NAVINFLUORNSENovember 06, 2023

Navin Fluorine International Limited

9,503words
114turns
15analyst exchanges
4executives
Management on call
Vishad Mafatlal
CHAIRMAN – NAVIN FLUORINE INTERNATIONAL LIMITED
Radhesh Welling
MANAGING DIRECTOR – NAVIN FLUORINE INTERNATIONAL LIMITED
Anish Ganatra
CHIEF FINANCIAL OFFICER – NAVIN FLUORINE INTERNATIONAL LIMITED
Bhavya Shah
ORIENT CAPITAL
Key numbers — 40 extracted
INR3
esteemed founder, Shri Arvind Bhai Mafatlal, the Board has approved a onetime special dividend of INR3 a share in addition to an interim dividend of INR5 per share. This momentous occasion provides us
INR5
ard has approved a onetime special dividend of INR3 a share in addition to an interim dividend of INR5 per share. This momentous occasion provides us with a unique opportunity to honour the visionary l
INR30 crore
is business will continue to remain a high-growth business for us in the future as well. Capex of INR30 crores towards development of a completely new capability in Surat is on track and is expected to gener
INR90 crore
two new products on specialty. The overall revenue impact of these contributing factors is about INR90 crores to INR100 crores. Adjusting for these factors, our revenue would have been in the range of INR55
INR100 crore
s on specialty. The overall revenue impact of these contributing factors is about INR90 crores to INR100 crores. Adjusting for these factors, our revenue would have been in the range of INR550 crores to INR
rs,
ct of these contributing factors is about INR90 crores to INR100 crores. Adjusting for these factors, our revenue would have been in the range of INR550 crores to INR570 crores for the quarter. EBITDA
INR550 crore
crores to INR100 crores. Adjusting for these factors, our revenue would have been in the range of INR550 crores to INR570 crores for the quarter. EBITDA margins were therefore impacted by lower operating le
INR570 crore
ores. Adjusting for these factors, our revenue would have been in the range of INR550 crores to INR570 crores for the quarter. EBITDA margins were therefore impacted by lower operating leverage, and we also
INR6 crore
ere therefore impacted by lower operating leverage, and we also had one-off cost of approximately INR6 crores due to some corrective measures taken at Dahej plant. I will now share the highlights of our p
INR963 crore
. For first half FY '24, on a consolidated basis, the company reported revenue from operations of INR963 crores as against INR817 crores in H1 FY '23, a growth of 18% year-on-year. Operating EBITDA stood at
INR817 crore
on a consolidated basis, the company reported revenue from operations of INR963 crores as against INR817 crores in H1 FY '23, a growth of 18% year-on-year. Operating EBITDA stood at INR213 crores as against
18%
orted revenue from operations of INR963 crores as against INR817 crores in H1 FY '23, a growth of 18% year-on-year. Operating EBITDA stood at INR213 crores as against INR193 crores in H1 FY '24, up b
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Guidance — 20 items
Radhesh Welling
opening
“This will contribute significantly to growth in revenues in Specialty starting next year.”
Radhesh Welling
opening
“We expect the plant to be running to optimal capacity going forward, and we expect to generate sizable revenues from the plant from next quarter onwards.”
Radhesh Welling
opening
“Demand for R22, especially in international markets was muted, and we expect demand to start picking up from end January onwards.”
Radhesh Welling
opening
“Our AHF project for adding 40,000 metric tons of hydrofluoric acid capacity in Dahej is progressing well and is as per schedule.”
Radhesh Welling
opening
“Going forward, all our CDMO business for global pharma innovators will be done under Navin Molecular brand.”
Rohit Nagraj
qa
“So, we had indicated last year that we have a target to reach about $100 million by sometimes FY '26, FY '27.”
Rohit Nagraj
qa
“And what could be the milestones to achieve those -- that $100 million target?”
Radhesh Welling
qa
“So as far as the target is concerned, we are working towards that right now.”
Radhesh Welling
qa
“It will be difficult for us to specifically project if it will be in one year or other.”
Rohit Nagraj
qa
“So, we had indicated prior that we will be speaking with Honeywell during 2023 for any new opportunities as well as the expansion or doubling capacity for the current Honeywell product.”
Risks & concerns — 15 flagged
These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
— Bhavya Shah
The overall revenue impact of these contributing factors is about INR90 crores to INR100 crores.
— Anish Ganatra
It will be difficult for us to specifically project if it will be in one year or other.
— Radhesh Welling
It will be difficult to give a specific target, but we are actually moving positively.
— Radhesh Welling
It will be difficult to say as to when we will achieve the full capacity, etc, but we're actually moving in the right direction.
— Radhesh Welling
That is little difficult to really ascertain because as you know, all of that is single product, single customers.
— Radhesh Welling
Or can we beat capacity constrained because some of our original Q2 production is now happening in Q3 and then that creates a challenge?
— Madhav Marda
I think it will be a little difficult to talk about it on an annualized basis because we're still trying to get handle on the Q4.
— Radhesh Welling
No, it's going to be very difficult for us to give that because we are still in conversation with the customers to understand what their requirement for calendar year '24 is.
— Radhesh Welling
I think there were two molecules last year, which we have not really had any -- the demand there has been very weak, and that has been clearly materialized in the domestic.
— Anish Ganatra
No, I don't think it is -- I mean, I don't think we can really influence that process, especially on a quarter-to-quarter basis, is really difficult because typically, what happens is on the repeat orders as we have mentioned before, our customers tend to actually operate on a very -- on a campaign basis.
— Radhesh Welling
But the timeline as to when we receive the POs for the repeat orders, it's very, very difficult for us to influence.
— Radhesh Welling
So, I think it will be a little difficult for us to look at or compare the export versus domestic mix in our specialty.
— Radhesh Welling
No, I think it's going to be difficult for us to give specific timelines.
— Radhesh Welling
We're currently in the process of having some of the commercial discussions, especially on the Honeywell debottlenecking, but it will be very difficult for us to give specific timeline on either of these two projects.
— Radhesh Welling
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Q&A — 15 exchanges
Q
Sir, first question is on the CDMO front. So, we had indicated last year that we have a target to reach about $100 million by sometimes FY '26, FY '27. So how do we see the progress going ahead? And what could be the milestones to achieve those -- that $100 million target? Will it be step jump or will it be a gradual increase?
Radhesh Welling
So as far as the target is concerned, we are working towards that right now. It will not be a step jump, so it will not be that one year, we've actually done significantly lower than that in the following year, we suddenly achieve $100 million. It will be a gradual move towards that. At the same time, the business, as we have indicated before as well, will continue to remain lumpy. That's just the nature of the business. As you all know, about two years back, we started focusing specifically on identifying and developing more late-stage opportunities. And we are actually seeing a lot of succes
Q
Sorry, we lost you. We just heard the starting of that question then after that we lost you. Sudarshan Padmanabhan: Sir, my question is more on understanding on the long-term contract expiration. So, we have seen a few long-term contracts getting signed. But over a period of time, how much of revenues or scale do you expect -- or do you want from a long-term contract because it is also sacrificing stability for versatility. So, one, on that strategy, what is your thought process? The second is on the business perspective, I'm not looking at a segment. But as a whole, we're seeing Agri specific
Radhesh Welling
So, I think as we have indicated before as well, our focus will continue to remain to ensure that our overall business is very diversified as well as very balanced. What I mean by that is that we will continue to focus on businesses which are backed by long-term contracts and then invest in dedicated plants for specific customer for specific products. We will also have investments done in MPPs, which will make molecules for multiple customers and -- multiple segments. And that is the model we will continue to have. As I have indicated before, if you look at the CDMO business, it's a pure servi
Q
Just a couple of clarifications. So first, on the debtor days. Your debtor days have come down by 30-odd days. Is there any particular reason? And should we take this as a norm going forward?
Anish Ganatra
So, thanks, Krishan, this is Anish here. On the debtor days, I mean you're right, I mean, it has come down and part of it has got to do with how we are changing our approach towards collection. We are focused on ensuring that the collections happen on -- the credit terms are tighter in the sense that we do not want extended credit. We're also using innovative programs on vendor financing and customer financing to ensure that the receivables are received because, both our focus on working capital and cash flow is no longer transactional, It's more strategic in nature. So, to answer your questio
Q
Yes. Just on the Specialty Chemicals business with regard to - these production-related issues that you've highlighted. Could you please share some more colour about what exactly these are about? And does this impact the ramp-up timeframe that we had in mind for this -- for the multipurpose plant when we originally envisaged the project?
Radhesh Welling
Yes. So, I don't want to get into too much technical details. But both of these are new molecules, one which we had earlier done in Surat at very small volume, and we were actually doing the commercial production in MPP. And the other one was a completely new molecule that we were doing for the first time in MPP. We have since resolved the issues. And the production has actually started for both the molecules. The total quantum of that was approximately INR34 crores between the two molecules. And that sales is actually -- will be deferring from Q2 to Q3. So, both the molecules, the sales of bo
Q
My first question was the deferral that we are seeing in Q2 across sub-segments. If I were to look at -- because if it's a deferral, does it goes to Q3 or Q4, for example? Is it fair to assume that the revenue that we had planned for FY '24 as a whole, that doesn't change because of the deferral? Or can we beat capacity constrained because some of our original Q2 production is now happening in Q3 and then that creates a challenge? Just wanted to get your thoughts there.
Radhesh Welling
Yes. I think it will be a little difficult to talk about it on an annualized basis because we're still trying to get handle on the Q4. But specifically with related to Q2 to Q3, most of these sales will actually move to Q3, but the only question is that will all of that be incremental over and above what we would have otherwise done in Q3. To answer that question, we will have to look at it on a BU-to-BU basis. I earlier talked about on the specialty. On the CDMO, it's about INR18 crores as was indicated earlier. That will be an incremental revenue, it will come in Q3. But on the other busines
Q
Sorry if this is a bit repetitive. But on the CDMO side, given that you've seen two large molecules being pushed out to CY '24. Could you maybe help us or give a sense of how we should think about the revenue growth for this segment in F '24 and F '25? That was the first question.
Radhesh Welling
No, it's going to be very difficult for us to give that because we are still in conversation with the customers to understand what their requirement for calendar year '24 is. We know that they have actually told us that we will continue to supply them these molecules for the next campaign. And the next campaign is basically moved to FY'24. But we don't have the answer yet from the customer in terms of exactly what the volume required for these campaigns is going to be. So, it is a little -- I would say a little early. We probably might have a better idea on what the calendar year '24 numbers l
Q
Starting with the bookkeeping one. Can you help us understand what is the capacity utilization for all the three plants, which is Honeywell, MPP and dedicated agro for this quarter?
Radhesh Welling
We have not given out the capacity utilization numbers, and I don't think it will be appropriate for us to do that because a lot of that information is confidential. Got it. No, this is just for modelling to tell how the progression will happen for each of this plant, but that's fine. But a follow-up to the -- Radhesh, actually, in your previous call, you mentioned that Honeywell plant has reached the optimal utilization, post the recommissioning. Have we again got into a problem to now come back and look at more gradual than reaching again an optimal utilization? No, if you see after the shut
Q
Sir, first question is on the HFO debottlenecking. We were supposed to announce the project somewhere in between the second and the third quarter. So where are we on that those timelines? And the second question is on the cGMP-4 plant. When can we expect the announcement for the cGMP-4 plant?
Radhesh Welling
No, I think it's going to be difficult for us to give specific timelines. Both these projects are currently in the pipeline. The discussions are going on. We're currently in the process of having some of the commercial discussions, especially on the Honeywell debottlenecking, but it will be very difficult for us to give specific timeline on either of these two projects.
Q
Sir, my first question is related to speciality chemicals. two quarters back, you had mentioned one of the molecules, which show where the demand was pretty low, but somehow the margin was -- it's a very high-margin molecule. So, any update on that? Are we seeing demand recovery or anything from the customer? Are you worrying?
Radhesh Welling
Yes. That was the agri molecule, I think you are referring to, which we were supplying from Surat, we've actually didn't have much of the demand in the first half. The demand has again come back. We will be supplying -- we supplied some molecules in this particular quarter, and we will continue to supply in the coming quarter. But the good news is that we have actually received a pretty good forecast for the following year for that molecule. Okay. And sir, another question is related to CDMO. Last quarter, you had mentioned about Fermion agreement. So basically, that particular agreement has t
Q
Sir, one of my question was in terms of specialty chemicals. So, what percentage of an intermediates -- as we are supplying intermediates, as you said, especially to the agrochem side, what percentage of the intermediates goes into patented or generic products? Can a ballpark be given for that number?
Radhesh Welling
I think the way we look at our business is whatever we do has to be differentiated, where we have a clear differentiated value proposition. As you know, when we started our business, and we were building up the business, a lot of it was going into generic molecules. A lot of the new opportunities that we have are primarily into the new molecules. It will be difficult for us to give on a quarter-to-quarter basis split between generic and patented molecules. Sure, sir. And sir, just a follow-up to that, I wanted to know is, of course, you are talking about being differentiated. I completely unde
Q
Sorry for harping on this again. With respect to the new dedicated agri pre-sales that we have made, we now estimate that the commissioning will be by end of FY '24 instead of December '23. So, if we can get some colour on the reason for the slight delay that will be helpful. And secondly, you have mentioned that we have received POs for the dedicated portion of the capacity for CY '24. So just your thoughts on how does this arrangement work with the customers. Is it more contractual in nature in terms of volume tie-ups? Or is it more driven by annual purchase orders that the customers -- mean
Radhesh Welling
Yes. So as far as -- as we have mentioned, almost 50% of that particular project is underlined by one particular customer. As we are going into 2024, we have received confirmed purchase orders for the volume that will be supplied from '24. And that process will continue. As we have indicated, the model is typically as we work on other dedicated projects. But typically, it's a cost- plus pricing model that we employ. As for the remaining 50%, as we had indicated earlier, and as Anish also mentioned in reference to one of the earlier questions, as we get the plant, our initial focus would be to
Q
So, in the opening commentary, you did say that the HF plant is largely on track. So just wanted to hear some comments, how do we plan to utilize it captively probably over the next three years to four years. And what kind of projects we are looking at to kind of consume the HF internally? And second, just an extension to that, how should one see that debt panning out over the next couple of years. We are at around INR1,200-odd crores of gross debt, how should one see that?
Anish Ganatra
Okay. So let me take the gross debt question, first. I mean gross debt, and I mean, I've said this before, we normally don't give forecasts out on debt, etc. I mean our focus always has been to take projects and progress them within a solid financial framework, which we agree with the Board, which covered amongst other things, debt return, commercial, de-risking, etc, yes. So unfortunately, I won't give the guidance on that going in the future. But it is what it is at the moment. And you just have to look at it as we bring projects for approval and share with you as to where the profile of the
Q
On the new project announcements, in the past, we've been -- there'll be a little bit of a lag in terms of we're probably closing out some of the plants that we've had on board. So, is it largely the uncertainty in environment, which is holding us back in terms of closing out some of the divisions? Or are there anything more to sort of read into it?
Radhesh Welling
Actually, give the proper answer to this, right? We are working on opportunities. I think what is important is that we will not pursue growth opportunities just for the sake of it. We will ensure that we need to be, first of all, convinced of those opportunities. And once we are, we will take it to the Board for approval. I think despite what we are seeing in the larger macro environment, we are actually seeing pretty good traction with our key customers. And a lot of these opportunities that we are talking about are primarily with our key customers. And Nitin, if I may add, the fund raise rem
Q
I wanted to have your thoughts on how you are looking at growth in the Specialty Chemicals business in FY '24.
Radhesh Welling
FY '24 as in current year? Yes. So current year, we've already spelled out. I mean you see the projects that we have already undertaken in Dahej. Those are the ones which will contribute to the growth, and we will, directionally, quarter to quarter, it could move from one quarter to another quarter. But overall, these are the investments which we have made. We have already have got two new plants on the ground in Dahej. Third one now coming up. So that will actually ensure that we see -- continue to see growth in specialty. So, I mean, is it comfortable for you to work with a 20% kind of growt
Q
I would like to thank everyone for taking the time out and joining on the call today. I hope we've been able to respond to your queries adequately. We look forward to your continued support as we navigate the journey ahead. Wishing you and your loved ones a joyful and prosperous Diwali in advance. May the festival of lights bring you happiness, good health and success. Thank you very much.
Management
Speaking time
Radhesh Welling
38
Moderator
17
Anish Ganatra
16
Sanjesh Jain
8
Abhijit Akella
4
Meet Vora
4
Rohit Nagraj
3
Krishan Parwani
3
Madhav Marda
3
Jason Soans
3
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Opening remarks
Bhavya Shah
Thank you, and welcome to the Q2 and H1 FY '24 Earnings Conference Call. Today on this call, we have Mr. Vishad Mafatlal, Chairman; Mr. Radhesh Welling, Managing Director; and Mr. Anish Ganatra, Chief Financial Officer of Navin Fluorine International Limited. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinion and expectations as of today. Actual results may differ materially. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. Our detailed safe harbour statement is given on Page number two of investor presentation of the company, which has been uploaded on the stock exchange and company's website. With this, I now hand over the call to Mr. Vishad Mafatlal for his opening remarks. Over to you, sir.
Vishad Mafatlal
Ladies and gentlemen, I would like to welcome you to Q2 and H1 Financial '24 Year's Earnings Call. As we delve into the financial and operational performance of the half year gone by, I'd like to emphasize that our unwavering commitment remains firmly rooted in delivering the utmost value to our stakeholders. Over the past few months, we have intensified our focus on enhancing customer interactions and forging stronger partnerships, initiatives that have already yielded positive results. As we navigate the complex landscape of our industry, my priorities to the team remain crystal clear. Paramount importance is placed on safety and well-being of our workforce and the operational resilience of our facilities. While continuing to drive efficiency across the organization, we are steadfastly building a robust and diverse business pipeline that positions us for sustainable growth and success in the future. Our focus is to improve the quality of revenues that is more predictable, diverse and
Radhesh Welling
Good evening and thank you for attending the earnings call. The revenues and profitability in the quarter Q2 FY '24 were below our expectations. Though our order books across businesses remained strong, our actual production was lower than our planned. Let me take you through the business-wise performance for the quarter. Our specialty business performance was impacted due to deferment of sales of two products from Q2 to Q3 due to certain production-related issues in the Dahej. On the positive side, we are expected to launch two new molecules from our Dahej plant and three new molecules from Surat facility in the coming quarter. We are confident, with the strong partnerships and technology platform, we'll continue to deliver innovative offerings to our customers. This business will continue to remain a high-growth business for us in the future as well. Capex of INR30 crores towards development of a completely new capability in Surat is on track and is expected to generate revenue from
Anish Ganatra
Thank you, Radhesh. Good evening to all the participants. Let me brief you on the overall financial performance of the company. Sales during the quarter were impacted largely due to slower stabilization of R32 plant. The progressive ramping up of HPP plant at Dahej, post the June July shutdown, sales of a campaign in CDMO deferred to Q3 FY '24 due to change in product specification and method of analysis, production-related issues in Dahej resulted in deferral of sales of two new products on specialty. The overall revenue impact of these contributing factors is about INR90 crores to INR100 crores. Adjusting for these factors, our revenue would have been in the range of INR550 crores to INR570 crores for the quarter. EBITDA margins were therefore impacted by lower operating leverage, and we also had one-off cost of approximately INR6 crores due to some corrective measures taken at Dahej plant. I will now share the highlights of our performance for Q2 FY '24 and first half FY '24, post w
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