Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Jubilant Ingrevia Ltd (BOM:543271, Financial) reported a healthy sequential performance for Q1 FY25, driven by improving business performance in the Specialty Chemical segment and cost initiatives.
- The company witnessed rising demand in the pharmaceutical end-use segment with healthy volume placements, particularly in regulated markets like North America, Europe, and Japan.
- The Nutrition segment saw steady demand and marginal price improvements towards the end of the quarter, except for Choline.
- The company’s manufacturing facility at Bharuch successfully completed its USFDA inspection with zero 483 observations, enhancing its credibility in regulated markets.
- Jubilant Ingrevia Ltd (BOM:543271) is on track with its CapEx plans, focusing on high-potential product categories and aiming for significant revenue and EBITDA growth over the next five years.
Negative Points
- The company is facing continuous pressure on the ephedrine segment due to lower demand from the paracetamol end-use segment.
- The Agrochem sector, despite showing marginal improvement, is still under pricing pressure due to excess global supply.
- In the Nutrition segment, Choline prices remained subdued, impacting overall profitability.
- The Chemical Intermediates business experienced lower revenue due to marginally lower volumes and muted prices, affecting overall financial performance.
- Higher ocean freight costs and lower acetic acid prices posed challenges in maintaining market share and profitability in the acetyls segment.
Q & A Highlights
Q: First of all, Speciality Chemical EBITDA side, what has driven this sharp improvement, both end of the margin and absolute EBITDA growth on a Y-o-Y and on sequential basis?
A: Yes, So let's start with the main highlights of this quarter's results. Couple of things. On a year-on-year basis, the volumes have increased significantly, and that is a trend which has started even in the last quarter if you look at our last quarter numbers as well as, Q4 numbers as well. And even though pricing is slightly lower, but the net impact of that is that EBITDA is improving at an overall level versus last year. The second thing which has played out here very strongly is the cost initiatives that I think I've been talking about for the last two quarters now. The full impact of all those cost initiatives is reflecting now in the bottom line quite strongly.
Q: Also, can you quantify the cost impact in this quarter. So we could get a sense of how much is the actual cost savings that will be coming in an entire year?
A: See all the initiatives that we have taken on the cost side between and then we have put that in our IR presentation as well between (inaudible) business excellence initiatives and also on the energy side in last quarter. The combined impact of those initiatives on an annualized basis is INR120 to INR140 crores. Obviously, not all of that kicks in immediately. Some of that takes its own time to ramp up. But on an annualized basis, that is the kind of impact you're talking about of all those initiatives.
Q: Our unallocated corporate overhead have increased very sharply. Is there any one-off in there?
A: Yes, from last quarter, from Q4 of last year to Q1 of this year, there is an increase of about INR8 to INR9 crores. It is on account of some one-off expenses, which were unavoidable in Q1. But we expect our unallocated corporate expenses to stabilize at INR16 to INR17 crores every quarter from now onwards.
Q: Sir, first of all, on the specialty tankers, congratulations on a significant improvement. Sir in your opening remarks, gave some sense that there is a significant improvement in Fine Chemicals and also in (inaudible). In Diketene that you mentioned that old products that your utilization is 80% to 90% and new product is roughly 50% to 70% utilization. Just wanted to get some sense that how much contribution to EBITDA improvement is actually driven by the ramp-up in Diketine based new products and overall utilization may be going up?
A: Yes. So, hi, Rohan. I think it's a combination of all the factors, Rohan. I think if I just talk about our key businesses within Specialty Chemicals versus last year, the Pyridine business has seen significant improvement in volumes and obviously the core cost improvements we have done a major part of that or in the Pyridine business is a major beneficiary of that because that's one of our biggest product, as I think you know. On the Diketene portfolio, as you would remember, about 1.5 or almost now 2 years back, we had launch field phase one of Diketene products. Those products are running at 80% plus utilization levels. And the reason for that is that we have commissioned in March, one of them is already running close to 70% utilization levels. The other one, hopefully we'll get there in next two, three, four, maximum six months. So there is significant contribution coming from these products in the overall EBITDA improvement. On an incremental basis, while I don't have the number handy, what is the percentage contribution and we can't even disclose that in public domain, but there will be a significant contribution coming from incremental revenues coming from Diketene portfolio, apart from what Pyridine has contributed. The third main driver, of course, is the CDMO business, where as compared to last year, particularly in the pharma side, we are getting more traction, we have more products and obviously those are high-margin products. So they are also contributing significantly to overall EBITDA increase.
Q: Sir, on this CDMO, if you can share, you also mentioned in your opening remark, almost you have in the quarter itself have met almost 100 plus customers in Japan and other countries as well. The kind of feedback, if you can share with us that these are in the CDMO specific categories or a specialty bankers or how soon you think that some of these conversations can get converted into the top line addition?
A: So the 100 plus customers that I talked about is not just CDMO to be very transparent. It's across Japan, US and Europe. We obviously did this road shows and met all our existing key customers of some of our catalog products as well. But at the same time, there are at least, I would say one-third of these customers whom we are calling our key customers and there we see opportunities of CDMO kind of opportunities existing. In fact, in many of those conversations when we met the CXO or senior executives of these companies and the discussion has been at a fairly strategic level and we would discuss where we can become a long-term partner to them, and obviously, CDMO is one key lever to create that long-term strategic partnerships. We and as you explained in the last quarterly call also, we look at our CDMO business in three parts. There is a group out of it where we are in discussions with all four or five major innovators, and we have specific opportunities we are discussing with them and one of them is in very advanced stage of negotiations. Hopefully we should be able to announce it very soon. But there are at least a half a dozen more of such opportunities which are in various stages and as you probably would know, these agrochemical opportunities are, they take time to view up. But when they happen, they happen as a step function. So that's what we expect. But in Agro, I would say, hopefully that at least one, we should announce soon and there is another a half a dozen which will hopefully materialize over the course of next year, year-and-a-half. On the Pharma side, obviously, it is a lot more segmented versus agrochemicals. There we start with small volumes in early stages and then gradually they ramp up. So it's more steady growth that we are expecting there. And that is an ongoing process. Our CDMO pharma business has grown quite well in the last three years also and we are hoping to accelerate that growth with the wider funnel that we have created, not just this to this roadshow, but otherwise also, we have intensified our efforts to engage with pharma customers. The third part of CDMO business is the semiconductor related opportunity. I had mentioned in the last quarterly call that we had four or five opportunities. The good thing is on the back of this roadshows, those at least have now become at least 2.5x we have at least 10 to
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
