Firstly the accounting equation doesn’t hold,so there may be more ‘errors’ in the annual report.Clearly management have done a very shoddy job.Secondly it is impossible to have zero assets,no matter how much you leased assets you have?Finally the company is not paying taxes even for it’s foreign subsidiaries.How does that work?Similar thing happened with shilpi cables,showed extraordinary revenues with little taxes paid even in the foreign subs.
Just look at the freight costs they have fallen by a third YOY even though sales have increased by quite a bit.Same thing with power and fuel.Even the other expenses have fallen heavily.All these improvements have happened simultaneously?
The fact that they do not have any fixed assets(or they have leased all assets as you say )makes the company more suspicious.Mind you that the company also does not have any inventory (i have subtracted consolidated inventory - standalone inventory) raises more questions.Again the company is not paying any taxes on the subsidiary which is responsible for 40 percent of the revenue and also zero dividends are paid every year.It may have been because of bifr ,that it didnt pay dividends in the past,but why is not paying even a small dividend right now?
i feel when the stock price is down from 182 to current level and there is old management issue. I feel i have accepted that market know more than the reasoning we can think off and punished this stock like anything.
As there are so many good companies to think off… i have moved on from this…
Hope this help to confront with reality. I have gone through Kitex/ canfin etc. and have seen how kitex went from 200 to 1100 and came back and same kind with canfin. Now learned hard way to move on from favorite stories…
My personal opinion and not following this company now.
I agree. This massive reduction in costs needs explanation. Particularly for power costs nose diving. Freight and packing can be effects of GST implementation. Will keep an eye for FY18 AR once out. I hope company will take cognizance of issues raised and improve corporate governance. Once capital being locked - I will wait for some more time for sure. Anyways current price is at dirt cheap valuations and positive cash flows and good BS will ascertain limited downside from current price.
This might look trivial but might also have some reflection on Corporate Governance of Company-
Fibreweb-ANNUAL REPORT 2016-17
Mrs. Soniya P. Sheth Age: 32 years, Qualification: M. A., Nature of Expertise: She is Interior Decorator, Investment consultant & Dynamic professional also having good marketing experience. Name of Company in which she holds Directorship: 1) Kunststoffe Industries Ltd. 2) M/s. Stallion Breweries Ltd. 3) Chemical & Alkali Distributors Ltd., 4) Fiberweb (India) Ltd. She is wife of Managing Director Mr. Pravin V. Sheth.
Kunststoffe Industries Ltd. Corporate Governance Year End: March 2015
Mrs. Soniya P. Sheth Age: 30 years, Qualification: 12th Passed, Nature of Expertise: She is Interior Decorator, Investment consultant & Dynamic professional also having good marketing experience. Name of Company in which she holds Directorship: 1) Kunstststoffe Indus. Ltd. 2) M/s. Stallion Breweries Ltd. 3) Chemical & Alkali Distributors Ltd., 4) M/s. Bharat Capital & Holdings Ltd., 5) M/s Gayatri Pipes & Fittings Pvt. Ltd. 6) Fiberweb (India) Ltd.
mrkakademrkakade@gmail.comJun 15 Gothamcapital
Despite of 100% increase in revenue costs nose dived more than 40%. Trade payable has moved from 174.838 lacs to 2260.437 lacs. You yourself is saying previous year it was reduced by 26%. One year its gone down by a quarter and next year it increases 15 fold and still we wish all is well then something is amiss somewhere.
I agree. This massive reduction in costs needs explanation. Particularly for power costs nose diving. Freight and packing can be effects of GST implementation. Will keep an eye for FY18 AR once out. I hope company will take cognizance of issues raised and improve corporate governance. Once capital being locked - I will wait for some more time for sure. Anyways current price is at dirt cheap valuations and positive cash flows and good BS will ascertain limited downside from current price.
Hi, i had spoken to the management some time back and got clarifications for several issues…will try and reply them here. i have also done a detailed visit to their plant to get a grip on the manufacturing process and the facility.
*Reduction in power and fuel cost:
The power situation has shown a drastic improvement post Praful Patel taking over as the Administrator of the UT of Daman & Diu. Apart from taking down unauthorised structures in the UT, the administrator has also addressed rampant power thefts in UT. While this has helped in better power availability for industry, at large, Fiberweb has also got a dedicated substation installed in its premises which enables it to draw power straight from the utility without any interruptions. Lower diesel consumption (as compared to previous year) implies lower costs under the power & fuel head
The situation was very different earlier. Apart from the weekly power outage that Fiberweb had to cope with, it also had to face issues on account of excess power drawn by other companies on its feeder line. This would restrict the amount of power that Fiberweb could draw upon. Since the manufacturing process at Fiberweb is a continuous process (and not batch process), it cannot afford discontinuity in power availability. At such times, its lines would automatically start drawing power, without any downtime, from the UPS installed at the premises. That said, switching off from the UPS back to the utility line is relatively difficult and calls for some downtime in the manufacturing process as well. The fuel powering the UPS was diesel and hence the previous year witnessed a fair amount of diesel consumption
*Reduction in Freight forwarding
Fiberweb is always asked to quote its supplies on a FOB basis. Once its clients’ receive the quote, they seek local expertise to negotiate insurance and freight rates, for getting the goods delivered to their premises. That said, in the eventuality of them being unable to negotiate a better rate, Fiberweb’s help is sought to source a cheaper alternative. On occasions when Fiberweb ships on a CIF basis, this cost head will look inflated. And Vice Versa.
My read and observation:
The company is a converter. Imports PP from Exxon Mobil, converts into FG and exports fabrics. The company enjoys a conversion charge per ton of RM it processes. For instance, if PP is sourced at $1000/ton, and the company enjoys a $1000/ton for conversion, its FG will be priced at $2000/ton. This may imply a 50% gross margins. Now if RM prices go up to $1500/ton, given the fixed conversion charge of $1000/ton, its FG will now be priced at $2500/ton, implying its gross margins at 33%, isnt it? Two imp points to note here: (a) its important to note the EBIDTA/ton trend in the company and not EBIDTA margins (reasons just explained) and (b) its important to note capacity utilisation trend to get a better understanding on volume sales as a rising crude would imply higher revenues (value sales) and vice versa.
Already explained in one of my earlier replies
Net block bloats due to the new 3000 MTPA Meltblown line added at their Daman facility.
While a rise in receivable days look alarming, theres a proportionate increase in payable days as well. As a result of which the net working capital cycle has actually improved in FY18 over FY17.
To understand their business model, lets split the standalone and consolidated business. The standalone business manufactures nonwoven fabrics, supplies 25% to the domestic markets and exports the rest to US and Europe. This it does thru 2 mfg facilities based in Daman, one its own with 5000 MTPA of spunbond fabric and another facility on lease with 2500 MTPA of spunbond fabric. With a net block of Rs. 84 crs (as reflected in their latest AR), I am not sure what you meant by saying they don’t have any fixed assets. At their existing facility at Daman, they have also added a new line of meltblown fabric of 3000 MTPA, at a capex of ~Rs. 45 crs. Now, their 100% subsidiary has been set up in Dubai only for trading purposes. Why this route? So that the brand ‘Fiberweb’ is not diluted. While the parent co, Fiberweb India, manufactures high quality fabrics and supplies to international clientele, the subsidiary (Sheth NonWoven Trading FZE) procures lower quality fabrics from China and supplies to its clientele (who also demand such quality for other commoditised applications). That also explains why incremental inventories are not added via the subsidiary. Dubai is a tax free zone and hence this profit wont be taxed unless untill repatriated (to the best of my understanding).
Several productivity improvement and cost containment measures have been implemented in the company. And this has happened over the last couple of months. While I’ve explained reasons for the drop in power & fuel and freight rates (in one of my earlier replies), i shall try and explain the reasons for a fall in some other heads.
*Reduction in packing material consumption:
Fiberweb has consciously addressed this issue, by reducing the thickness of the packaging used in its rolled products. It earlier used a 3 layer packaging, for which their vendors had to hire extra labor to unpack them. Fiberweb currently uses a single layer packaging. Besides that the company has also reduced the thickness of the core (around which its fabrics are rolled).
These 2 initiatives helps bring this cost head down.
Somecost heads look deflated on account of reclassification of accounts undertaken in the last quarter of FY18. For instance, expenses incurred towards getting the Italian technician to Fiberweb plant, multiple times for training and smooth technology absorption, during the installation process of the MeltBlown line was earlier accounted in the ’travel and conveyance’ head. However, this expense needs to be capitalised (and is now capitalised) as it was incurred during the installation of the new line. Likewise, office expenses in th US have also been consciously curtailed. Being a marketing office, the company didn’t find a need to retain a leased property. The US office is manned by only 3 marketing personnel other than the CMD, Bhavesh, himself (one each for east, west, north & south) who operate remotely and meet at frequent intervals to discuss business strategies etc.
Besides their manpower costs have also been rationalised. The newly commissioned meltlown line hasnt seen any incremental hires. Existing employees have been trained and skill sets developed to handle this line. Rather the company has retrenched some existing staff as well.
This is a great defense of a battered company.
There has to be some basic reason as to why the stock is getting continuously hammered. Also if you can let me know as to why the companies is paying nil taxes.
Fiberweb has informed the exchanges, that the Company bags Very Prestigious EXPORT ORDERS of value added products for Rs 253 Million.
The order covers both products in the field of PP Spun Bond and Melt Blown Fabrics
Fiberweb informs that it has received another export orders worth INRs 127 Million (US$ 1.76 Million). The order covers our both products in the field of PPSpun Bond and Melt Blown Fabrics.
Conference call details: Date: 23rd October, 2018: Tuesday Time: 06:30 pm India time Dial in numbers: 022 6280 1369 / 022 7115 8270
P.S.: We manage the financial communications for Fiberweb India Ltd. For any further clarification, please get in touch with Padmaja at: padmaja@irfluence.com
is there any way to know us why revenues are down yoy and also mom.
what is the cash and cash equivalents of the company at the end of september 2018.
there seems to be both cash payables and cash receivables up drastically even though the revenues are down.
Note: completely confused on stock now. recently started accumulating stock in very small chunks.
Was researching and after making notes, thought of verifying in the forum. Confusion seems to prevail here too. I will put my notes for others to comment…
Reason for Consideration: About the company: Founded in 1985 in Daman & Diu.
Apart from manufacturing and exporting Garbage bags and Carrier bags, the Company has also established its flagship unit for Spun Bond Nonwoven Fabrics, being the first of its kind in India. From <https://fiberwebindia.com/about-us/>
Specialty textile fibers incl. Technical Fibers: "Nonwovens are broadly defined as sheet or web structures bonded together by entangling fiber or filamnets mechanically, thermally or chemically…)
Spunbond: 7500MTPA (5000 owned) @ 92% utilization
Meltblown: 3000MTPA @ 17% utilization (commissioned in Q4 FY18)
70% revenue from exports
Offsets oil price rise from $ appreciation
Small company (286 Cr) operating in a niche space
India non-woven is growing @ 8~10% and is expected to grow @ 12~15% in future
Operates in high growth segments:
Personal hygiene market is expected to grow @ 20% CAGR
Geotextile @ 10.2% CAGR
Growth of Automotive…
Packaging industry growth @ 18% CAGR
Global nonwoven @ 7.5% CAGR
Asia Pacific accounts for the highest share of global demand
Expected growth in India 18.3% (luxury goods….- Strange this comes under luxury goods!)
No major domestic player in India
International players like Berry Plastics, Kimberly-Clark, Ahlstrom, Dupont, Fitesa etc operate…
Business model portfolio has turned healthy with
Relatively lower share of Agri (40% Vs. 45% PY)
PAT/EBITDA levels maintained with reduced topline
Good financials:
Zero debt company
Good ratios:
|PE|3.9|
|ROE|22%|
|ROA|17%|
|ROCE|22%|
There is a huge gap in demand and supply (esp. for flat bond products…)
Stated strategy:
1. Maximize gain: Sale of value added products vs. pursuing volume opportunities (traditional)
a. FDA approved usages
b. Contact products (Medical, hygiene…)
i.
c. Specialty fabrics (margins 50% higher…)
2. Cost fluctuation effects are mitigated through price indexing
a. This also effectively takes out the windfall, except inventory gains and forward contracts…
3. Invest in line, to increase plant capacity!
a. Flat Bond line… at about $10M
Concerns:
Raw material is disproportionately high:
% of Cost (2300/2466)*100=93.2685%
% of revenue: (2300/2861)*100=80.3915%
Raw material price is dependent upon Crude (Polypropylene resin)
Dip in Q2 FY19 sales
While maintaining EBITA & PAT with relatively less change! (+ve)
Underperforms sector in Revenue growth, while at par on earnings growth! Silver lining: Earnings growth faster than revenue growth!
Unlikely to match surreal past growth, on a small base, of 65.8% vs. 17.3% of market and last year growth @ 25.1% and even that is unlikely to sustain!
Lowly paid Senile Management, with average age of 59.5, with short average tenure (1 year) at top management and !
But board has a few highly paid ones! - mismatch of governance!
Steadily reducing margins on legacy business:
$350/t Vs. $800/t in 2017 for lawn garden market (single beam leased line products)
Reduced order sizes, though @ higher margin affects overall profitability!
Longer product development & approval cycles affect the new strategy…
Poor results were masked by strength of $, due to export dominance
Products increase
Packing & forwarding costs
freight costs
Litigation costs
Reducing promoter stake… currently @ 45.51% from 63.77% in Jan 2017
A funding agency (New Horizon Fund) has withdrawn from investing on Flat Bond project - is it because of lack of confidence on the company/management or the project?
Company rarely announces dividends???
Costs have come down disproportionately along with reduction in revenue! Is there something cooking?
