- Total Revenues for Q1FY18 has declined to Rs.239 Cr as against Rs.249 Cr for Q1FY17
- Q1FY18 EBITDA stood at Rs. 47 crores as against Rs. 51 crores in Q1 FY17
- PAT stood at Rs 27 Cr as against Rs. 28 Cr in Q1FY18 and PAT margins have improved to 11.2%
- The fragrance division reported revenues of Rs. 204 Cr, 8% y-o-y decline during the quarter. The domestic consumption was lower by 12% and overseas business was stable at a growth of 3%. This business registered a profit of Rs. 37 Cr.
- In the Flavors division, the revenues stood at Rs. 31 Cr, lower by 9% year-onyear while the domestic business grew by 8%. The overseas segment saw a decline of 28% year-on-year. This business segment had an operating Profit of Rs. 6 Cr
Impact of GST
- Domestic business was particularly hit by GST. Larger companies have almost resumed their operations post GST. Smaller clientle is expected to resume normalcy after 1-2 months
- Product launches have delayed by 2-3 months due GST Transition
- Almost 60% of the business have resumed already of which maximum are large orders
- Though clientele faced an upward GST rate of 18% from 14.5%, company expects GST passon to net the effect
- Company expects larger consolidation of manufacturing industry which will help the company’s market share to grow
- Fragrances should grow at around 15% CAGR or 13% CAGR
- Since GST helps the company to bill all different productlines in the same invoice, they have included JASH into their retail Pack.
- This business is expected to shell out Rs. 50-60 Crores in future to control costs by about 1 Mn -2 Mn Euros
- On the domestic frint, the larger products which are at a lower margin so larger customer are getting favorable pricing. So, these customers have deferred sales earlier than the smaller customers. Hence the top-line decline is much steeper than the gross margin decline
- Overall demand in terms of consumption, in terms of new product launches, interms of new product adoptions are quite robust and strong. Company is also hoping for a revival in the market demand after the demonetization and GST effects have normalized
- As large clients have reacted to GST earlier, the company 60% of the business to revive quickly in this segment post GST transition
- Company expects to be market share for this segment o be at 22.5% approximately
- The company have taken a conscious call to eliminatesome of the low value or low margin products and have taken a hit on the top-line
- The company is committed to a 15% to 20% CAGR growth on the profit line
- GST has led Agarbatti business into inclusion which has led our service income down by Rs. 8 Crore from the last quarter
- Company is expecting GST to consolidated the manufacturing business in India which is ultimately lead to cost reduction for suppliers.
- Additional amortization and one time of cost of Rs. 70 Lacs for integration of Gujarat Flavors has kept the operating profit at low levels
- Revenue Contribution from Gujarat Flavors was Rs. 3 Crore and form HTT was Rs. 3 Crore
- Seasonality of Flavors business particularly in the clientele containing beverages and Ice Cream products faced a lower demand
- The flavors will grow 17% to 20% CAGR. The split between fragrance and flavours business is about 80:20.
- Market Share is currently 2% in the domestic side in 2014 and will be around 4% currently
- There is a capex of Rs. 9 crores in the first quarter which relates to the acquisition of HTT and the acquisition of Tanishka products
- The company had also acquired a property at our development center, which is total of Rs. 27 Cr , of which Rs. 17 Cr have been paid out in the first quarter
- The Company should be doing about Rs. 15 crore of maintenance capex, around Rs. 6 crores to Rs. 7 crore of infrastructure improvement and Rs. 30 crore investments in the twoprojects on the fragrance innovation.
- Probably another Rs. 25 crores to Rs. 50 crores on improvement in operations led by the cost reduction in the Netherlands operation