10 Questions for Manjushree Technopack Management â 24th Aug, 2011
1). Excellent 1st Qr Results! Sales & Profits up by over 60% again just like 1QFY11.
Congratulations! With such a tremendous quarter behind you, how does the rest of the year look?
Any major clients added? Besides Coke as your major client, have you been able to penetrate deeper into Pepsi account?
2). Production Capacities
What has been the progress on the capacity expansion program? What is the current capacity available and what was the Capex incurred in FY11 for the same. What is the capacity utilization currently? What are the plans going forward and how much would be the Capex spend for FY12?
3). Product Segments - Preforms and Containers are the main segments.
Could you share the production/Sales break-ups between the two segments for the year? Is it correct that Container Sales are more or less stable from Quarter to Quarter while Preforms segment has major seasonality being driven by CSD segment in the hot summer months.?
4). Seasonality in sales âQ1 & Q4 are your best quarters
Looking at the results over last year and this year, it is very clear that Q1 & Q4 are your best quarters â demand-wise. And this is mainly driven by the CSD segment âhot summer months.
The Sales slowdown is usually more than 25% from peak sales in Q4 or Q1. How have the last 2 months been? Is the same pattern likely to repeat in Q2 & Q3?
On the other hand, if we look at the demand surge in Q4 & Q1 it looks like it could absorb any capacity. Something like 3x existing capacity may also get absorbed?? What is the peak demand from say Coke and how much is Manjushree currently supplying?
Amcor, Futura, Sunrise and AMD Industries are the main competitors in Preforms? Are there any others? Have any of them ramped up significant capacity in recent times? What is Manjushreeâs share in performs market currently?
5). Competition
Amcor is unlisted and so is Sunrise. Futura has been making losses since last 3 years. But AMD Industries has been doing well. For last 2 years they were at similar OPM as Manjushree but lacked slightly behind at NPM levels. They too had a very good 1Qr and registered NPM at ~16%!
Kindly elaborate and help us understand the competitive scenario better. How serious is AMD as a competitor, with ramped up Preforms capacity. What about competition in the Containers segment? How is Pearl Polymers doing? Any other significant player?
6). Operating Margins - Sustainability
The most noticeable and remarkable performance is in constantly improving Operating margins â from 16% to 19% to 22% in the last 3 years.
You had mentioned last year that this is simply economies of scale at play. What is the picture for FY12? We now have new facilities catering to the enhanced capacity? What are sustainable Operating Margins for FY12 and beyond?
7). Capex and Funding
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What are the Capex plans for the next 2 years and how much funding would you need to tie up for the same in FY12 & FY13? Would this be totally through debt or are there any chances of equity dilution?
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8). Working Capital Management
One of the pains in your seasonal sales demand is to keep producing and storing during the leaner Q2 & Q3 to deliver for bumper requirements in Q4 & Q1. This is perhaps reflected in the huge rise in Working Capital requirements in FY11. from 22% of Sales in FY10 to 38% in FY11, mainly due to rising Inventory.
The Interest burden has come down from Rs 3 Cr levels in 4QFY11 to 1.9 Cr in 1QFY12, but the pattern is likely to repeat in view of the above. Kindly share what the company is doing to manage burgeoning Working Capital needs.
Have you tied up any loans through the ECB/FCCB route for lower cost funding on both long term debt and working capital front? Could you give us a sense of the likely Interest range for FY12?
9). Net Margins â Sustainability
We had exactly the same situation in FY11. A stupendous first quarter with Net Margins crossing 9% for the first time. Management had sounded very confident of maintaining Net Margins at 9% levels for FY11, but ended up at ~7%.
Please comment on what are sustainable Net Margin levels for FY12 and beyond?
10). Major opportunities & Challenges
Where does Manjushree technopack see itself in the next 5 years? What is the size of the opportunity in its niche? Can we see Manjushree Technopack reach 500 Cr Sales, by when? What are the major challenges before the company and where are the big opportunities?
