IOLCPNSEQ3 FY22February 08, 2022 IOL Chemicals and Pharmaceuticals Limited
7,831words
156turns
15analyst exchanges
4executives
Management on call
Monish Shah
ANTIQUE STOCK BROKING
Sanjay Chaturvedi
CHIEF EXECUTIVE
Abhay Raj Singh
VICE PRESIDENT &
Pardeep Khanna
CHIEF FINANCIAL OFFICER
Key numbers — 40 extracted
17%
fen pharma business have performed well better compared to the prior period and contributed about 17% to the quarterly revenue for the company and overall about 37% of our revenue in the pharma segme
37%
prior period and contributed about 17% to the quarterly revenue for the company and overall about 37% of our revenue in the pharma segment now comes from non-ibuprofen. During the Q3 IOLCP has filed
3%
business. Overall the Q3 results show significant improvement from Q2. Our sales grew by a modest 3% but our PAT numbers grew by 29%. With this I would like to hand over to my colleague, Mr. Parde
29%
s show significant improvement from Q2. Our sales grew by a modest 3% but our PAT numbers grew by 29%. With this I would like to hand over to my colleague, Mr. Pardeep Khanna, our CFO who will be tal
Rs.564 Crore
nd nine months ending financial year 2022. The total revenue for the quarter increased by 3% to Rs.564 Crores as compared to Rs.548 Crores in Q2 of FY2022. In Q3 of FY2022 the EBIDTA was at Rs.68 Crores and
Rs.548 Crore
cial year 2022. The total revenue for the quarter increased by 3% to Rs.564 Crores as compared to Rs.548 Crores in Q2 of FY2022. In Q3 of FY2022 the EBIDTA was at Rs.68 Crores and in nine months ending fina
Rs.68 Crore
to Rs.564 Crores as compared to Rs.548 Crores in Q2 of FY2022. In Q3 of FY2022 the EBIDTA was at Rs.68 Crores and in nine months ending financial year 2022 was at 238 Crores. Similarly EBITDA margin in Q3 o
238 Crore
Q3 of FY2022 the EBIDTA was at Rs.68 Crores and in nine months ending financial year 2022 was at 238 Crores. Similarly EBITDA margin in Q3 of FY2022 was at 12.1% and 14.6% for nine months. Depreciation fo
12.1%
nths ending financial year 2022 was at 238 Crores. Similarly EBITDA margin in Q3 of FY2022 was at 12.1% and 14.6% for nine months. Depreciation for the quarter was Rs.11 Crores and Rs.32 Crores for
14.6%
financial year 2022 was at 238 Crores. Similarly EBITDA margin in Q3 of FY2022 was at 12.1% and 14.6% for nine months. Depreciation for the quarter was Rs.11 Crores and Rs.32 Crores for
Rs.11 Crore
A margin in Q3 of FY2022 was at 12.1% and 14.6% for nine months. Depreciation for the quarter was Rs.11 Crores and Rs.32 Crores for nine months ending FY2022. Profit after tax for Q3 of FY2022
Rs.32 Crore
FY2022 was at 12.1% and 14.6% for nine months. Depreciation for the quarter was Rs.11 Crores and Rs.32 Crores for nine months ending FY2022. Profit after tax for Q3 of FY2022 stood at Rs.40 Cr
Guidance — 20 items
“Pardeep Khanna, our CFO who will be talking more in detail.”
“So far we have spent about 116 Crores and this is in line with what we typically do in a year and going forward we do expect that we will be spending about 150 Crores or so annually.”
“My followup question will be why is there no large scale capex plan even though the company has over 300 Crores on the balance sheet and ample access to get fund growth is being compromised due to distribution of dividends and not reinvesting back into the business?”
“Last several years we spent over 400 Crores of capex, many of those assets are still waiting to be fully utilized so rather than jump in and create more assets we are taking a relook at what kind of portfolio we want to have for the future so what you will see in the coming years is the existing assets that have already been deployed being utilized more effectively and then the new assets that we put into place will be for some of the new products that we are considering.”
“Today we are not actively thinking about expanding that capacity we are thinking of expansion in new molecules to actually derisk the company as you know ibuprofen is our bread and butter business we will continue to be world market leaders in ibuprofen API, but our investor expect us to derisk the business away from ibuprofen and that is the direction that we are taking.”
“Yes we do have a portfolio of new products under development I do not anticipate any of the new product launches in this quarter, but towards the later part of the next year yes certainly we are looking at some of the products and rather than give you the specific which product the list that we have shared with you are the products under development it will be from amongst that list.”
“My next question is are you expecting further improvement of margin in next quarter or upcoming quarters?”
“Next quarter as in Q4 we expect a slight improvement in margins and for the next year we certainly expect an improvement in margins because as the business derisks itself away from being one product company we will see an expansion in margins.”
“My next question is last quarter concall I have asked regarding the cash reserve utilization you told that we will be coming out of the plan in December or January, actually I have called in your customer relationship officer also but he told there is no information regarding that so what is the capex?”
“We are in the final stages of deciding where to deploy the capital and of course this new wave of Omicron has delayed some of our decision making because a lot of our employees were out for a sustained period so I would expect that sometime this quarter we will finalize our plans and maybe by next quarter give you an update.”
Risks & concerns — 6 flagged
The margins have been on stress on account of continuous volatility in the chemicals pricing and lower volumes of the ibuprofen business.
— Sanjay Chaturvedi
We live in a global interlinked economy it will be very hard to create a business where we are making 100% of products in India for the Indian market based on Indian raw materials, so in fact I think that may perhaps be a higher risk business, so having a level of interdependence is really a true reflection of what global businesses are like and we will continue to have that interdependence.
— Sanjay Chaturvedi
I will not move away from ibuprofen and risk the organization on metformin I would actually derisk the overall organization and it is not just metformin, it is metformin, it is clopidogrel, it is pantoprazole, it is levetiracetam, and it is a host of other products that I am commercializing.
— Sanjay Chaturvedi
Currently ethyl acetate is in the range of about I would say 100, 100 plus, acetic acid is perhaps in the late 60s and ethyl acetate continues to be 115, 110, this is really so volatile that it is changing on a weekly basis so I am not trying to be evasive I am just trying to hedge and answer that captures and reflects the true volatility of the raw materials.
— Sanjay Chaturvedi
BASF is certainly back in the market because BASF is back in the market it is putting pressure on other players that are not sufficiently backward integrated and I suspect that some of the smaller players that you have in India that has capacities in the range of 50000 tonnes a month will continue to operate and play a niche role for limited supply to limited customers.
— Sanjay Chaturvedi
Keeping that as a baseline scenario would it be reasonable to surmise that pricing would soften further in the chemicals business and if that happens would it be reasonable to surmise that spreads would also soften a little bit or you saying that it is out of line?
— Gagan Thareja
Q&A — 15 exchanges
Q
Good afternoon and thank you for the opportunity. My first question for you is do we have any clarity on what the capex plans for the year and ahead?
Sanjay Chaturvedi
So far we have spent about 116 Crores and this is in line with what we typically do in a year and going forward we do expect that we will be spending about 150 Crores or so annually. My followup question will be why is there no large scale capex plan even though the company has over 300 Crores on the balance sheet and ample access to get fund growth is being compromised due to distribution of dividends and not reinvesting back into the business? I think it is an excellent question you asked let me give you two data points and begin to answer that. The first data point I am going to give you is
Q
Good afternoon Sir. Thanks for the opportunity. Sir my first question is can you just give the split between the volume and price growth for ibuprofen over second quarter?
Sanjay Chaturvedi
I would say broadly the volume in the Q3 was about 10% more than in Q2, pricing continues to be stable or somewhat negative so ibuprofen I think we have bottomed out in the business and both in terms of volume and in terms of pricing. Just wanted your view like what are the pricing trends that we are seeing for the new contract in ibuprofen? I would say that most of our business is in a combination of domestic and semi-regulated market that is where the contracts do not really exist. The contracts are applicable primarily for the regulated market and in those markets we are expecting annual co
Q
My question is among the API we have in pipeline any other products we are planning to launch this quarter or this year means you have mentioned clopidogrel, paracetamol, fexofenadine, apixaban among them?
Sanjay Chaturvedi
I would say we are already having products developed, validated, existing capacities, the focus is on utilizing these capacities rather than launching new products right now. Yes we do have a portfolio of new products under development I do not anticipate any of the new product launches in this quarter, but towards the later part of the next year yes certainly we are looking at some of the products and rather than give you the specific which product the list that we have shared with you are the products under development it will be from amongst that list. My next question is are you expecting
Q
Sir my question is regarding the raw materials and on that front how much of our dependence is on China for the raw materials?
Sanjay Chaturvedi
I would say the short answer to that question is we do not have a lot of dependence on China. We have certainly on Metformin we buy some raw material from China DCDA whereas on ibuprofen I have almost no dependency on China. When I look at my other chemical business which is a significant part of my overall portfolio I am importing certain raw materials but none of them are from China. Okay so will it be right to say that the increase in shipping prices has had an impact on our margins? Yes. To what extent would that be? I am trying to deconvolute in my head between chemicals and pharma but I
Q
Good afternoon and thank you for the opportunity. I just want to continue from the previous participant. If I see FY2024 what sort of sales mix do we see between chemicals, ibuprofen and other APIs?
Sanjay Chaturvedi
Let me begin by saying that the chemicals business is unique in the way that the topline of the chemicals business to a large extent depends on the raw material pricing, so on the chemicals business the big product in our portfolio is ethyl acetate, a big component of that price is determined by whatever is the raw material price for acetic acid and ethanol and let me tell you that acetic acid prices had been highly, highly volatile so rather than just talk about this year I will give you historical perspective. Historically acetic acid prices have raised all the way from Rs.30 a kilo to Rs.85
Q
Thank you for the opportunity. Can you share your thoughts on a demand forecast and how do you see Q4 now?
Sanjay Chaturvedi
Q4 we expect to be similar to Q3 slightly marginally better both in terms of demand as well as profitability. In terms of demand next year we do see a slight increase compared to this year by about 10% or so and I am specifically talking about Ibuprofen. Thank you so much Sir!
Q
Good afternoon. Thanks for the opportunity. My question is just around the global perspective on ibuprofen I just want to understand given the fact that we are market leaders and at this level of pricing our margins are at least slightly below what we would want them to be, how is the supply side taking this overall and given that we are the large part of the supplier do we have any influence on price from that perspective or is it that our cost curve is very different from the new plants that have come up I am just trying to understand what the scenario is on the supply side?
Sanjay Chaturvedi
Let me talk both about the demand side first and then the supply side. On the demand side the demand is pretty stable, there was a dip in the market this year and it is actually inching it way forward. On the supply side there is a little bit of a shakeup in the sense but overall if you look at the high level headlines the demand side is stable, the supply side numbers are stable, but the players on the supply side has changed somewhat in terms of relative ordering and what I mean by that is happy to say IOL continues to be the numero uno player in this category for this product. Our supply si
Q
Thanks for the opportunity. So firstly can you also highlight what is the spread of prices between regulated and semi-regulated markets, is that widened or more or less stable?
Sanjay Chaturvedi
It is stable and as a general rule for commodity APIs there is hardly any difference in pricing between regulated and semi-regulated market. So even for semi-regulated market it would be more or less at $11 or $11.5 per kg kind of a pricing for ibuprofen? Yes there are some differences certain customers the overall difference is almost never more than 10%. Tushar Manudhane: With this supply side continuing either with the addition of capacity or by the new player entering and assuming that the demand would be more or less single digit would be 6% to 7% so what kind of gives confidence that pri
Q
Thanks for the opportunity. Now question is with regards to the other pharma products so you mentioned that now almost more than one third of the pharma business is coming from the other products outside ibuprofen so if you could kind of talk about the other products which are key there and what sort of revenue levels or volume levels that you are currently operating at?
Sanjay Chaturvedi
I think I am happy you are asking that question because that is the kind of very significant business achievement that we have done this quarter. Let me give you a historical perspective, last year the non-ibuprofen business contributed less than 200 Crores to the revenue of the company, this financial year is going to contribute something in the range of around 350 Crores now for less than 200 to 350 Crores is a significant jump and this is not just one product it is a basket of products it has clopidogrel, fenofibrate, it has lamotrigine, it has pantoprazole, metformin, so I would not encour
Q
Regarding ibuprofen is the issue primarily won us inventory or has the molecule lost any market share?
Sanjay Chaturvedi
I am not sure I understood what you meant is it is a question of inventory or has the molecule lost its sheen that is what you said? I understand over the year or so there was overstocking right due to COVID and because of that the volumes and prices dropped but are there any other fundamental factors that play such as paracetamol gaining market share over ibuprofen? There are a couple of these factors working in tandem one is clearly there was a lot of overstocking that was in the previous financial year and the Q1 of this financial year. Having said that on quarter-by -quarter we continue to
Q
Thank you for the opportunity. My question is on the customer front.
Sanjay Chaturvedi
On what front I could not hear that? On the customer front, so will it be right to say that most of our customers especially in the chemical business we are in a long-term contract with them? No, we do not have long-term contracts then what I would say is we have a very solid relationship with these customers for several years for almost a decade we have been doing business with them so we have a very good understanding of what their demand is, what kind of offtake will they do so we do not have long-term agreements with them, but we have a long term relationship with them and we said directly
Q
As you said we have no growth on ibuprofen business that way can you say that we do not have any pricing or competitive advantage in that segment?
Sanjay Chaturvedi
You are talking about ibuprofen? Yes. No, I do have a competitive advantage by competitive advantage is my skill, my competitive advantage is my experience, my competitive advantage is the talent and the team, my competitive advantage is my level of backward integration, my competitive advantage is the relationship I have with customers and it is really all of these things put together that gave me an edge it is very hard to quote a dollar value to each of the competitive advantage enumerated. But we do not have pricing power? Pricing power in commodity APIs is almost unheard of. You only have
Q
Sir on your chemical business because of the price movement itself you would have had some strong growth if you could just dealing it year-to-date chemicals growth into volume and price, one and second if you could also give us some idea of the spreads on the chemical business this year compared to last year for the nine months period?
Sanjay Chaturvedi
There are couple of questions you asked me in there, the first one you asked me about volume growth, volume versus last year is more or less flat, I am running my asset at pretty good asset utilization so there is really no scope for me to add to that except may be a few percentage points. Second question you asked me was about the financial performance of this year versus last year on the chemicals business. That the topline is certainly a lot more this year and that has to do only with the pricing. Then you asked me the third question was about the spread. You know last year the spread was a
Q
Just I wanted some clarity you said that volume growth has been flattish y-o-y or q-o-q?
Sanjay Chaturvedi
Can you repeat your question please? There is two pricing the spread you said from 20 kg the spread has improved so I believe that y-o- y pricing has been better and volume has been flattish that is what you said on year-on-year basis? You are talking about my chemical business and specifically for ethyl acetate within the chemical businesses is that correct? Yes. What I meant was my volume is fairly flat year-on-year my spread has actually gone down from about 18, 20 to about 15. Okay now this spread has come up to 50? 15. Secondly on ethyl acetate price you said this would be roughly around
Q
Thank you very much. I thank all the participants and I would leave you with a message that your company continues to demonstrate good business performance despite some very strong market headwinds. We continue to invest for building a stronger future through our capex, churning of the product portfolio, increase the regulatory filings and the approvals as well. Q4 you should expect a slightly better performance than Q3 and over the next year also we will add to our portfolio of chemical products we are evaluating what for us to add, parallelly we will grow the non-ibuprofen API business subst
Opening remarks
Monish Shah
Thank you Lizaan. Good afternoon everyone and welcome to IOL Chemicals and Pharmaceuticals Limited’s Q3 FY2022 results conference call. Today on the call, we have with us Dr. Sanjay Chaturvedi - CEO. Mr. Pardeep Khanna – CFO, Mr. Abhay Raj Singh – VP and Company Secretary. I will now hand the call over to Dr. Sanjay Chaturvedi for his opening comments. Thank you and over to you Sir!
Sanjay Chaturvedi
Thank you Monish. Very good afternoon to everyone. Thank you all for taking the time to participate in this earnings call. I trust you had the time to read the earnings document. I am certain that you will have many questions but before we take up these questions I would like to shed some light on the industry what is our business, the kind of what are my own perspectives in the performance of the quarter and subsequently my colleague, Mr. Pardeep Khanna, our CFO, will provide a lot more granular details on the financial performance. So let me begin with saying that our non-ibuprofen pharma business have performed well better compared to the prior period and contributed about 17% to the quarterly revenue for the company and overall about 37% of our revenue in the pharma segment now comes from non-ibuprofen. During the Q3 IOLCP has filed four DMFs with US FDA we got six products’ GMP certification from MOH Russian Authorities. Additionally we also got approval from the Korean FDA for tw
Pardeep Khanna
Thank you Dr. Sanjay. Good afternoon to all and warm welcome to IOLCP 9 months and Q3 FY2022 earnings call. I will take you through the highlights for the Q3 and nine months ending financial year 2022. The total revenue for the quarter increased by 3% to Rs.564 Crores as compared to Rs.548 Crores in Q2 of FY2022. In Q3 of FY2022 the EBIDTA was at Rs.68 Crores and in nine months ending financial year 2022 was at 238 Crores. Similarly EBITDA margin in Q3 of FY2022 was at 12.1% and 14.6% for nine months. Depreciation for the quarter was Rs.11 Crores and Rs.32 Crores for nine months ending FY2022. Profit after tax for Q3 of FY2022 stood at Rs.40 Crores and Rs.130 Crores for nine months ending FY2022. The PAT margin for the third quarter was 7.1% and for nine months for FY2022 was at 8.4%. With this I would now request the moderator to open the forum for question and answer session. Thank you very much.