Ultramarine Pigments conducted it’s FY23 AGM today. Here are the notes I have taken. Please note that I might have missed a few points and I have tried to keep my biases on the company/the management out while making these notes.
- The holding company Ultramarine Pigments Ltd. makes Ultramarine Blue, Ultramarine Violet and Surfactants in Ambattur and Ranipet.
- The two subsidiaries – Ultramarine Specialty Chemicals Ltd. and Ultramarine Fine Chemicals Ltd. were started to get tax benefits.
- All subsidiary activities i.e. Pigments and Speciality Surfactants are in Naidupeta.
- The main fuel is not electricity but LNG.
Pigments
- US and Korea are the key markets in pigments contributing 30% in revenues.
- Customers are well-diversified in the surfactants business.
- 80% of pigment sales go to the plastic master-batch industry.
- Ultramarine Blue is not just required to make the blue colour but others including black, violet etc.
- Ultramarine Pigments Ltd. has 13% market share in the pigments industry.
- The pigments business is a very niche market and the company plans on staying as a leader in it.
- Mixed Metal Oxides are pigments for high-temperatures. Ultramarine pigments can be used at temperatures of ~250 degrees Celsius. But from 600 degrees, MMOs come into play. This is why the company entered into this product.
- MMOs go more into the paints industry.
- Pigments contribute 25-30% to the bottom line.
- 1500 MT was completed before expected time hence the new 2250 MT was initiated.
- It takes about 4-5 years for a plant to get to optimal utilization.
Surfactants
- Last year was a bad year for surfactants.
- Nature-wise there are two types of surfactants – commodity and semi-commodity.
- Due to the price fluctuations of the commodity natured surfactants, the ROCE was low this year.
- For speciality surfactants, customers take 4-5 months for product approval, then orders of small batches are given before they go for the product.
Others
- The new 1800 MT plant is in Medium Chain Triglycerides which have food and pharma uses.
- In ITES, the company is in medical billing and some publishing.
- In ITES, customers are chosen where margins are better than normal margins.
- Doubtful debts written off upto 3.1cr was due to a Chapter 11 bankruptcy by one of the US based distributors.
- There is a meagre loss in Branded Detergents but the company will continue to pursue it in a small scale with the hope that it might work at some point.
- The capacity of the pigments division post-capex will be 8000 MT. But the management says that the capacities aren’t very relevant because the product mix keeps changing.
- The 6 new products launched last year were a mixture of MMOs and speciality surfactants. They do not contribute to the revenues a lot but these were developed by the company’s in-house R&D team.
- There is no vacant land left with the company. Infact, the company is looking for more land.
- We can expect a temporary reduction in sales because of the ongoing geo-political situations. The management says that everyone has been hit because of the war and there isn’t much they can do.
- The management is absolutely focused on the bottom line. They do not really care about market shares and revenue growth as long as their bottom line grows.
- Can expect 25-35% ROCE going forward. The low ROCE can be attributed to the commodity type of surfactants but as speciality surfactants come on-board this situation will change.