ADOR FONTECH AR (2016-17) Highlights.
Sales is stagnant at 146cr. OPM has shrunk to 8% from 10%. Dividend this year has been reduced to Rs 3 per share from 3.5 last year.
Reasons for loss or inadequate profits: Stagnation in external business environment, particularly in respect of repair welding segment.
Expected increase in productivity and profits in measurable terms: Target for 2020
The Company is targeting increase in manpower productivity in two tranches
(i) 1.5 crores and then
(ii) 2 crores per annum/per sales person by 2020
with a profitability target of 12-15% on revenues.
Much depends on the economy, industrial growth and the organisation’s leverage in respect of the same.
My Note : In 2011, sales force strength was 150 people.
- On Repairs and Reclamation Business :
Welding market for repairs and refurbishment is basically dependent on core sector industries .
Their spend in terms of availability of capex for improvement projects, deferment of new purchases, life cycle of the components and subscription to repair based on
(b) time frame/bottleneck
© ease of replacement
(d) Nature and kind of breakdown
(e) Periodicity of usage etc., largely determines availability of business opportunities for the industry.
When prima facie performance of general industries
goes up, ipso-facto (Inevitably) activities for repair will also follow the general trend of incline.
It is opined that in the near future, this industry will slowly transition from stagnation to growth, keeping pace with the economy.
- Current year outlook:
Current year outlook seems fairly good. Much depends on the robustness of the economy and the upscale movement in the industry.
My note: Previous year commentary “Last
couple of years have been quite challenging coupled with slow economic growth. This is expected to continue for another year or two”
Opportunities in repair and reclamation :
Lot of opportunities exists in terms of job work repairs. However, it is essential to understand the requirements and facilitate impeccable execution. It is the latter which offers lot many challenges including locating the right contractors, ensuring compliances etc. While there are plethora of opportunities in this sector, there are corresponding risks associated and it becomes essential to tread with care.
While it is essential to scale higher, it is all the more essential to ensure that the basic tenets of business remains well insulated.
Challenges in the business:
The first biggest challenge is getting to know the user and understand the individual user’s process and finish requirements, so that best possible recommendation can be made.
The second biggest challenge with customers is getting them to truly understand the best products to use for their applications and the value addition that can happen.
Once these two are done, Customers often seek for performance guarantees. While organisations may provide warranties based on past experiences, potential risk factors have to be reckoned, as metals and metallic properties would have undergone structural changes with usage. Hence prediction with certainty cannot be
ensured and the risk perception will continue to remain as a perennial phenomena.
- On increasing Working capital
Working capital of the Company has been on an increase in the recent. Nonetheless, business of Ador Fontech Limited is primarily in the B2B segment and more oriented towards public sector undertakings and large business conglomerates. While there may be
some possible delays, reliability in collection remains intact.
- On 3D future technologies
3D Future Technologies is sill at its nascent stage and has a capital base of rupees four crores. Two crores of equity contribution from Adon fontech and has extended corporate guarantees . 3D future in turn has invested 50lakhs in The CENTER for TECHNOLOGY ASSISTED RECONSTRUCTIVE SURGERY (CTARS) .
Mainly dealing in Oro-maxillofacial reconstruction surgeries, involving 3D custom printing. Its a chennai based start up. It seems to be in partnership with Ador .
Import of equipment – capital intensive and deployment of manpower – labour intensive, have both been the necessary payouts in the initial phase of business formation.
Reducing dividends :
More capex & working capital requirements this year. Need to fund 3D future. FD(cash) a hedge for annual employees compensation.
GST impact :
Short term negative. Long term positive.