DCM Shriram Q3FY17 Concall Summary

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Financial Highlights

DCM SHriram 9M FY17 Financial Performance
  • Q3FY17 revenue stood at Rs 1448 Crores, an 11% increase over last year and mainly led by sugar and Chemicals business
  • 9 Months revenue is Rs. 4408 Crores which is 5% dip as compared to last year
  • PBIT for Q3 was up by 121% to Rs. 169 Crores whereas 9 Months improved to Rs. 500 crores which is a rise of 48%.
  • Net profit increased by 124% and 9 Month Net profit stood at 395 Crores which is an increase of 60%.
  • EPS improved from Rs. 15.2 last year to 24.3 this year.
  • Increase in debt from Rs. 426 Crores last year to Rs. 774 Crores is due to expansion projects. However, the debt-equity ratio is a comfortable 0.32 and debt to EBITDA is below 2 as well.
  • The board declared an interim dividend of Rs 140% aggregating to Rs 54.7 crores
DCM Shriram Q3FY17 FInancial Performance

Chloro-Vinyl, Chmicals and Plastics Business

DCM Shriram Chloro Vinyl Business Q3Fy17
  • Chlorine prices are going down and their supply is limiting the capacity utilization in Chlor-alkali plant though the situation is expected to improve in the coming months
  • PVC prices have gone up resulting in higher revenues. Though there was a slump in demand due to demonetization, same is stable now at a run rate of 12000 to 13000 per quarter
  • PVC prices will be around 71-72
  • Coal and Carbon material prices have shown upward trend over the few months but have been stable thereafter.
  • PBIT of Rs. 91 Crores is a 9% improvement over last year and revenues also showed an increase of 14%. 9 Months revenue stood at
  • 9 months PBIT was 284 crores up by 13%
  • Revenue up 14%. PVC prices were up 16% as compared to last year. 9 months revenue was up 8% at 1129 crores
  • PVC prices which were up by 16% contributed to higher revenu
  • Capacity utilization for Bharuch plant for Chloro vinyl division is about 50% & the company is continuously building it up as chlorine sales are picking up
  • No cost push in terms of cost of production per tonne.

Chemicals Business

DCM Shrriam Chemicals Business Q3FY17

Plastics Business

DCM Shrriam Plastics Business Q3FY17

Sugar Business

DCM Shriram Sugar Business Q3FY17
  • Production till Jan’17 has been 20% higher than the last year and is expected to continue this season.
  • Overall revenue went up by 179% to Rs. 377 Crores. 9 months revenue were higher by 64% at 1049 crores.Higher sugar volumes and prices and higher power sales led to the increase in Revenues
  • Q3 Fy17 PBIT registered an increase from -1.90 Crores to 88 Crores. 9 Month segment PBIT was 182 crores as corresponding to 31 crores last year
  • Sugar realizations also increased from Rs. 2658/qtl last year to 3539/qtl now
  • Company has accrued during the quarter Rs 12.70 crores on account of production subsidy by Central government for sugar season 2015-16
  • Sugar business has recorded reasonable sugar prices over last few quarters. Sugar price per Kg had a margin of Rs. 1.5 last quarter but this quarter the price has increased to Rs. 37 vs 34 production cost.
  • Cane price of the company currently is Rs 305 quintals
  • Cost of sugar is up by Rs 4. The margin is about 3
  • The domestic sugar production in the current season is expected to be lower than demand. This would enable the industry to reduce the excess stocks it has been carrying over last few years.
  • No Expansion plans since the plant is underutilized at 75% and company aims to increase if to 100 in the next one and half year.
  • Sugar prices have been reasonable and due to lower production versus demand, company expects to clear the excess stocks from the past year.
  • Sugar production may increase by 15-20%. 7-8 lakhs per quarter in sales of sugar is pretty average
  • Recoveries have been lower as compared to last year
  • Total cost of inventory is 32 & is coming down
  • Sugar capacity in TPD is 33000
  • Capacity utilization of sugar is about 450 lakh quintals of cane, so based upon that current is about 75000 tonnes
  • Sugar production in UP is about 8.2-8.5 million
  • Last year, due to drought & foggy climate the recovery rate is down about 0.3% -0.4% last yea
  • Output of sugar last year was 31 lakh quintal
  • Strengthening factors: Normal monsoons, better cane pricing policy of government and commissioning of more efficient plant that has led to higher volumes and profits.
  • The cane plantings for next sugar season are expected to go up. With normal monsoon, country should record higher production in next season.
  • All 4 factories started crushing in Nov 16. The sugar production till Jan. 17 has been about 20% higher than last year
  • Sugar closing stock is 10.1 lac Qtls as on 31st December 2016
  • The sugar recoveries have been lower than very high recoveries achieved last year. We are focusing on further increase in cane availability & thus sugar production in our area.
  • A rational cane pricing policy by central and state Govt. will contribute to consistent performance of this business.

Shriram farm solutions

DCM Shriram Farm Solutions
  • Revenue was 248 crores for the quarter. For 9 months revenue stood at 777 crores, which was lower by 47% due to suspension of DAP/MOP trading business & lower revenue
  • Value added input business revenue increased by 7% due to higher volumes of seeds & crop care chemicals
  • Subsidy outstanding stood at 173 crores as compared to 260 crores in same period last year & 307 crores as on 31/03/2016. This includes Rs. 53.8 crore relating to DAP/MOP business

DAP/MOP Business

  • Suspended imports of DAP/MOP from beginning of year
  • It has led to sharp drop in turnover of Farm solutions but has improved the overall profitability & freed up significant amount of capital employed
  • Last year the company sold DAP/MOP of Rs 619 crores as corresponding to nil this
  • Current year results are net of loss of 11.2 crores on DAP/MOP activities carried out last year

Bioseed and Farm Solutions

DCM Shrriam Bioseed Business Q3FY17
  • Q3 is the short and offseason. 
  • Agriculture sector has been under stress which has led to demand & margin pressure for both bioseed & farm solutions businesses
  • With good output in Khariff 16, higher sowing Rabi and increase in prices of some of key produce like Cotton, the agri-stress should reduce significantly.
  • Volumes and customer acceptance on a rise in Philippines and Indonesia but slow in Vietnam.
  • Import of DAP/MOP fertilizers has been stopped which has affected turnover but increased profitability.
  • Farm solutions Revenue excluding DAP/MOR was flat 248 Crores but PBIT increased from 18 Crores last year to 19 Crores in Q3 this year.
  • Farm Solutions 9 Months revenue was 47% less YOY on account of suspension of DAP/MOR trading. It also reflected in lower PBIT of 27 Crores vs 56 Crores last year with net loss of 11.2 crores.
  • Bioseed business revenue increased  to 53 Crores from 47 Crores so did the segment PBIT from -20 Crores to -13 this year.
  • Overall revenue of bioseed was Rs. 400 crores for 9 months which is 8 Crores less YOY but PBIT improved to 39.6 Crores. 
  • Revenue increased to Rs 53 crores for the Q3 as corresponding to 47 crores last year. For 9 months revenue stood at Rs 400 crores as corresponding to 448 crores
  • PBIT for Q3was Rs -13 crores as against Rs -20 crores last year. For 9 months it was 39.6 crores as corresponding to 25.8 crores
  • Bioseed business in Philippines, Indonesia & Vietnam continue to work to build customer acceptance and grow volumes
  • While Philippines & Indonesia recorded volume growth, Vietnam is taking longer time.

Fertiliser Business

DCM SHriam Fertilsier Business Q3FY17
  • Delays and inconsistent release of subsidies is a matter of concern for fertilizer business Outstanding subsidy eased and was at Rs. 213 Crores  Vs Rs 324 Crores ast year;
  • Revenue was 190 Crores which was 17% lower YOY which led to lower PBIT of 14 Crores from 17 Crores.
  • Revenue for Q3 stood at 190 crores which was lower by 17%. For 9 months revenue was down by 14% on account of a 16% decline in realizations
  • PBIT for Q3 was 14 crores as against 17 crores in last year. PBIT for 9 months 36 crores up from 25 crores last year
  • Energy efficiency is improving. The company is evaluating measures to further improve energy
  • efficiencies while working with the Govt. for a more rational policy particularly for old plants.

Fenesta Building Systems

DCM Shrriam Fenesta Business Q3Fy17
  • Revenue and PBIT showed a growth of 21% and 61% YOY with order booking improvement of 37% and billing of 20-23%. Total YOY revenue increased by 21% and PBIT by 37%. For 9 months Revenue & PBIT improved by 21% & 37% respectively 
  •  The company is investing to expand manufacturing in Fenesta which is doing well both in projects and retail segment and is contributing to bottomline
  • Retail sales is about 70% & 30% proje
  • EBITDA margin is 7%
  • The company plans to make significant investment in marketing, sales & distribution brand building & service capability.
  • Company expects 30-35% increase in order books but that converts to billing of 6 months to 12 months.
  • The business continues to contribute positively to the company’s bottom-line.
  • Fenesta has a reach to 125 cities presently and growth target is 25% every year.

Cement Business   

  • Sluggish demand, higher costs of input and soft prices have ailed cement business in Q3FY17
  • Cement capacity is 400000 tonnes per annum

Expansions and Projects

  • Completed Rs. 700 crores expansion projects in chemicals and bagasse based power.
  • Other projects worth Rs. 300 Crores in chemical business (97 Crores), Sugar distillery (185 Crores) and Fenesta (19 Crores) are slated to complete by December’2017.
  • Investments made in upgradation of Chlor-Alkali plant which is expected to bring Cost competitiveness.
  •  The new chemical plant has achieved capacity utilization over 50% & is expected to achieve full capacity over next few months
  • Capital employed in various business current year vs last year:
DCM SHriram Capital Employed 2016 vs 2015