Fairchem Speciality - Previously "Adi Finechem"


Fairfax India’s Annual report is out. U can access it here

I found the following about Fairchem interesting…

Fairchem(Adi Finechem): In 2018, Fairchem implemented changes in its plant that further debottlenecked its operation and optimized the production process. These changes have resulted in increasing installed capacity from 45,000 to 72,000 metric tons per annum (MTPA) of raw material that can be processed. In 2018 Fairchem processed 39,000 MTPA implying a capacity utilization to year end capacity of 54%. This provides considerable room to grow since the plant can operate at up to 90% of installed capacity. Fairchem has also initiated two capital expenditure projects: both will be financed
by a mix of term borrowings and internal accruals and are expected to enter production in 2020:
• a plant to manufacture sterols and higher concentration tochopherols; and
• a plant to manufacture bio-diesel using three by-products of its manufacturing process: palmitic acid,
monomer acid and residue.

(ravish) #125

This same report also states something very special about its Aroma business i am copying those lines below

Based on IFRS, for the year ended December 31, 2018 Privi revenue grew 48% to $157 million, net earnings grew 59%
to $6 million, and shareholders’ equity grew 11% to $60 million, generating an ROE of 10%.
This is quite a remarkable result when you consider that on April 26, 2018 there was a major fire at Privi’s main
production facility. While it is fortunate that there were no injuries as a result of the fire, the fire completely gutted
critical production units that impacted all production, all of the raw material and finished goods warehouses and the
administrative offices. The entire plant including the production units that were not affected by the fire had to be
temporarily shut down. However, Privi was able to open the facility and start operating the plants not affected by the
fire in a record time of 29 days. Using third party production facilities in combination with its own production units
unaffected by the fire, Privi was able to start supplying all of its products by June 2018.
Around the same time there were fires in two other plants that produce products similar to Privi’s, resulting in an
acute shortage of certain aroma chemicals and consequently in much higher prices and margins.

Above lines suggests that Q3 profit was a one time affair means this profit wont be possible in future.


Privi used third party facilities for some of the production. So, this should have reduced some margin. Once the Privi restores the plant, normal margins should come back(like the 2018 March quarter??). BTW, 20 crores has come to the company from insurance in the 4th quarter as per the notes in the last quarterly results