Apcotex Q4FY17 Concall Summary

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Financial Highlights

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  • Turnover of about Rs. 87 crores against Rs. 58 crores in Q4 FY16, a growth of about 28%
  • EBITDA stood at Rs. 8 crores as compared to Rs. 9 crores in Q4 FY16
  • PAT margin of 4.13% for Q4 FY17
  • EBITDA for the period stood at Rs. 29 crores as compared to Rs. 38 crores with an EBITDA margin of 7.43% for FY17

Current Business Scenario

  • Business Mix is approximately as of now 50% is synthetic rubber, 50% is synthetic latex. and out of this 50% synthetic rubber and about close to 35% to 40% would be NBR and related products
  • NBR is currently produced in Valia Plant and Styrene is produced in Taloja Plant
  • They are the only manufacturer of NBR in India and the applications are majorly in automotive, varied rubber kind of industries
  • Business from one of the largest customers may remain uncertain as there is a temporary shutdown of orders which mayextendfor a longer period
  • Company has been able to secure some raw materials at lower prices and that is one of the reasons for a good margin improvement
  • Consolidation of Omnova Acquisition is completed in FY17
  • Construction latex that company supply to the construction industry has been the largest growth contributor in terms of percentage
  • 18%-19% growth rate in the latex industry for last 5 years.
  • Capacity Utilization of around 70%-75% across latex, synthetic rubber and NBR

Key Developments

  • Company incurred a gross sale loss of about Rs. 26 crores to Rs. 30 crores in Q4 FY17 for a period of 51 days due to unrest in Taloja Plant
  • The company restarted the HSR production at Taloja plant from April 2017 after almost after almost a year which will lead to margin improvement
  • Company has been able to reduced debtors for Omnova business from almost 85-90 days to approximately 65 days

Future Outlook

  • A crash in the new raw material prices in Q1 FY18 could lead to some pressure on the margins in the short term
  • Company plans to incur a CAPEX of about Rs. 25 crores to Rs. 30 crores in FY18, payback of 3 years
  • This Rs. 25 crores to Rs. 30 crores are mostly for reduction of cost and improving margins
  • Being the only manufacturer of NBR in India, the company expects to potentially grow in this segment as it has low market share now.
  • Company expects it should be able to achieve 50%, 60% market share in NBR business
  • For the next year or two,Companyexpects latex to drive the export growth
  • Volatility in oil prices will drive the RM prices
  • Company expects margins to reach 13%-15%, same level that it was 2 years ago
  • Company expects no net effect due to currency fluctuations especially fluctuations to INR

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