GMMPFAUDLRNSEQ4 FY23June 2, 2023

GMM Pfaudler Limited

9,156words
93turns
10analyst exchanges
5executives
Management on call
Tarak Patel
MANAGING DIRECTOR, GMM PFAUDLER LIMITED
Thomas Kehl
CHIEF EXECUTIVE OFFICER
Aseem Joshi
CHIEF EXECUTIVE OFFICER
Manish Poddar
CHIEF FINANCIAL OFFICER
Priyanka Daga
DGM STRATEGIC FINANCE, GMM PFAUDLER LIMITED
Key numbers — 40 extracted
INR 3,178 crore
th -- by giving you a snapshot for the financial year that we've completed. We closed the year at INR 3,178 crores of revenue, a significant increase over the previous year number, INR 431 crores of EBITDA, whic
INR 431 crore
ed the year at INR 3,178 crores of revenue, a significant increase over the previous year number, INR 431 crores of EBITDA, which translates to a 13.6% EBITDA margin, INR 235 crores of profit after tax, which
13.6%
gnificant increase over the previous year number, INR 431 crores of EBITDA, which translates to a 13.6% EBITDA margin, INR 235 crores of profit after tax, which translates to a 7.4% PAT margin, EPS o
INR 235 crore
er the previous year number, INR 431 crores of EBITDA, which translates to a 13.6% EBITDA margin, INR 235 crores of profit after tax, which translates to a 7.4% PAT margin, EPS of about INR 43 or so. The ord
7.4%
ch translates to a 13.6% EBITDA margin, INR 235 crores of profit after tax, which translates to a 7.4% PAT margin, EPS of about INR 43 or so. The order intake for the year also was quite strong and
INR 43
A margin, INR 235 crores of profit after tax, which translates to a 7.4% PAT margin, EPS of about INR 43 or so. The order intake for the year also was quite strong and we did about INR 3,392 crores of or
INR 3,392 crore
EPS of about INR 43 or so. The order intake for the year also was quite strong and we did about INR 3,392 crores of order intake, which translates to a current backlog on April 1, 2023, of INR 2,162 crores. Th
INR 2,162 crore
bout INR 3,392 crores of order intake, which translates to a current backlog on April 1, 2023, of INR 2,162 crores. This backlog is quite evenly spread between the international and the India business. The Inter
20%
intake continues to remain quite strong. Like I mentioned, the revenue growth was in excess of 20%, which was driven by the international business, which grew at 21% and the India business, which
21%
evenue growth was in excess of 20%, which was driven by the international business, which grew at 21% and the India business, which grew at 32%. The main drivers of the order intake were basically ou
32%
was driven by the international business, which grew at 21% and the India business, which grew at 32%. The main drivers of the order intake were basically our technology platform, which includes glas
rs,
continues to remain behind the budget. But we expect that in the coming months, some of these orders, which were actually going to be finalized, will now get finalized. And that will give us a nice bu
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Guidance — 20 items
Tarak Patel
opening
“And we are quite confident that, going forward, from what we've seen in the beginning of this year, the order intake continues to remain quite strong.”
Tarak Patel
opening
“But we expect that in the coming months, some of these orders, which were actually going to be finalized, will now get finalized.”
Tarak Patel
opening
“So in terms of outlook, we are quite positive with our outlook forecast.”
Tarak Patel
opening
“We expect the growth rate to continue in the same region of maybe about the 15%.”
Tarak Patel
opening
“From a margin perspective, we also do plan and we do hope to see an improvement in the current margins, which currently stood at 13.6%.”
Tarak Patel
opening
“We do plan to increase this margin, which will be driven by both improvement in margins in the international business as well as in the India business.”
Manish Poddar
opening
“Therefore, we are absolutely on track to surpass our FY '25 target of INR 3,700 crores of revenues, EBITDA of INR 630 crores and ROCE of 25%.”
Manish Poddar
opening
“So therefore, you will expect increment on Q4 over Q3 and there were a few one-time payments as well.”
Venkatesh B.
qa
“Do you have like a margin guidance target, whatever; what you can get to this year in terms of consolidated margins?”
Tarak Patel
qa
“We would expect 100 bps improvement there, somewhere in between that.”
Risks & concerns — 3 flagged
And we have seen some pressure on the India margins, mainly driven by higher input costs and a slight slowdown in investments in both chemical and pharmaceutical.
— Tarak Patel
But yes, so I think the way that you should look at it or company should look at it that internationally, historically, fourth quarter has always been weak in terms of margin.
— Tarak Patel
And in our GPMs, how do we account, what is the impact of the metal price movement that typically gets passed through as a inventory loss, again, typically in our gross margin line through the quarter?
— Nitin Agarwal
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Q&A — 10 exchanges
Q
Thanks for the opportunity. I had a few questions. So the first one is, in the fourth quarter, there was a dip in the international margins quarter-on-quarter. I think last quarter, I think we were at 12.7%. We have moved down to 8.9%. That's a sharp decrease. Now this dip, is this like a cyclical thing that every year, we will have a dip in the fourth quarter on the international side? Or is it just like we had something specifically negative in this quarter, which pulled down the margins? So that is the first question.
Tarak Patel
Sure. So Venkatesh, let me start off and then, both the CFOs are here, who can also jump in. But yes, so I think the way that you should look at it or company should look at it that internationally, historically, fourth quarter has always been weak in terms of margin. Usually, there are two reasons for this. One is obviously, as Manish mentioned, that the new increment cycle in international business starts on January 1. So you will always see that kind of bump up happening. But also, there is sometimes the catch-up cost that you have in some of the factories, which gets allocated right at the
Q
First question is regarding all these acquisitions that you made in the last financial year, that's JDS, Mixel and Hydro Air. If you could give some sense, where are the capacity utilizations across these plants today, when we acquired? And over the next 2 to 3 years, what kind of additional revenue generation capacity these plants have? And out of that, how much you look to add within the INR 3,700 crores target that has been mentioned?
Tarak Patel
Right. Sandeep, so let's just go through quickly the acquisitions. So like I had mentioned earlier, we closed 3 acquisitions this year. Hydro Air was kind of done earlier during the year and that company currently does about $7 million to $8 million of revenue, has been performing quite well and we expect that company to at least double in the next 3 years. This company, in terms of manufacturing capacity, is an engineering company. So it doesn't really have or need any kind of capacity or capacity utilization numbers, because they basically just order things from different vendors, put the en
Q
Just a couple of questions on the Q4 results, you have two line items. One is on the cost of goods and the other expenses. There is a meaningful change on a Q-o-Q basis. Is there a seasonality element to either both of these elements? If you can just help us explain those 2 elements? The COGS has gone up quite a bit and the other expense is also up quite a bit on a Q-o-Q basis.
Tarak Patel
Yes. So like I mentioned there is seasonality. There is always some margin reduction. If you look at the last year numbers as well, the Q4 numbers were lower by about 100 to 200 bps because of the seasonality. We have an increment cycle that kicks in on January 1st. So that's something, we had a couple of one-off payments that we had to make. Manish Poddar: And yes, basically, that's on the payroll side. And of course, the 3 new entities come up and their expenses do distort the picture on a comparative quarterly basis. And on the other expenses side, like we said, there are annual facilities
Q
Tarak, two questions and two parts to that. The first one being, we have been speaking about bioplastic, bioproteins and certain mock meats which are currently small industries, have a lot of potential to grow. So what is GMM Pfaudler doing over there in that domain? And secondly, if you could share some more details on the EV space and GMM Pfaudler playing a role in that?
Tarak Patel
Yes, I think Aseem will have. This is Aseem. I'll take the question. So yes, we are closely watching these and other mega trends. You mentioned 2 of them, bioproteins and then lithium. We actually have opportunities in both those areas. As far as bioproteins goes, the HARI acquisition that we made last year has some very interesting membrane separation technology that is applicable there. In fact, we have already worked with a couple of leading players in that space in Europe. And we are very hopeful that we can expand in Europe. As far as lithium is concerned, there, too, we have a play, we a
Q
Just 2 questions. One is Hydro Air, you said is more of an assembling unit. So isn't that, that kind of activity would get transferred totally to India? That is one. And you have shown, I think, around INR 333 crores odd amount as a debt, which is majorly used towards increasing the stake of 46% buying out that 46%?
Tarak Patel
Yes. So let me first answer the Hydro Air question, and then you can take the debt question. The Hydro Air question, the idea so Hydro Air, well, it's a $7 million to $8 million company, is very localized. It caters to certain parts of Europe, Italy, Germany, Switzerland. The idea of this acquisition was obviously to bring Hydro Air into, so we increase our product portfolio. We add new businesses and new industry that we can cater to. However, the real benefit will come now because Hydro Air has access to the Pfaudler's global network. The European business will still continue to cater to the
Q
Sir, just to get some understanding about our vertical-wise business, then in India, majority is skewed towards the technology side. And when we see international, I understand this is because of Pfaudler but it's rarely equally divided among technology, services, systems and all. So, Tarak sir, can you help me, how do you see that coming in the next 2, 3 years? How do you see that opportunity of improving our business on system side, services side in India too?
Aseem Joshi
Yes. Sanjay, this is Aseem. I'll take it. So, you're right. When you look at the pie, certainly in India, our, more the bulk of our revenue comes from the technology segment, both glass line and non-glass line. Now we do recognize the benefit of having a more greater balance with more systems and more services and that's our focus. The services piece, we have increased our emphasis on that segment. That's currently less than 10% of our revenue and we are focused on growing that. As you know, India is still a strongly growing market. So, the installed base is being built out. In the next 5 to 8
Q
Just one housekeeping item. On the international business, what would be our organic growth this year, excluding the consolidation that we made for this year, the acquisition we made this year?
Tarak Patel
So it's pretty much all organic, except for about $5 million or $6 million of -- $11 million is the revenue that we add. So you add, basically, Hydro Air for about 7 months, 8 months, and 2 months of Mixel, should be in the range of $5 million to $7 million. JDS hasn't already started. So everything else is really organic coming from within the Pfaudler, portfolio. And obviously, next year, going forward, once these businesses -- the businesses start producing and growing, they would then have a bigger share than we have in terms of the growth rate.
Q
Tarak, I just wanted to know if there's any increase or decrease in the market share for GLE, non-GLE or mixing?
Tarak Patel
So mixing, definitely an improvement in market share is our range of INR 30 crores of revenue a few years ago to now INR 150 crores, definitely growth in market share. In China, we've also probably grown market share in glass line. In India, with the two factories that we have now, I would say, our market share is stable. We had opened about a smarter sale strategy in glass line where we were really kind of going after high-margin business. And obviously, that is something that we continue to do. However, we are also now being a little bit more aggressive in the market. But otherwise, generall
Q
Pfaudler Inc, still holding 14% share? And will there be any, again, disinvestments in next 1 year or so?
Tarak Patel
Yes. So DBAG, the private equity fund through Pfaudler Inc. continues to own 14%. Out of which we have disclosed, at the time we had disclosed that we would acquire 1%. We are waiting for the final clearances from FDI France for the clearance on that and then we will acquire 1% from DBAG through Pfaudler Inc., which will then put the family in excess of 25%. The balance stake of DBAG of 13%, like you know, DBAG has been now around for about 9 years or so. And I think the time has come that they will eventually exit. The exact date and time of that exit and the way of the exit has also has not
Q
Thank you. Thank you, everybody, for joining us today. It was a pleasure interacting with you and we look forward to many more such interactions. Thank you, take care and see you soon.
Tarak Patel
Thank you. Thank you. Bye.
Speaking time
Tarak Patel
24
Manish Poddar
18
Moderator
12
Nitin Agarwal
6
Rohit Ohri
6
Venkatesh B.
5
Aseem Joshi
5
Ashit Kothi
5
Priyanka Daga
3
Sandeep Tulsiyan
3
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Opening remarks
Priyanka Daga
Thank you, Ryan. Good afternoon, ladies and gentlemen. A very warm welcome to all of you into the Q4 FY '23 Earnings Call of GMM Pfaudler Ltd. The earnings presentation was uploaded on the Stock Exchanges last evening and is also available on our website. Hope all of you had a chance to go through it. From the management, we have with us our Managing Director, Mr. Tarak Patel; our CEO of International Business, Mr. Thomas Kehl; our CEO of India business, Mr. Aseem Joshi; CFO of International Business, Mr. Alexander Pömpner; and CFO of India business, Mr. Manish Poddar. We will give you a brief overview of the performance of the company, after which, we will get into the Q&A. Before we begin with the overview, a brief disclaimer. The presentation which we uploaded on the stock exchange and our website, including of all discussions that will happen now, contains or may have certain forward-looking statements regarding our business prospects and profitability, which is subject to certain
Tarak Patel
Thank you, Priyanka. So let me start off with -- by giving you a snapshot for the financial year that we've completed. We closed the year at INR 3,178 crores of revenue, a significant increase over the previous year number, INR 431 crores of EBITDA, which translates to a 13.6% EBITDA margin, INR 235 crores of profit after tax, which translates to a 7.4% PAT margin, EPS of about INR 43 or so. The order intake for the year also was quite strong and we did about INR 3,392 crores of order intake, which translates to a current backlog on April 1, 2023, of INR 2,162 crores. This backlog is quite evenly spread between the international and the India business. The International business has a current visibility of about 8 to 9 months in most geographies, with certain geographies having even a longer backlog. For the India business, we have about a 6 to 7 months of backlog. And we are quite confident that, going forward, from what we've seen in the beginning of this year, the order intake conti
Manish Poddar
Thank you, Tarak. Good afternoon, ladies and gentlemen. On the results, as Tarak mentioned, we ended the year on a strong note, with INR 3,178 crores of revenue, 25% higher Y-o-Y and an EBITDA of INR 431 crores, 52% higher Y-o-Y. We also achieved an EBITDA margin of 13.6%, which is 1.5% higher than last year. Last year, we at 11.2%. On the quarter as well, Q4 ended up with 24% higher revenues Y-o-Y at INR 866 crores and 34% higher EBITDA at INR 96 crores. On international business, the EBITDA margins would improve by 0.5%, if we exclude the three new acquisition entities performance of HARI, JDS and Mixel. Therefore, we are absolutely on track to surpass our FY '25 target of INR 3,700 crores of revenues, EBITDA of INR 630 crores and ROCE of 25%. For the quarter specifically, payroll cost was higher for the international business. This is an accumulation of 3 factors. There were 3 new acquisitions that we just spoke about. Also, the annual increment cycle on the international business s
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