Thanx for the concall notes, I think every thing is dependent on their execution and getting from nylon to Bcf and other value added segments
Any idea why the result is below average as compared to the sept quarter 2016? Is it due to their transformation from nylon to bcf which has affected both top and bottom lines?
No idea. Looks like the pressure on raw material continues. Need to listen to management concall for further details
So Tiexta/PTT/Dupont Sorona/Mohawk SmartStrand is a BCF fiber only and as the link points out, BCF fiber is relatively new in the market (assuming carpet life of 10-15 years) and it’s being pushed by Mohawk and Godfrey Hirst, but there is still some time for it to emerge as champion. Need to dig more into the demand for this.
I pulled out the financials of Mohawk and it seems to be doing pretty well. Performed well in stock market also over 6 year period. Also, it recently announced that it will acquire Godfrey Hirst - https://www.prnewswire.com/news-releases/mohawk-industries-inc-announces-purchase-of-godfrey-hirst-group-300559624.html
Disc: Invested - around 7% of portfolio
Please share Q2 FY18 con call transcript
AYM has a youtube channel and they’re updating regularly now. Can’t say that this helps the company do well per se, but might give some insight into what happens there -
Company raising funds upto 80Cr, through preferential allotment of shares to Promoters.
Concall might give additional details for the purpose of raising funds:
Please kindly share concall details of Aym syntex
AYM has gone for fresh equity infusion of 80 crores.
But 45 crores out of this is due to conversion of corporate loan - any idea what this is? As per last annual report, promoter company gave loan of 20 crores, if I’m reading correctly. So maybe that is being converted along with some other loan given during this FY.
Infusion will bring promoter holding up to 70% and with potential conversion of preferential shares up to 72%. At conversion price of 75, this is better than current market price of 66.
Discl. : Invested with 4% allocation.
Highlights of Q3 and Nine month ended results
- Q3 Performance
o Revenue grew by 22.30 % to 227 Cr from 188 Cr last year same quarter
o EBITDA grew by 7% to 18.5 Cr from 17.24 Cr last year same quarter
o PAT fall to 25% by 3.23 Cr from 4.33 Cr last year same quarter
o PAT fall due to high expense on depreciation due to capex expenditure.
o Net debt of company grew from 6 Cr this quarter to total 239 Cr.
- Nine month performance
o Revenue grew by 2 % to 633 Cr from 625 Cr last nine month performance.
o EBITDA fall to 49.9 Cr from 79.9 Cr
o PAT come down to 4.2 Cr from 31.9 Cr.
- Total debt stand at 69.6 Cr increasing from March 2017 from around 46.5Cr. Mainly due to higher export receivables out of debtors above 180 days is only 0.6 Cr. Current ratio is 1.7 due to tight liquidity situation and lower EBITDA. Measure would be taken to strengthen the balance sheet till March 2018.
- CAPEX of 15.5 Cr has been done in this quarter and 43.6 Cr till 31st Dec.
- Company is going to raise fund by issue of equity upto 80 Cr to promotor on preferential basis as price determine by promotor in order to strength the balance sheet & plant expense.
- Business update last quarter
o In Nylon and Polyester textile business margin continue to remain under pressure. One significant improvement on Account of OEE the efficiency from 63 % last quarter have gone up to 84 % . It will continue in next quarter last 4-5 quarter it was down because due to lack of demand due to impact of demonetisation and GST. Several Lines are now getting back to work slowly and steadily.
o Difficult part is margin improvement :-
Negative news for nylon is antidumping duty after 11 years has been discontinued. Now there will be some inflow of material from Taiwan ,Korea and China. Company is much better position to tackle it and currently company is at peak level of selling in domestic market almost 60 % from the highest numbers. So it will convert to polyesters in export.
Antidumping duty will more affect to FDY segment the most in which company isn’t present at all.
Due to antidumping the real numbers will be known in next quarter onwards.
Focus will be continued on system building to gear up high quality customers and next focus is on business development.
In last quarter company has added a prestige amount in denim space one of the largest denim maker in India with whom company has started bulk business in new project and company has also commercialised with one line running on domestic and export market as well.
On the Palgadh side work is going to make capacity utilisation better. At present it operates about 70% which is still not high enough but higher than last year. Company hopes that as going business development numbers, this numbers slowly and steadily increase. Multiple fronts have started working in this area.
In term of BCF focus on a move to bring three new products that company has developed in last 12 months. Company will also looking to expand capacity before of good customer response.
- In BCF front almost 6-7 lines are deployed to long term contract out of 9 lines . How can company manage the volatility of raw material prices in case of BCF ?
o It is based on quarterly basis, whatever change in price of raw material happen is automatically transferred.
- In Palgadh plan does company have long term contract as company have in BCF ?
o It runs on a different business model, lot of effort are going to add better quality to have long term strategic customers. But the customers are on smaller in nature it is an different business model compare to BCF . Company enjoy strong brand name in Conventional dye space . Company have some old strong and loyal customers with consistency of quality.
- Does Palgadh business effect due to change in price in raw material ?
o No raw material price is on immediate pass through on monthly basis.
- Kindly give volume growth from prestigious customers in nylon and polyester division ?
o In this quarter there is small contribution of this customers which has been started in last year. Because it is a long process and they want to be comfortable before they ramp up with volume on overall they are consistent small in amount. Effort are there to go up slightly more than 5 % of revenue. Sampling has started but at certain sensitive product the entry barrier are high.
- Other expense go up by 54 Crore , What led it to increase ?
o 1.8-2 Cr is from job work charges
o 1.8 Cr is from excise duty reversed into this quarter
o Manufacturing expense increase as top line increases.
- What proportion of export is there to total revenue ?
o In this quarter it is 38 % of total revenue. This was due to one time trading activity in this quarter which will not be there in next quarter. So it will be around 17 %.
- As crude prices goes up does corresponding realisation also goes up ?
o Yes due to crude price raw material price increase . Nylon price also go up due to increase in crude price . Some time there is a lag that lead to margin pressure. Mostly prices are passed to customers.
o But sales also goes up as raw material price goes up.
- Why there is an increase in total borrowing ?
o Total borrowing is 300 Cr last quarter and this quarter it is just up by 6 Cr. In past it was more because of EBITDA doesn’t come out as expected and CAPEX plan of 15-20 Cr was there.
o It includes internal debt in which we take LC , all item that come under current liability considered as debt so it does not increase substantially.
o Working capital also gone up drastically due to GST impact but all will come to normal in coming few months.
- Does volume will increase and CAPEX?
o CAPEX will be on side where there are long term strategic customers where company expect to get returns in long term.
o In textile there is margin pressure so product mix will be change and improve margin.
o Utilisation will increase but at what margin that has to look on it. In BCF fairly good utilisation. In Palgadh slowly and steadily utilisation also going up. It is about 70 % which is good from last year if company achieve more than 5 % then that will be good.
- In polyester does company is getting expected returns?
o Efforts are going on but results are still not as expected.
- Fund raise of 80 Cr is very high as compare to company Market share and promoter holding is already 65 % . Can you elaborate on this?
o It is both for capex and extend balance sheet. Board is yet to decide an amount as well as quality of balance sheet.
- 28 % of revenue growth is there in last last quarter but EBITDA margin doesn’t improve any reason for that ?
o There is low margin in trading activity that goes up last year so overall margin are much lesser then normal margins. Growth was skewed because of trading business. This will not be there for next quarter. Next quarter will be more realistic.
- What was the trading sales number as of total sales?
o It was around 10-12 % of total sales.
- Company can raise fund by right issue then preferential issue?
o It is a very lengthy process and there are lot of norms to follow so we find prefential is best.
- What company is expecting from fund raising ?
o After fund raising debt to equity will come down & company will have better return in long run.
- Fixed asset of company has gone up substantially in last three years, any specific reason ?
o In last One and half year a lot of CAPEX has gone toward non-production. After this CAPEX there has been increase in Fixed assets. In future more CAPEX will be done in increasing productivity.
- Explain more on Comfil brand ?
o Launch two new brand in textile
Comfil :- Launch in all segment in BCF segment and conventional segment.
Wonderfill :- It is a type of yarn use in carpet space.
o These are new product and company is working on it from a year and half. Now attraction is getting on it.
- Kindly update on UK customers and some commodity?
o UK customers are there and they have increased exposure with AYM and slowly it Is increasing the volumes.
o On semi commodity that was running one line of production is now running on two lines. Sampling has started of high range products. First order will execute in January. Both brands are for export and domestic as well.
- Does we only sell BCF to Welspun or other things also?
o We sell BCF and other products as well.
- If Welspun as a customer moves away they can we manage the same number of CAPEX and utilisation?
o Yes we can because none of customer is more than 10 % of total revenue of company and Welspun is lower than 10 % . So it will not affect us if Welspun goes away.
- What is company annual maintenance capex ?
o Around 6-7 Cr a year.
- Can you classify between productive and non-productive CAPEX ?
o Lot of capex is toward land & lab building. Some of them has gone in machine upgrading . In 2014-15 some capex has gone toward capacity expansion where we don’t get the expected return. Some CAPEX is used in nylon space.
- Give Outlook on nylon business ?
o Due to anti dumping duty it is not good . But volumes pick up and margin is still an issue. So to get out of it company has to focus on semi commodity and speciality segment.
- Due to volatility in raw material prices does company have any long term tie up for raw material?
- If the nylon business is not running then why company don’t sell of it and shut down or transfer to polyester?
o It is not easy to sell off it will be stop contributing if it sell off but the fixed cost remain same and margin will be worse.
o In conversion to nylon market there is no barrier to entry and nylon was selling at very high margins like hot cakes but due to demand supply mismatch and anti dumping duty the margin compressed.
o From last two year the focus is on how company will be able to add good quality customers and more sustainable business to portfolio when there are certain barrier to entry.
- How company decide to build new product and share some information on R&D department ? What is your hiring policy ?
o New product is decided by a mix of internal and external . In last 3-4 month it is more on external basis on customer feedback.
o In term of hiring policy company have full team of R&D where M.tech and B.tech are hired who work on new product.
- Which companies are role model to follow ?
o Companies like Aquafine and trevire base in Europe are company’s role model.
- Does company belong to low cost player among other peers?
o No , Companies like Reliance , Alok Industries are 10 times more than us in size and focus is on reliable quality , order and supply for having success.
- Management Comment
o One Should not expect any miracle in short run It will take time and keep patience .
DuPont shutting down product line at Chambers Works
What could be the possible impact on AYM?
I think its nothing to related with Dupont Sorona brand…
As per AYM concerned, it is exclusive manufacturing partner of Sorona brand of Dupont in India and as per managment it will take atleast 2 years to material revenue to come from this partnership…