Highlights-of-financial-results-and-Operations-Q4-17-18.pdf (707.7 KB)
Highlights of financial results and Operations Q4 2017-18
Got the following response for my queries from the company:
Any reason behind diversifying to PVC Pipe manufacturing segment for a company like us which are a pure chemical business ?
Reply : As can be seen from our financials , our entire Revenues , profitability and growth are dependent on the Chlor -alkali sector. Hence our dependence is totally on the Chlor -alkali products. This we wanted to change and ensure that we do a proper diversification, and based on our study , and our history to be unique in the market , we have chosen to opt for PVC O pipes. These pipes are very new to the Indian market, and have a great potential , considering the focus of clean water and infrastructure development to this effect , which are the important agenda of the Government today. All these factors have led us to choose this product.
What is the capacity of this new plant to manufacture pipes ?
Reply : We would be implementing this Project in phases – over a period of next 6 to 7 years. For the first phase, we plan to install One Machine, and its annual capacity would be 3,000 TPA.
Did company take any new debt to finance this venture ?
Reply : Yes. The cost of the Project for the first phase is estimated at Rs.50 Cr, of which Rs. 35 Cr would be debt, and the balance from internal generation.
When do we foresee this facility to start production ?
Reply : The Production is slated to commence from the Q 3 of the current financial year.
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Hi Sarbjeet,
Many thanks for sharing the details!! Very helpful!!
Did they comment anything on what is the advantage of PVC O pipes and how is competitor landscape for PVC O pipes?
Additionally, can you give some insights on increasing their chlor alkali capacity from 125 TPA to 200 TPA? Have they received required approvals?
Any information on above points will be very helpful! Thanks!!
Regards,
Ritesh
Hi Ritesh,
I didnt ask these questions. We ourselves have to analyze the competitor data for PVC pipes. Because if you ask the company about it then I am not sure if we wil get accurate response.
In their investor PPT they had mentioned about this expansion from 125 to 200. But no timelines given.
I had sent a mail to company for inquiry regarding Promoter shares in Non-Demat form, due to which stock has been added to T2T segment.
Company said after 30th June once they declare the share holding pattern, then all shares of promoter will be moved to Demat form.
Guys, AR is out
http://www.chemfabalkalis.com/pdf-2017/Annual-Report-FY-%2017-18-new.pdf
Has wonderful commentary from management answering few queries we discussed here. Everything looked fine except that higher management gave themselves a real good hike.
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@Experts, How long this Caustic Soda cycle will last for? I’m currently holding Gujarat Alkalies and higher prices but not sure what is influencing the short term correction even after fabulous results posted by company.
Disclosure: Holding Gujarat Alkalies at higher price.
In concall transcript of Meghmani Organics Limited dt 28.05.2018, which is into Chor Alkali, Agrochem and Pigment, they have replied as below regarding chlor alkali ECU realization,
"I will tell you, under chlor-alkali we consider only caustic and chlorine, rest are the chlorine derivatives and that is the separate industry altogether, alright. And chlor-alkali we believe the price would be in the range of 35,000 to 40,000 this year. It is very difficult to forecast being a cyclic industry what is beyond the quarter, actually. But this year on an average we can believe it will in the range of this one. "
Also GACL Management has also said that Chlor alkali ECU will remain in range of Rs. 36000-38000 PMT during their past 2-3 quarters video interview with press.
During March 18, the prices were above this range and were hitting even 44000 PMT depending on the customer quantity offtake. The same has cooled off now.
Given the EU and US clamping down on old Mercury plants, the supply contraction will sustain the prices at these levels in india for next 2-3 years atleast. Thus it is safe to assume EBIDTA margins in range of 30% for Chlor alkali units going forward for next 2-3 years assuming the power costs don’t rise much
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Quarterly numbers are out. Though below my expectations ( Due to high Caustic Soda Price I was expecting more) , still are decent. Slight DIP in QoQ revenue but inventory adjustments and Tax expenses saved the day for Net Profit which has shown some increase QoQ.
20+ EPS Annually on track.
Disc : Invested for more than an year and still in loss.
Had written to company for few queries, PFB the questions and their response:
- What were the realizations of Caustic Soda this quarter and the Q4 of previous FY.
Reply : The Caustic realization was almost at the same level for both the Qtrs, at about Rs. 38,000/- per MT .
- Do we monetize Chlorine as well or its just disposed off ?
Reply : We do monetize the Chlorine generated from the process – it is liquified and sold. Also part of Chlorine is captively used in the Mfg of Sodium Hypo and HCL.
- What was our utilization levels for Q1 ?
Reply : Our Capacity utilisation level for Q 1 was at 90 %.
- In India our competitors (Meghmani, Gujarat Alkali) are planning to increase their capacities for Caustic Soda, is this a concern for our profit margins ?
Reply : We do not contemplate any major concern for our profit margin, as Caustic being a commodity , has an average growth rate of 6 to 7 % per annum. Capacities keep adding in the Industry and in fact we are also in the process of increasing the capacities , and we need to deal with the competition. Also the competitors mentioned are in the Western part of India.
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I was looking at investor PPT of OLIN ( A big player in US for Caustic Soda). They have given good guidance for Caustics Soda price in Jul-Sep Quarter as well.
Even in India prices of Caustics are firm so far.
However I wanted to compare the competition in South India where Chemfab is located because majority of consumption for this commodity is in area where its produced. I only know Andhra Sugar as south based player who deals in Caustics Soda. If anyone has any info on other players, could you please share the same.
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I was comparing following companies for their Caustic Soda segments
I am surprised to see Chemfab ,in spite of being only Caustic Soda related business, lags behind other two in profit percent of Revenue. Can someone think of any valid reason for this.
Could this be purely economies of scale , since other two players are large in comparison ?
The difference in margins would be due to the degree of integration in operations in terms of power, forward and backward chemicals, usuage of chlorine etc.
If you can compare the FA turns, that might help (though it won’t be easy to do given that other cos have other areas too)
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Thanks Sir, it makes sense.
However due to multiple segments other companies operate, we may not get right picture.
TGV (old rayalseema alkalies) also based in south india and worth keeping track…
Company reported loss on account of plant shutdown at Ongole. Isn’t the company liable to report such things when they are happening ?
https://beta.bseindia.com/xml-data/corpfiling/AttachLive/3d142d2e-876e-4642-910e-57441236822d.pdf
6 a) The Company had suspended the operations from 10 July 20113 at its Ongole plant in order to dispose Excess accumulated inventory, post which the Management is evaluating various
options of running the unit profitably.
b) Pending final decision ot viability oi the unit, the operations at the Ongole Plant remains suspended on further notice. The Management has carried out a detailed impairment evaluation
and had recognized an impairment loss of Rs. 1,953.25 Lakhs pertaining to the carrying value of s property, plant and equipment, disclosed as exceptional item under Statement of Profit and loss
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The company had reported the suspension of operation of plant as per LODR within 24 hours earlier itself
311c9ca7-8886-4610-a2c9-338a62674057.pdf (375.7 KB)
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INDIAMART ad for PVCO pipes.docx (303.5 KB)
The company seems to have started taking orders for PVCO pipes. Might be trading before self manufacturing the same. This indicates strong market demand for the product