Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Navin Fluorine International Ltd (BOM:532504, Financial) reported a robust 7% year-on-year top line growth despite adverse market conditions.
- The company has secured firm orders for its Agro Specialty project, which is targeted to commence commercial production by September.
- The HPP vertical saw a significant 66% year-on-year growth, driven by stable HFO operations and strong sales of new R32 capacity.
- The company is making progress in diversifying its revenue streams and strengthening partnerships, which are foundational to long-term sustainable growth.
- Navin Fluorine International Ltd (BOM:532504) continues to improve its operating EBITDA margin, which stood at 19.2% in Q1 FY25, up from 18.3% in Q4 FY24.
Negative Points
- The Specialty Chemical vertical experienced a 30% year-on-year decline in revenue due to inventory level rationalization by global agro majors.
- The CDMO vertical saw a 13% year-on-year decline in revenue, reflecting lower order visibility and deferred purchasing decisions.
- Operating EBITDA for Q1 FY25 dropped by 12% year-on-year, impacted by lower specialty sales and a lower CDMO mix in the overall revenue basket.
- Profit after tax in Q1 FY25 stood at INR51.2 crores, a 17% drop from INR61.5 crores in Q1 FY24, due to higher depreciation costs associated with new CapEx.
- The company faces near-term headwinds in the agrochemical environment, with global majors rationalizing inventory levels and impacting specialty business.
Q & A Highlights
Q: Can you provide more details on the agrochemical environment and its impact on your business?
A: The agrochemical sector is facing inventory rationalization due to high interest rates, but the fundamentals remain strong. We expect demand to recover in the second half of FY25. Our long-term contracts with major global players help mitigate short-term price pressures.
Q: What is the status of the INR540 crore CapEx project and its expected returns?
A: The project is on track to commence commercial production by September 2024. We have firm orders for the dedicated capacity for FY25. The project is expected to achieve peak revenues by FY27, with a targeted EBITDA margin of 24-25%.
Q: How is the CDMO business performing, and what are the future projections?
A: The CDMO business is progressing well, with increasing order visibility and deepening relationships with big pharma. We expect FY25 to be better than FY24, and we aim to achieve $100 million in revenue by FY27.
Q: What is the impact of the current market conditions on your Specialty Chemicals business?
A: The Specialty Chemicals vertical saw a 30% Y-o-Y decline due to inventory rationalization by global agro majors. However, we are adding new molecules and signing agreements for patented agro products, which should start contributing to revenue from calendar year 2025.
Q: Can you provide an update on the capacity utilization and financial performance of the HPP vertical?
A: The HPP vertical saw a 66% Y-o-Y growth, driven by stable HFO operations and strong sales of new R32 capacity. Our HF, R22, R32, and HFO plants operated at optimal capacity. We expect the pricing for R32 to show an uptick in the domestic market.
Q: How are you managing the financial impact of the current market conditions?
A: We are focusing on improving margins, reducing working capital, and optimizing our balance sheet. Our net debt-to-equity ratio stands at 0.38x, reflecting our financial strength. We continue to drive growth while ensuring a tight financial framework.
Q: What are the future plans for CapEx and growth beyond FY25?
A: We will start formulating views on the next leg of CapEx by mid-calendar year 2025. Our focus will be on maintaining a strong balance sheet and converting EBITDA into cash flow to support future growth initiatives.
Q: How is the performance of the new R32 capacity, and what are the future expectations?
A: The new R32 capacity is performing well, with strong domestic and export order books. We expect the pricing to improve, and additional capacities will be ramped up faster upon commissioning in February 2025.
Q: What is the impact of Chinese competition on your business?
A: While Chinese competition is aggressive in price reduction, our long-term contracts with global majors and focus on innovative products help us maintain our margins. We continuously work with customers to improve efficiency and remain competitive.
Q: Can you provide more details on the financial performance of Q1 FY25?
A: We reported revenues of INR524 crores, a 7% Y-o-Y increase. Operating EBITDA was INR100 crores, a 12% decline, mainly due to lower specialty sales and CDMO mix. Operating EBITDA margin stood at 19.2%, and profit after tax was INR51.2 crores, a 17% decline due to higher depreciation costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
