Chembond’s annual report is out and can be accessed from:
What is interesting in this year’s annual report is a lot of R&D/Incubation projects are closer to fructification. The company has not provided a segment wise sales numbers which it does in the presentation but some interesting excerpts/inferences are:
Water business is bread and butter of the company and it looks like it will continue to chug along nicely.
This should do well due to the ongoing infra push but is a relatively smaller part of the business.
The animal nutrition business had a strong second half (also evident from Q3 presentation). The key developments here are:
- Creating an India wide sales force
- Launch of newer products and addition of newer accounts (probably institutional customers).
- The most interesting commentary here is the following:
The development activities in the areas of enzymes and probiotics for varied applications, in addition to animal health continues. In this context, six different microbial strains for nitrogen and sulphur metabolism have been delivered
The above is like pushing the envelope further in enzymes and moving into more areas (industrial/human?).
This segment has shown fantastic growth both organic and inorganic (Pheroze Sethna acquisition). The adhesives business has doubled and Industrial coating grown by 60%. This segment could also grow significantly due to the toll manufacturing agreement coming to an end. The toll mfg business was a zero margin business and any freed up capacity could help would allow manufacturing realignment of
the products we make and to allow debottlenecking operations in some businesses.
The JV seems to have started delivering results this year. From the AR:
On the back of the approval from a major brewing company, the Company started business in the segment
by supplying bottle cleaning products to several of their plants. The Company also developed, and successfully supplies products to the food processing and dairy segments. Team expansion to serve the customers and new application trials are underway to build on sales growth opportunities for the next year. Lubricant and cold disinfectant applications are being explored by the Company
This looks to be the most exciting area that the company is in. From the AR:
CPML has fi rmed up plans to scale-up its biobased polyamide production. Polyamides, also known as
Nylons, are a family of thermoplastic polymers that can be melt processed into fi laments, fi lms or shapes for application in various industrial and non-industrial uses. Development work on polyamide 610 and other specialty polyamides, most of which are based on bio-renewable raw materials, was started around 4 years ago.
In the current year this production will be scaled up several notches and we plan to simultaneously commence work on building a plant to global scales. One of your Company’s patented product, developed over three years ago, has been accepted by customers and is being used by them with promised results.
The scale-up of polymer manufacturing would be a milestone event and has the potential to change the revenue mix of the Company
FInal comments: Over the last many years Chembond has consistently innovated and has created a stream of differentiated and specialized products. This looks like is the year when a lot of hardwork done earlier is starting to pay-off. The Water chemical business and the cash will provide the earnings cushion while rest of the projects stabilize and grow. The animal nutrition business should start becoming sizable and continue with the momentum gained in last two quarters. The Industrial segment should grow fast becuase of Henkel toll moving out and along with Pheroze Sethna clients there could be considerable cross selling and rationalization opportunities. Finally any success in the Polyamide business could create a different company altogether. Interesting times ahead, keeping fingers crossed.
Disc: Chembond forms a significant part of portfolio and the views expressed are biased.