Navin Fluorine International : Q1 FY22 Earnings Call Transcript

"Navin Fluorine International Limited Q1 FY2022 Earnings Conference Call"

July 27, 2021

Disclaimer: This document is subject to errors and may or may not contain words which have been included / omitted due to human error while transcribing the conference call. Any and all information should be verified with the company by the reader.

MANAGEMENT: MR. RADHESH WELLING - MANAGING DIRECTOR -

NAVIN FLUORINE INTERNATIONAL LIMITED

MR. KETAN SABLOK - CHIEF FINANCIAL OFFICER -

NAVIN FLUORINE INTERNATIONAL LIMITED

MR. JIGAR KAVAIYA - STRATEGIC GROWTH ADVISORS

MR. PRATIK SHAH - STRATEGIC GROWTH ADVISORS

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Navin Fluorine International Limited

July 27, 2021

Moderator:Ladies and gentlemen, good day and welcome to the Navin Fluorine International Limited Q1 FY2022 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on beliefs, opinions, and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing "*" then "0" on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Radhesh Welling, Managing Director of Navin Fluorine International Limited. Thank you and over to you Mr. Welling!

Radhesh Welling: Thank you. Good morning and my very warm welcome to all the participants. I am joined by our CFO, Mr. Ketan Sablok and Strategic Growth Advisors, our Investor Relations Advisors. I hope everyone got an opportunity to go through our financial results and investor presentation, which has been uploaded on the stock exchange as well as on our company's website.

At the outset, I would like to wish and pray that you and your loved ones are safe and well. We continue to follow various protocols at all our manufacturing sites and the corporate office to prioritize and safeguard the health, safety, and wellbeing of all our employees. All our sites are currently fully functional and we have successfully completed vaccination program for our site employees.

Now, let me start with key highlights for the quarter ended June 2021 followed by business segment wise update and then Ketan will take you through financial highlights. For Q1 FY2022, our company has delivered an operating revenue of Rs.314 Crores with a growth of 53% on Y-o-Y basis, operating EBITDA of Rs.78 Crores, which translates to growth of 50% Y-o-Y basis and operating profit before tax of Rs.67 Crores, which grew by 59% on Y-o-Y basis. All of our business segments showed good growth compared to Q1 of FY2021, although it is on a very lower base primarily due to nationwide lockdown we saw in Q1 FY2021. Work on new HPP project is going well and we expect plant commissioning to happen in Q4 FY2022. Work on our multipurpose plant in Dahej is also progressing well.

Our high value businesses have seen good performance growth of 52% to Rs.200 Crores for Q1 FY2022 compared to same period last year. It now contributes 64% for the total revenue for the reporting quarter. Our specialty business reported a growth of 37% on Y-o-Y basis to Rs.133 Crores for Q1 FY2022 compared to the same period last year. On Q-on-Q basis it was marginally up by 1%. The business witnessed good growth driven by mix of new

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products and market share gain, which primarily happened in US for one of our large products.

During this quarter, we continue to strengthen our pipeline of new products and are seeing strong demand for our capabilities from agrochemical and other industrial segments. Our CRAMs business reported a revenue growth of 98% to Rs.67 Crores for Q1 FY2022 compared to same period last year; however, on Q-on-Q basis it was down 11% primarily due to moving of one order from June to July. We are seeing good traction among our existing customers and good flow of repeat orders.

We continue to focus on expanding product project pipeline and further diversifying our customer base. In this regards, we have added a few new exciting customers in this quarter. Revenue of our legacy business Refrigerant Gas and Inorganic grew by 55% on Y-o-Y basis to Rs.114 Crores for Q1 FY2022 as compared to same period last year and it contributed 36% of the total revenue for the reporting quarter.

Our Inorganic Fluoride business of up 98% on Y-o-Y basis for Q1 FY2022 to Rs.56 Crores compared to same period last year and on Q-on-Q basis it was lower by about 6%. The segment has seen good demand traction from our existing enduser industries of stainless steel and glass. Our efforts of widening our end user segments are being fruitful and to that extent export in this business has shown growth driven by addition of new international customers.

Our Refrigerant Gas business up 28% in Q1 FY2022 on Y-o-Y basis to Rs.59 Crores compared to the same period last year. On Q-on-Q basis, it was marginally up by 1%. Improvement in the trade and service sector despite COVID related restrictions and good volume traction from international markets are contributing to the segment growth; however, the prices in international markets were bit subdued and this impacted overall margin.

Sales into non-emissive applications have been steady this quarter. That is from my side. I now hand over to Ketan to give you a brief on the financial performance of the company. Over to you, Ketan!

Ketan Sablok:Thank you, Radhesh and a very good morning to all the participants. I hope all of you and your families are in good health. I will share the highlights of our performance for the quarter and following which we will be happy to respond to your queries.

So for Q1 FY2022 the performance on a standalone basis, the company has reported a growth of 53% in net revenues from operations of Rs.314 Crores in Q1 against Rs.205

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Crores in Q1 FY2021. As mentioned by Radhesh earlier, the strong growth was also a factor of lower performance in Q1 FY2021 due to nationwide lockdown restrictions in the base quarter.

Operating EBITDA was up by 50% to Rs.78 Crores for Q1 FY2022 as against Rs.52 Crores in Q1 FY2021. The operating EBITDA margin stood at 25% during the quarter. Margins were marginally impacted due to rise in raw material cost, some pricing pressures and also due to the high employee cost during this quarter as the annual increments, some bonuses were paid out during this quarter and the addition of new employees during the course of last year.

Other income for Q1 FY2022 is Rs.7.6 Crores. It was Rs.35.6 Crores in Q1 FY2021. The Q1 FY2021 included Rs.26.2 Crores of interest income due to income tax refund. So that was the large item in the last quarter.

Operating PBT grew by 59% to Rs.67 Crores for Q1 FY2022 as against Rs.42 Crores in Q1 FY2021. The operating PBT margins stood at 21% in Q1 FY2022. Profit after tax stood at Rs.56 Crores for Q1 FY2022 as against Rs.52 Crores in Q1 FY2021. The PAT margin was at 18%.

Quickly on the unit wise performance for the quarter, the high value business grew by 52% and the legacy business grew by 55% during this quarter. Specialty business grew by 37% to Rs.133 Crores and CRAM segment grew by 98% to Rs.67 Crores. The legacy business showed an upward trend with a growth of about 97% to Rs.56 Crores in Inorganic Fluorides and about 28% that is to Rs.59 Crores in Refrigerant Gas business Y-o-Y basis.

So, that is all from my side. I think we can now open the floor for Q&A. Thank you very much.

Moderator:Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Sudharshan Padmanabhan from Sundram Mutual Fund. Please go ahead.

Sudharshan P:Thank you for taking my question and congrats on good performance on the high- performance side. Sir, my question is to understand you had mentioned that in CRAMs we have been good in the inquiries from customers in Europe and US so some color with respect to the nature of these customers, I am trying to understand whether they are large innovative, smaller buyer biotech, I mean what is the kind of projects that they are looking at whether it is early phase development, some colour on this and what this also some kind of follow through from Manchester because that is what we are being talking about as well

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that kind of getting a lot of input from Manchester and migrating those projects to India as well so some colour on this would be helpful, Sir?

Radhesh Welling: Sure, so if you look at the overall growth that we are seeing and when talk about growth and basically including the inquiry, etc., in that in CRAMS basically there are three different kinds of growth. One the projects which are very nicely scaling up and we have actually been working very closely with the customers to ensure that we continue to service these businesses as they scale up so that we are actually seeing a pretty good traction because of which we continue to see pretty good repeat orders. We have actually specifically in this quarter, have actually added some new customers, these are big size bio- pharma companies primarily from US. Some of these companies we have been looking to target for almost last two years and we have finally now managed to crack it in this particular quarter and that would really help us going forward. These customers are primarily US based and these are midsized biopharma company and we believe that as we grow and as the engagement with these companies grows, the business will be extremely good for a midsize company like Navin Fluorine and the third piece, which is what we are primarily seeing in Europe, we have some long lasting relationships in Europe with some of the large innovators so there we have actually seen the good flow of new enquiries coming in from existing customers. So those are three different categories of inquiries that we are seeing, which will then translate to the growth in terms of sales for our CRAMS business. I hope that was helpful.

Sudharshan P:Yes, Sir definitely helpful. Sir, my second question is a little bit more strategic. I mean today if you look at it I think we have done a phenomenal job on the CRAMS side and specialty chemical I mean largely the agro and the pharma side across bio and the chemicals as well, but if I look at fluorine as such has got lot more applications across other chemicals, across automobiles, so many other sectors. You have earlier mentioned that we are working on several things on the project level on the R&D side, my question is today when we are looking at the capex that is expected to come again next year or later that in specialty plant would that accommodate the newer projects or the newer applications that we are talking about or these newer applications would primarily be for the current set of products that we are developing and we would announce another round of probably capex for the newer applications on the production?

Radhesh Welling: If you look at the two capexes that we have announced, one is related to HPP and one related to MPP, if you look at the MPP investment it is primarily related to existing applications, primarily agrochemical and some pharma piece is there. As far as HPP is concerned it is all new applications primarily these are new applications to us to India, etc., so those are focused on new application, but I think the applications that you are specifically referring to like EV, etc., those are not part of these existing capexes those are

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