Dishman Carbogen Amics Ltd (BOM:540701) Q4 2024 Earnings Call Transcript Highlights: Strong Revenue Growth Amid Operational Challenges

• Carbogen Amcis CRAMS: 15.5% for Q4 FY24, 17.7% for FY24.
• Cholesterol and Vitamin D Analogues: 25% for Q4 FY24, 17.8% for FY24.
• India CRAMS: 5.2% for Q4 FY24.
• India QACs and Generics: 7.2% for Q4 FY24.

Release Date: May 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Dishman Carbogen Amcis Ltd (BOM:540701, Financial) successfully resolved all issues highlighted by the EDQM and passed the audit with flying colors.
• The company also passed the USFDA audit with minimal recommendations, ensuring compliance and stability in key markets.
• Carbogen Amcis Group achieved a record turnover of over CHF0.25 billion for the first time in its history.
• The company is receiving a significant number of inquiries for new projects, indicating a bright future and potential growth.
• Dishman Carbogen Amcis Ltd (BOM:540701) has completed major CapEx projects and is now focusing on digital transformation to enhance productivity.

Negative Points

• The company faced unexpected challenges with the USFDA audit, which slowed down production and manufacturing capabilities.
• Despite resolving operational issues, the company did not meet its ambitious budget targets, resulting in a slightly lower EBITDA.
• The geopolitical situation has made it difficult for small biotech companies in Europe to raise money, affecting some of Dishman Carbogen Amcis Ltd (BOM:540701)'s customers.
• The French facility experienced significant operational issues, including machine failures, leading to a negative EBITDA impact of INR47 crores for the quarter.
• The company has faced consistent one-off expenses, including IT project costs, employee remuneration corrections, and maintenance expenditures, which have impacted financial performance.

Q & A Highlights

Q: What is your understanding regarding the one-off items moving forward for the next financial year, and what could be your final EBITDA margin for FY25 considering potential one-offs?
A: One major factor impacting our consolidated numbers is foreign exchange fluctuation due to translation of costs from various currencies into INR. For FY25, barring any unforeseen impacts, we are targeting a 20% EBITDA margin at a consolidated level. This includes efforts to reduce raw material costs and interest expenses.

Q: Could you explain the breach of the venture covenants and its implications?
A: The breach involved two covenants: the net leverage ratio and the economic equity ratio. The net leverage ratio was 4.8 times against a covenant of 4 times, and the economic equity ratio was 33% against a covenant of 40%. We have received an in-principle agreement from the bank for a 12-month covenant holiday and are negotiating better terms.

Q: What caused the substantial increase in provisions from INR233 crores to INR380 crores?
A: The increase is largely due to the pension provision, which rose from INR189 crores to INR333 crores due to changes in assumptions related to interest rates. This is a non-cash impact.

Q: What triggered the USFDA audit for your Bavla plant, and was it for the entire unit or specific parts?
A: The USFDA audit was a general audit covering the entire Bavla site, excluding the formulation plant. The audit was unannounced and the site is now approved.

Q: Can you provide guidance on revenue, EBITDA, and PAT levels for FY25?
A: For FY25, we expect a 10% to 12% growth in revenue and an EBITDA margin of 18% to 20%. We anticipate generating free cash flow and a cash profit of around INR400 crores to INR500 crores.

Q: What is the status of the ADC project and when can we expect revenue from it?
A: The ADC project has started, and we are currently analyzing the validation batch. Major revenues are expected to ramp up from FY26, with peak demand anticipated around 2030-2031.

Q: Why are employee benefit expenses so high compared to sales?
A: As a CDMO company, a significant portion of our costs are related to manpower for developing new molecules. This is essential for our business model, which focuses on early-stage development and Phase III trials.

Q: What is the expected EBITDA loss for the French facility in FY25?
A: We expect the EBITDA loss for the French facility to be around INR35 crores to INR40 crores in FY25, down from INR100 crores in FY24.

Q: How will the recent regulatory clearances impact your business?
A: The clearances will allow us to increase orders from existing customers, attract new customers, and facilitate internal collaborations, particularly moving projects from Switzerland to India, which will help improve margins.

Q: When do you expect the company to be profitable at the PAT level?
A: We expect to achieve profitability at the PAT level by FY26.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.