Company Background & Business Overview
- Fiberweb is a pioneer and amongst the leading players in manufacturing of Spun bond woven fabric in India.
- It was established as a plastic moulding company in 1986 and it forayed into manufacturing Spun bond non-woven products in 1995.
- The company exports products to USA, UK, Europe, New Zealand, Australia, UAE & South Africa
- The company crossed the INR 100 cr. topline for the first time in 2017 and has become an approved supplier to Lowe leading to being approved supplier to Walmart in USA.
- Johnson & Johnson, P&G, Unichem are some of the well renowned customers of Fiberweb along with many others as well.
- The company manufactures diverse products across 3 main categories.
- Among 3 segments that company serves, the products for Personal hygiene segment form 30% of total production and are supplied locally to customers like J&J, Unichem and many others. These products are not exported
- Rest 70 % are exported, with 40% in agricultural market and 30% goes in general textile market
- This segment wise break up of production had been the same for years and would be the same even after the capacity expansion that company is undergoing as discussed ahead.
- Fiberweb has 100% Export oriented units and 70% of revenues come from exports out of which 80% came from USA, 10% from UK and 8% from in 2016.
- Reason behind the large exports to USA is that first of all, large number of orders comes from USA and the order size from USA is of 50-100 containers as compared to 1-2 containers from Europe and other markets. The large order size results in continuous production for weeks, 24*7 and in continuous process industry, less the change, better is the profitability. Thus, USA is a preferred customer due to bulk orders.
- The Q1 is generally the worst quarter among all other quarters.
- It is because the order pattern in USA (the biggest customer contributing 80% of exports revenue) is such that orders for an entire year till next June are placed in July-August. As the prime season is April-May, products are to be delivered latest by April and so units run at full capacity for 3 quarters and at less capacity in Q1 due to the seasonality.
- The Q1, FY 2018 has posted phenomenal results on account of better product mix and continuous inflow of orders from new and existing clients across globe
- Revenue grew by 313% YoY, from INR 13 cr. in Q1, FY 2017 to INR 53 cr. in Q1, FY 2018
- EBITDA registered a strong growth of 181% YoY, from INR 3 cr. in Q1, FY 2017 to INR 8.4 cr. in Q1, FY 2018
- Profit after Tax (PAT) increased by an exceptional 231% YoY, from INR 2.3 cr. in Q1, FY 2017 to INR 7.7 cr. in Q1, FY 2018
- EPS in Q1 FY 2018 grew by 211% at INR 5.7 as compared to just INR 1.8 in Q1 FY 2017
- The company has become a zero debt company and net worth turned positive in Q1, FY 2017
- The companyhedges its sales proceeds to protect it from exchange rate fluctuations and any potential loss. This quarter company had a profit of INR 32,000 in the foreign exchange. It was shown in the other income section of P&L statement
- The company has decided for NSE listing and has assigned the task to concerned people for the same and is expecting to get listed by Q3, FY 2018.
- The company's cost of raw materials has increased from INR 5.5 cr. in Q1, FY 2017 to INR 41.6 cr. in Q1, FY 2018. It has happened as the company had engaged in trading activity at UAE in this quarter. So, consolidated results include this trading activity
- Under trading activity, company procures finished products from other manufacturers from China, East Asia and sells them at UAE. Because of this activity along with the rise in prices of raw materials, the cost of raw material has increased.
- Also, In order to maximize profit, the company has adopted the strategy of higher production by only taking the orders for higher grammage. And even though the costs have increased, but there has been corresponding increase in the Bottom line as well
- ExxonMobil has remained the supplier of the raw materials since past 20 years.
Expansion Plans & CAPEX
- The company has a total installed capacity of 7500 MT at present.
- They have two units, one with 5000 MT capacity and other with 2500 MT capacity, located at Daman (U.T.). The Unit-I use unique double beam technology with diverse applications, supplied from renowned manufacturer, Reifenhauser Gmbh, Germany.
- Unit- I produce high quality products accepted by large companies as end-users across developed countries. The Unit -2 is a leased out facility with made by same German manufacturer
- In order to meet the rising demand across markets (domestic & International), Company has planned a capacity expansion of 13000 MT out of which 12000 MT is to be installed and made operational in FY 17-18
- The company has raised INR 32.58 cr. through preferential allotment to meet the capital expenditure of buying two machines- one with 10000 MT spun bound and another 3000 MT melt blown technology based machine)
- With the expansion exercise, the company's total installed capacity would become 20500 MT
- Capex on melt blown machine is about INR 20 cr. and for 10000 MT machine, it is about INR 80 CR.
- Out of 3000 MT melt blown non-woven technology based products, 2000 MT will become operational by September 2017. And 10000 MT will get operational by end of FY 2018
- The melt based technology is a very specialized one and the product manufactured by this machine is in short supply (25% difference between demand and supply) in the international markets, and the product offers great margins
- Against about U.S.$ 2.1 for 1 kilo in Non-Woven market, this product price about $3.5 per kilo and the corresponding increase in the production cost is about 3% to 4%
- It is estimated that melt blown products' profitability would be approximately 70% more than the normal non-woven products.
- This product is mainly used in Filtration industry and is also used in agriculture segment. In fact, Existing customer of the company has requested for the installation of this machine and it is expected that post-installation, machine would run at full capacity with influx of orders.
- Also, Company would be increasing the capacity of Unit-2 by 50% or 1250 MT in FY 17-18, thus increasing production without any Capital expenditure thereby attaining better RoI.
- The company is expecting a minimum of 20-25% revenue growth and about 25% -30% increase in bottom line in FY 2018 as compared to previous yeAr
- On consolidated basis, with trading activity at UAE, the estimated figure may change slightly upwards as the trading business is expected to grow.
- The company has an order book of INR 147 cr.
- In USA, about 7-8 new clients have been added in Q1, FY 2018
- The company has taken Trading in Q4, FY 2017 quarter on an experimental basis as there were number of customers wanting to purchase products but at lesser price and they were fine with small compromise in quality. The company started procuring the material from the Chinese manufacturers and selling them to customers in USA with a trading margin of 12-15%. But as the quality is not of the same standard, therefore, in order to prevent the brand equity dilution, the company is planning to set up a 100% subsidiary at UAE fully dedicated for trading activit
- Economic growth, Government Initiatives to promote technical textiles sector, increased investment in industry, higher consumption and growing exports are going to fuel the growth in the medium to long term.