying in our country, and they were not able to get that. Likewise, in this, the other three products what time would you be going for the backward integration, or have you already started with it? If you could throw some color on it and also whether the three-year perspective, the API business by FY25 if we take a view o
Sanjay Chaturvedi
Sure. There are actually quite a lot of questions that you've asked me within what you've said. I'll pick out the two key themes of what you asked. Number one, you asked me that over the next three years, how do I see the split of the pharma portfolio? Needless to say, ibuprofen with certainly become less than 50% of my total pharma business. Again, if I talk about the philosophy and the strategy of what we do, we come into products at scale. What I mean by that is, if I look at my Metformin capacity, my Metformin capacity is perhaps one of the largest in the country today. If I look at my clo
Q
Once again, thank you all for taking the time out of your busy schedules for this. I would like to reiterate the message that, yes, this previous financial year we had, despite, very strong headwinds, the company continued to demonstrate good business performance in line with other API players. We continue to build a stronger and a much more sustainable future through our investments in CAPEX, product portfolio and increased regulatory filings. This year, we've made significant investment in leadership, training and development and we've also hired critical talent in the industry and over the
Management
Speaking time
Sanjay Chaturvedi
71
Dhaval Shah
21
Moderator
16
Jaspreet Arora
10
Monish Shah
8
Ranveer Singh
7
Anupam Agarwal
6
Aditya Shah
6
Rohit Suresh
5
Chirag Fialoke
4
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Opening remarks
Monish Shah
Thank you, Rutuja. Good afternoon, everyone and welcome to IOL Chemicals And Pharmaceuticals Limited 4Q FY22 results conference call. Today on the call we have with us, Dr. Sanjay Chaturvedi – CEO, Mr. Pardeep Khanna – CFO, and Mr. Abhay Raj Singh – VP and Company Secretary. I will hand the call over to Dr. Sanjay for his opening comments. Thank you and over to you, Sir.
Sanjay Chaturvedi
Thank you Monish. A very good afternoon to everyone joined on the call. Really appreciate you all taking the time to participate in this Earnings Call. I trust you had the time to read the earnings document that we have shared. I am certain that many of you are going to have questions, but before we take up those questions, I would like to shed some light on the industry, what's our business, what's our own perspective in terms of performance for the quarter and the year, and subsequently my colleague, Mr. Pardeep Khanna – our CFO will provide a lot more granular details on the financial performance. So, let me begin by saying that, our non-Ibuprofen pharma business has performed well compared to the prior period and is now contributing about 20% to the quarterly revenue for the company and overall, about 35% of the revenue in the pharma segment. During the Q4, we filed one DMF with the USFDA, whereas for the entire year we filed about four DMFs, four new DMFs with the USFDA. In additi
Pardeep Khanna
Thank you Dr. Sanjay. Good afternoon to all and welcome to IOL’s quarter four of financial year 2022 earnings conference call. I will take through the highlights for the quarter four and financial year 2022. The total revenue for the quarter increased by 3% to Rs. 573 crores as compared to Rs. 555 crores in quarter three of financial year 22. In quarter four of financial year 22 the EBITDA stood at Rs. 50 crores and for full financial year 22 it was at Rs. 288 crores at a revenue to Rs. 221 crores. Similarly, EBITDA margin in quarter four of financial year 22 was at 8.6% and 13% for financial year 22. Depreciation for the quarter was Rs. 11 crores and Rs. 43 crores for the full year. Profit after tax for quarter four of financial year 22 stood at Rs. 28 crores and Rs. 166 crores for the whole year. The PAT margin for the financial year 22 was at 7.5%. With this, I would now request the moderator to open the forum for question-and- answer session. Thank you very much.
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