DCM Shriram Q3FY18 Concall Summary

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Financial Highlights

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  • The overall Q3FY18 Net Revenue is at Rs. 1784 crores and it  grew 31% over the same period last year.
  • The revenues of own products is at Rs. 1393 crores and it is up by 36% whereas revenues of traded products is at Rs. 391 crores and it is up by 15%.
  • Growth in revenues of own products is mainly driven by volume growth across all our businesses.
  • Volumes growth contributed 30% out of the total 36% growth in revenues.
  • Chemicals, plastics, Sugar and sugar power registered significant volume growth.
  • The PBDIT for Q3FY18 at Rs.347 crores was up by 73.5%.
  • The PBDIT for own products was Rs. 299 crores, up 74% over last year.
  • The margin for own products went up from 16.8% in Q3FY17 to 21.5% in Q3 FY18.
  • There is healthy margin improvement across most of our business verticals except Sugar, during this period.
  • The finance costs and depreciation charges came in higher by 7% and 19%, respectively.
  • This was due to capitalization of Chemical expansion projects in September 2016 and Power Co-gen in Nov. 2016.
  • Tax rate was also higher, estimated at 24.7 % for the current year vis-à-vis 13.5% last year.
  • The Net profit stood at Rs. 213 crores that is 56% higher than corresponding period last year.
  • The Gross Debt as at 31st December, 2017 stood at Rs. 631 crores vs. Rs 964 crore as on Dec 31, 2016. Cash and Cash equivalents stood at Rs. 454 crore vs Rs. 190 crores for the same period.
  • The financials for 9 month 2018 recorded similar trends as the Q3FY18 financials.
  • Overall net revenues was up 28% with revenues of own products going up by 40%.
  • Volume growth provided 30 % out of the 40 % revenue growth in own products. Both Sugar and sugar power sale & Chemicals registered significant volume growth.
  • The PBDIT at Rs. 996 crores was up 71% and PAT at Rs. 619 crores was up 57% over 9MFY17.
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Expansion plans

  • There is  announcement of expansion initiatives in Chloro-Vinyl (including captive power plant) and Sugar businesses( including power and distillery) amounting to Rs. 1,200 crore are progressing well.

Chloro Vinyl Business

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  • The Chloro-Vinyl business of the Company has highly integrated operations with multiple revenue streams and 143 MW captive power generation facilities.
  • Chemicals operations are at two locations (Kota – Rajasthan and Bharuch – Gujarat), while Vinyl is at Kota only.
  • The multiple revenue streams enable the Company to optimize operations in a manner to maximize the contribution per unit of power .

Chemicals Business

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  • Net revenues of the businesses for Q3’18 at Rs. 427 crores grew 88% YoY and 26% sequentially.
  • The overall volumes registered growth of 34% YoY and 9% sequentially.
  • The ECU realisations grew 22% sequentially. This led to the PBIT of the business reaching Rs. 217 crores for the quarter, up 201% YoY and 48% sequentially.
  • The Nine months period registered volume growth of 33 %, revenue growth of 68 % and PBIT growth of 129%.
  • The chlorine demand growth has actually been higher than Caustic, supported by low prices of chlorine in the country. As a result of these efforts, the Bharuch plant is now operating at 100% capacity.

Plastics Business

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  • The Net Revenues of the business for Q3’18 stood at Rs. 151 crores, up by 44% due to higher volumes.
  • Volumes grew by 66% on a Y-o-Y basis due to lower sales in Q3FY17.
  • The PVC prices were down 7% YoY and 2% sequentially.
  • The Supreme Court’s ban on the usage of petcoke is reflected in terms of higher cost.
  • PBDIT went up to Rs. 25 crores vis-à-vis Rs. 19 crores, last year due to higher sales volumes.
  • The plant operations were stable except the disturbance caused by ban on use of Petcoke. This led to lower production as well as cost increases.

Sugar Business

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  • Q3FY18 Net Revenues of sugar business at Rs. 432 crores was up 21% YoY, led by higher sugar and power volumes.
  • The Sugar sales volume went up by 19%, in line with higher crushing as season commenced earlier.
  • The power sales volume are up 50%. Lower sugar realizations, higher cane costs and decline in prices of Molasses & bagasse adversely affected the profits of the business.
  • The PBIT of the business at Rs. 49 crores, was lower by 45% YoY. During the period, the Company also recorded inventory loss of Rs. 22 crore due to the declining sugar prices.
  • For 9MFY17, the turnover at Rs 1574 crores is up 59% and PBIT at Rs 231 crores is up 27%.
  • An increase of 15-20% is expected in cane crush for the season 2017-18 on top of 47% increase in cane crush last season.
  • It is expected to commission 150 KLD distillery by end of January 2018. This will provide part insulation against the present softness in Molasses prices.
  • The sugar prices have seen sharp drop in the last few months. The net margins have turned from +ve Rs 495/ per qtl in last sugar season to –ve Rs 200 presently.

Shriram Farm Solutions Business

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  • Q3FY18 net revenue came in higher by 27% to Rs. 316 crores, including impact of recognizing SSP subsidy arrear for Q2 FY18, subsequent to change in the system of claiming subsidy for July-Dec 2017 announced by the govt.
  • ‘Value Added’ segment’s revenue stood higher by 30% vis-à-vis last year.
  • Sales of variety seeds and growth nutrients registered healthy growth whereas SSP’s sales was stable.
  • The PBIT stood at Rs. 33 crores vs Rs. 19 crores last year.
  • Earning improved due to better PBIT margins in value added inputs.

Fertiliser Business

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  • Net Revenues of fertilizer business in Q3’18 is up 13% YoY.
  •  The volumes were up 4%, led by higher production.
  • There is one-off positive impact of freight arears amounting to Rs. 5.5 crore that was recognized during Q3 FY18; overall recovery of arears stood at Rs. 19.5 crores for the season.
  • The PBDIT for the quarter came in higher at 83% to Rs. 25 cr vs. Rs. 14 crores last year.
  • Margins improved with better operating efficiencies
  • The company is  working with the government to review the energy consumption norms applicable wef April 2018 and also reimburse the fixed costs at the enhanced rates announced by the previous govt.

Fenesta Business

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  • The Q3 FY18 net revenue was up 33% YoY, as the segment recorded healthy growth in deliveries and project execution.
  • Volumes in the ‘Retail’ and ‘Projects’ segment stood higher by 11% and 117% YoY, respectively.
  • The contribution of the Retail segment to net sales stood stable at 62%. Business earnings improved as a result of higher revenues.
  • The business is making positive PBT over the last several quarters.
  • The overall order booking also marked a healthy improvement of 10% YoY.
  • The Fenesta business achieved high growth deliveries and revenues which led to improvement in PBDIT margins also.
  • The order book, which has been under stress in this business since last few quarters, experienced modest growth during Q3’2018.
  • Retail seems to be on upward trajectory, however the project segment still looks challenging.

Bioseed Business

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  • Q3 is an off-season for this business in India and in the overseas markets, with very limited sales.
  • India Revenues in Q3FY18 were marginally down at Rs. 37 cr against Rs. 44 cr in Q3 FY17.
  • International Business saw revenues at Rs. 19.5 cr. vs. Rs. 8.2 cr. last year. For Nine months ending Dec 2017, the International business recorded revenues of Rs 74 crores, up 56% YoY.
  • Q3 is typically an off-season for this business both in the domestic and international geographies in which we operate.

Other Businesses

  • Operations of the Cement business remained steady during the quarter, with revenues higher by 3%.
  • In Hariyali, there is a continuous work with BPCL to reduce out fuel pump outlets and sell the properties, however, the progress is slow.
  • Cement operations have been stable except the disturbance caused by ban on use of petcoke.
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