Wanted to speak to the management of Ultramarine. They don’t have an investor relations department so I called their CS. First, he said they don’t take investor queries. Later, he wanted to know if I’m a shareholder. With such limited information on the company and with such little communication with investors, I’m not sure if they have the best interest of minority shareholders in mind.
4 Likes
Annual Report FY2023 Business Update
- Revenue 541 Cr, +10%
- Improved realisation in Pigments and Sulphonation.
- Could have been better. Logistical constraints & supply chain issues affected.
- Export 151 Cr vs 117cr, +29%.
Pigment Division:
- Revenue 159cr, +21% & Volumes -5%.
- Better mix (performance pigments), better realisation.
- Decline in domestic demand in the 3rd quarter.
- Steep increases in input costs, i.e fuel, freight and key raw materials, caused margin pressure
- Exports 102 Cr vs 82 Cr, +26%
- Fresh Capacity under Subsidiary (Ultramarine Specialty Chemicals Limited).
Surfactants Division:
- Revenue 333cr vs 326 Cr
- Exports 16 Cr, +52%
- Ranipet plant full capacity utilisation but the Naidupeta plant witnessed a drop.
- Affected by extreme volatility in RM prices, restricted ability to pass on.
- Situation improved in the 3rd & 4th Quarter. Plans to operate Naidupeta at better utilization.
Wind Power Generation
- Owns and operate 6 Wind Turbine Generators at 3 locations in Tamil Nadu.
- Capacity of 4.3 MW.
- All the units generated are consumed at the Ranipet and Ambattur Plants.
- Generated 61.84 lakh units vs 55.23 lakh units in the previous year
- Two new machines becoming fully operational.
- Captive consumption 49.36 lakh units, + 6.37 lakh units
ITeS Division:
- Revenue 50 Crores,+ 47% over
- Tight cost control measures, profit 15cr, +47%
- Both the key verticals, e-publishing & health care, witnessed growth
- Focus remains on quality to achieve additional business from the existing clients.
Capex
- New plant to manufacture ingredients for food, cosmetics, personal care has been commissioned in Naidupeta.
- Trial production is underway. The installed capacity of this new plant is 1800 MT
Projects through our Subsidiary
-
Commissioned the green field project to manufacture Pigments at Naidupeta (AP). Capacity is 1500 MT. 8 months of operation, achieved 70% capacity utilisation. Plant is Capable of producing more volume of premium pigments, margins improvement.
-
Another new Pigments Projects at Naidupeta. Capacity of 2250 MT of Pigments. Capital outlay of 80 Crores. Expect some portion of the capacity to come online in FY24.
-
Another Project for complex inorganic pigments. Partially completed, balance in the current FY. Total cost of the project is 37 Crores
13 Likes
Anyone planning to go for AGM on July 21st? will company upload any recording??
In the past few years, company has really ramped up their capex spends. I have summarized their finished and announced capexes over time.
Capex
- FY18: Doing 70 cr. capex for a new surfactant plant in Naidupet (30’000 MTPA capacity; delayed and commercialized in FY21)
- FY21: Greenfield capex of 67 cr. (revised cost: 76 cr.) for premium grade pigments at Naidupet (1’500 MTPA capacity; commercialized in FY22)
-
FY22:
– Capex of 21 cr. for specialty chemicals i.e. ingredients for food, cosmetics, personal care (capacity: 1’800 MT) (commercialized in FY23)
– Capex of 24.4 cr. for mixed metal oxides in Naidupet (expected commercialization in FY23)
– Capex for 61.5 cr. for additional pigment capacity in Naidupet (1’500 MTPA) -
FY23
– Capex of 80 cr. in another new Pigments Projects at Naidupeta (capacity: 2250 MT). Expect some portion of the capacity to come online in FY24
– Another project for complex inorganic pigments. Partially completed, balance in FY24. Total cost: 37 cr.
Disclosure: Not invested (no transactions in last-30 days)
23 Likes
Do we have any details about the new capex for ingredients in food, cosmetics, personal care ?
Any other companies which have done a similar capex/operates in this segment for reference ?
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.
32 Likes
Ultramarine 62nd AGM Notes-
Ultramarine Pigments-
Ultramarine Pigments is mainly into ultramarine blue and violet pigments, it has manufacturing plants at Ambattur and Ranipet.
Started two subsidiaries Ultramarine specialty chemicals and ultramarine fine chemicals (Set up subsidiaries because the company was gaining some sort of tax benefit)
Subsidiary activities in Naidupet
Compitetion-
Ferro (Nubiola) has been in existence for a long time now, and the company doesn’t see any kind of threat from this competitor.
Huebach Pigments Private Limited, based out of Gujarat, can try to sell products at a loss to gain market share, will they be successful in gaining market share?
Ultramarine says many companies tried, but they were not successful.
Possible Margin expansion due to reduction in Logistics and energy costs-
During COVID, logistics costs increased, and right now costs are back to pre-COVID or below pre-COVID levels.
Energy costs are mainly LNG, LNG went up to Rs 130 per kg and is now back to Rs 80 per kg.
Pigments customer geography-
The US and Korea contribute 30–35% of the market share in pigments. Pigments are sold through distributors.
Surfactants customers geography-
Customers are very well disaggregated in surfactant space.
Pigments –
80 percent of sales to the master-batch industry
Ultramarine blue pigment is also used in making other pigments.
Example: Ultramarine blue is used in every Kia car you see out there, white goods, etc.
Company has 13% of the world market share.
The company is foraying into mixing metal oxide (450 t).
Ultramarine blue cost – 350 to 600 per kg
Mixed Metal oxides costs 650 to 1200 per kg.
Pigments bottom-line contribution is 25–30%.
The company expects revenue degrowth in FY24 in the pigment space.
Surfactants-
There are two types of surfactants- commodity and semi-commodity. The company is trying to get onto the semi-commodity and specialty surfactant sides, where margins are comparatively better than commodity surfactants.
ITES-
Medical billing and some publishing
Margins are better in this division when compared to other players.
The company is not bothered by revenue growth in this segment, it cares only about margins and the bottom line, and it will continue to do so.
Others –
3–4 years for the capacity to be fully utilised.
There are some raw material supply issues, and the company is working on them.
The company is more focused on the bottom line than the top line and expects good growth in the bottom line in the next 3–4 years.
Promoter stake has reduced from 52% to 42% in the last 3 years due to sales by non-operating promoters.
A bad debt of 3.1 crore was written off (US distributor). The company is trying to recover it, but there are very low chances.
The branded detergents segment is currently loss-making, but the company will continue to pursue operations as the loss is very minimal.
6 new products: mixed metal oxides and specialty surfactants (ingredients in laundry), products are in the trial balloon phase and are developed by an in-house R&D team.
Right now, the company does not have any vacant land, in fact, if there is further need, the company will look to buy 40–50 acres of land in Tamil Nadu.
No plans to list on the NSE
There are no plans for share buybacks, and the dividend policy will remain unchanged.
The company has been kind enough to give approval for the plant visit.
Disclaimer - Invested
19 Likes
Are you still tracking this company? Wanted to catch your thoughts now.
Still the reaultsvare good considering the situation of entire segment. Major drop will be an opportunity to invest. They have continuously expanded capacities, ventured into higher value chain of products. Have diversified into surfactants as well.
No reco.
Hold small quantity from lower levels.
1 Like
Dip in EPS appears mainly due to increased expenses. Big portion of increase in expenses are due to increased employee benefits, higher raw material costs and changes to inventory. I wouldn’t entirely say this is a bad result, rather an okay one. Since they have expanded capacities, it would be a case of operating deleverage when demand is not up.
1 Like