AARTI Industries Ltd · NSE:AARTIIND
AARTI Industries — Q2 FY2019 Earnings Presentation
66 slides from AARTI Industries's earnings presentation, November 2018
Slide 1: Presentation
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Slide 2: Disclaimer
2 Disclaimer AARTI INDUSTRIES LIMITED may, from time to time, make additional written and oral forward looking statements, including statements contained in the company's filings with Bombay Stock Exchange and National Stock Exchange, and our reports to shareholders. The company does not undertake t
Slide 3: Vision, Purpose & Values
3 Vision, Purpose & Values Vision Purpose To emerge as a ‘Global Partner of Choice’ We define our purpose as ‘Right Chemistry for leading consumers across the globe of for a Brighter Tomorrow’ where ‘Right Speciality Chemicals & Intermediates for Chemistry’ means the Sustainable and cost Pharmaceuti
Slide 4: Profile
Profile Aarti is one of the Globally ranks at 1st Promoters are First Generation Technocrats Highly integrated operations Present in niche most – 4th position for • 5 of 6 Promoter Directors are engineers. 3 of 4 • Cost-efficient processes chemistry spaces. competitive 75% of its portfolio. Founder
Slide 5: Transformation Journey
5 Transformation Journey Hitting right milestones at right time • Merged Salvigor Labs, producers of DMS and Sulphuric Acid and Set up additional their downstream unit at Vapi to Set up Alchemie Merged products into Aarti. Aarti manufacture (Europe) Ltd. a Alchemie Organics Pvt NCB with • Change of
Slide 6: Transformation Journey
Transformation Journey • Crossed Rs. 1,000 cr in • Commenced calcium chloride facility total income. and 2nd Phase of PDA facility at Jhagadia • Merged Surfactants • Commenced multipurpose Ethylation Specialities unit at Dahej SEZ, Gujarat Pvt. Ltd. • Crossed Rs. 2,900 cr • Operationalized Co-genera
Slide 7: What differentiates us
7 What differentiates us Our product mix comprises more Most chemical companies focus than 200 research-led products on a handful of products We have focused on the manufacture Most chemical companies focus on a of integrated derivatives fragmented standalone product mix We have global capacities &
Slide 8: People Connect
8 People Connect Though we are a B2B Company, our products touch people in various ways in their everyday lives Speciality Chemicals Polymer and additives: Our products are used in aircrafts, automobiles, cruise Liners, electro-static precipitators, bullet-proof jackets, electronic gadgets and vario
Slide 9: People Connect
9 People Connect Though we are a B2B Company, our products touch people in various ways in their everyday lives Pharmaceuticals Active Pharmaceutical Ingredients: Intermediates for innovators and generic companies | Our products are used in anticancer, anti-asthma and anti-hypertensive drugs as well
Slide 10: Global presence – Exports by geography
10 Global presence – Exports by geography Over 45% of revenue coming from global markets Europe 25% Japan America China 26% 10% 10% Rest of the World 29% Aarti’s esteemed Customer list includes Leading Multinationals and Global Giants Aarti’s has a marketing & distribution subsidiary in US and UK
Slide 11: Speciality Chemicals – Major Customers
11 Speciality Chemicals – Major Customers • Diversified customer base – 400+ export customers & 500+ domestic customers • Customers spread across the globe in 60 countries with major presence in USA, Europe, Japan & India Agro Intermediates & Fertiliser 20-25% of revenues Polymer & Additives 15-20%
Slide 12: Speciality Chemicals – Major Customers
12 Speciality Chemicals – Major Customers Pigments, Paints, Printing Inks, Dyes 15-20% of revenues Pharmaceuticals & Other Speciality Chemicals 15-20% of revenues Other Speciality Chemicals include fuel additives, Oil extraction, Rubber chemicals, Optical brighteners, UV absorbers and FMCG
Slide 13: Industry Accreditation for Exports
13 Industry Accreditation for Exports CHEMEXCIL presented the Company ‘Trishul Award’ for outstanding export performance for FY16-17, FY15-16, FY14-15 and ‘Award of Excellency’ for the consistency in export performance for FY13-14
Slide 14: Knowledge, Process, Innovation Superiority
14 Knowledge, Process, Innovation Superiority • Benchmark R & D Program – Introduced pioneering technology and manufacturing processes in India – DSIR (Department of Scientific and Industrial Research) approved Facilities – Dedicated pool of over 100 engineers & scientists – GMP approved pharmaceuti
Slide 15: Knowledge, Process, Innovation Superiority
15 Knowledge, Process, Innovation Superiority • In 2017, Board of Directors of the Company approved an investment of Rs. 75 crore to set up a world class R&D, scale-up and innovation complex – R&D Complex to come up at Mumbai, Maharashtra. – This would the Company’s 4th R&D center. Two of these cent
Slide 16: Knowledge, Process, Innovation Superiority
16 Knowledge, Process, Innovation Superiority Directly utilize HCL gas, Produce 100% byproduct of Benzene Export grade chlorination, for Chloro Calcium Chloride Sulphonic Acid (CSA) Granules from manufacturing diluted HCL Pioneering First and Only in India to innovation Scrub NOx in Sulphuric Acid c
Slide 17: Industry Accreditation for Innovation
17 Industry Accreditation for Innovation In recognition of outstanding achievements, the Indian CHEMTECH Foundation accorded Aarti Industries Institute of Chemical Engineers bestowed the with the ‘Outstanding Achievement for Innovation’ prestigious Lala Shriram National Award for award for the compa
Slide 18: Industry Accreditation for Green Chemistry
18 Industry Accreditation for Green Chemistry AIL’s Jhagadia Unit has been awarded at SERB-IGCW 2017 in MNC large and Medium Scale Category, for incorporating principles of green chemistry & engineering into manufacturing as well as for the initiatives taken towards pollution prevention while meetin
Slide 19: Manufacturing Facilities
19 Manufacturing Facilities 17 manufacturing units Bhach au, Gujar Jhagadi Kutch Dahe at Madhya Pradesh Pithamp Sariga a j ur Vap Tarapu m Silvass Maharasht i r Dombiva a ra li Head Office Mumbai HEAD OFFICE - MUMBAI PRODUCTION SITES
Slide 20: Manufacturing Facilities
20 Manufacturing Facilities PDA Facility, Jhagadia R&D Centre Zero Discharge Setup, Jhagadia Section of Jhagadia Unit
Slide 21: Pharma Units
21 Pharma Units USFDA Unit, Tarapur Section of USFDA Plant, Tarapur Section of USFDA Plant, Tarapur
Slide 22: Management Profile
22 Management Profile Driving a transformational enterprise - hitting the right milestones at the right juncture Nurtured into a globally leading company in core products Established track record of execution where returns have improved with growing capex Pushing innovation agenda – introducing high
Slide 23: Management Profile
23 Management Profile Mr. Shantilal Shah – Vice Chairman Mrs. Hetal Gogri Gala – Director Founder Director Electronics Engineer and MDP from IIM – Ahmedabad Commerce Graduate Portfolio: Pharma, HR & Admin Portfolio: Financial Management Mr. Parimal Desai – Director Mr. Kirit Mehta – Director Founder
Slide 24: Business Model
\ AARTI INDUSTRIES LIMITED Business Model
Slide 25: Segmental overview
25 Segmental overview Speciality Home & Personal Pharmaceuticals Chemicals Care Polymer & additives Active Pharmaceutical Agrochemicals & intermediates Non-ionic Surfactants Ingredients (APIs) Dyes, Pigments, Paints & Printing Inks Pharma Intermediates Fuel Additives, Rubber Intermediates for Innova
Slide 26: Segmental overview
26 Segmental overview Speciality Home & Personal Pharmaceuticals Chemicals Care Polymer & additives Active Pharmaceutical Agrochemicals & intermediates Non-ionic Surfactants Ingredients (APIs) Dyes, Pigments, Paints & Printing Inks Pharma Intermediates Fuel Additives, Rubber Intermediates for Innova
Slide 27: Global Partner of Choice
27 Global Partner of Choice Aarti Industries is a rare instance of a global speciality chemicals company that combines process chemistry competence with scale-up engineering competence Vendor servicing to Make-to-stock to robust Partner of Choice To Transform Make-to-order Knowledge from arbitrage O
Slide 28: India – A Manufacturing Hub
India – A Manufacturing Hub ▪ Ranked 30th in 2018 against 60th in 2013 by WEF in Global Manufacturing Index ▪ Ranked 77th in Oct 2018 against 130th in 2016 in Ease of Doing Business Global Index. Key reforms such as GST, Digitisation, Govt. promoting Make in India leading in Ease of Doing Business.
Slide 29: Indian Chemical Industry: Growth Frontiers
Indian Chemical Industry: Growth Frontiers ❖ Increase in Manufacturing opportunities in India wrt end applications (mainly due to Chinese situations). ➢ for both Domestic & Export Markets ■ Examples: ● Increased manufacturing in India for products such as Diuron, Propanil, Dicamba, Metolachlor, PNT
Slide 30: Indian Chemical Industry: Offerings & Requirements
Indian Chemical Industry: Offerings & Requirements What India offers What Indian Companies need to do ● Capex & Opex Cost Savings ● Strong Safety, Health & Environment ● Availability of Feed Stock ● Better Project Management ● Skilled Manpower ● Strong R&D ● Access to Ports ● Customer Relations Mana
Slide 31: Opportunities for Indian Chemical Companies
31 Opportunities for Indian Chemical Companies One of the major challenges in the Chemicals Business is the Compliance of Environmental Norms. Over a period of time, the regulating MNCs are de-risking their sourcing agencies have became more stringent in arrangement and want to add an Indian ensurin
Slide 32: Aarti’s Speciality Chemicals – Business Model
32 Aarti’s Speciality Chemicals – Business Model • Create differentiated process • Cost Competitiveness & Economies of Large • High value products Scale • Customization • Ability to cater to large global customers • Participate in Growth of fast • Largest in India & Ranked amongst Top 5 growing end-
Slide 33: Benzene Based Value Chain
33 Benzene Based Value Chain (NCB) Value Chain Chloro Benzene Value Chain PDA Value Chain Chlorination (Ranked amongst top 3 globally) Nitration (Ranked amongst top 4 globally) Ammonolysis (Ranked amongst top 2 globally) Hydrogenation(Ranked amongst top 2 globally) Others Fluro compounds - Halex che
Slide 34: Introduction of New Products: Toluene Based Value Chain
34 Introduction of New Products: Toluene Based Value Chain
Slide 35: Other Chemicals
35 Other Chemicals • Sulphuric Acid and Derivatives Sulphuric Acid OLEUM 23% % 65% SULPHUR 1000 OC SO2 SO3 Chloro Sulphonic Acid Di Methyl Sulphate Global leader Steam Di Ethyl Sulphate Co Gen Power Plant (6MW) • Single Super Phosphate (Fertilizer) • Export Grade Calcium Chloride Granules (for Oil E
Slide 36: Pricing Model
36 Pricing Model • Key RM cost component + Delta per kg or per ton. • Variation in key RM prices/component passed on to customers. • Delta per Kg or per ton comprises of other RM, Energy Costs, Overheads and Profits. These are fixed in absolute terms. • In general, savings by way of yield improvemen
Slide 37: Projects Status & Rampup
37 Projects Status & Rampup • Nitro Chloro Benzene (NCB) Value Chain – Expanded NCB Capacity of 75,000 tpa from earlier 57,000 tpa, commissioned in Nov 2015 FY14 FY15 FY16 FY17 FY18 Production (in tons) 54,230 53,400 59,500 63,700 68,700 • Chloro Benzene Value Chain – Expanding Chlorination Capacity
Slide 38: Projects Status & Rampup
38 Projects Status & Rampup New Toluene Value Chain • Nitration Unit at Jhagadia (Nitro Toulene & Downstreams) – New Capacity of 30000 tpa commissioned in Q3FY18 – Utilisation at 50% in H1FY19 • Ethylation Facility at Dahej – Commenced in Sept 2016 – Capacity to manufacture about 8,000 – 10,000 tpa
Slide 39: Multi-year deals
39 Multi-year deals Rapidly changing global environment where global industrial players graduating from Vendor Strategic Enlistments Partnerships Conventional Knowledge Cost Arbitrage Arbitrage Model Long-Term Short-Term Stability and Opportunism Sustainability Relationship-driven approach where we
Slide 40: Long Term Multi Year Contract – 1
Long Term Multi Year Contract – 1 (Part of existing benzene based value chain) ▪ Contract Detail Highlights ▪ Aarti Industries signed $620 Million multi year contract with a global agrochemical company. ▪ Contract term - 10 Years ▪ Supply of high value intermediate chemicals for use in herbicides ▪
Slide 41: Long Term Multi Year Contract – 2
Long Term Multi Year Contract – 2 (Strategic Manufacturing tie-up) ▪ Contract Detail Highlights ▪ AIL signed $1.54 billion multi-year supply contract with major Specialty Chemical Conglomerate. ▪ Contract term - 20 Years ▪ Supply of specialty chemical intermediate. ▪ Basic technology provided by Cus
Slide 42: Ongoing Growth Projects
42 Ongoing Growth Projects Major Projects over FY19 & FY20 Details Jhagadia Chlorination & Speciality Chemical Complex Dahej Capex for New Long Term Contracts Navi Mumbai New R&D Centre API and Pharma Intermediate Vapi & Tarapur de-bottlenecking and expansions Based on this, AIL management expects r
Slide 43: Future Growth Initiatives/Projects in pipeline
43 Future Growth Initiatives/Projects in pipeline Details of Major projects under drawing board stage Further Scaleups in • Existing NCB and Nitro Toulene Capacities • Existing as well as addition of newer NCB, DCB & NT based downstream derivative products • Existing non-benzene, non-toluene range o
Slide 44: Segmental overview
44 Segmental overview Speciality Home & Personal Pharmaceuticals Chemicals Care Polymer & additives Active Pharmaceutical Agrochemicals & intermediates Non-ionic Surfactants Ingredients (APIs) Dyes, Pigments, Paints & Printing Inks Pharma Intermediates Fuel Additives, Rubber Intermediates for Innova
Slide 45: Pharmaceuticals
45 Pharmaceuticals Facilities • In all four Manufacturing units of which - two are USFDA approved facilities & other two are WHO GMP approved facilities End User Industry • Global Generic Pharmaceutical Companies, Innovator and Large Pharmaceuticals MNCs, Branded Generic Indian Pharma Companies. Sal
Slide 46: Pharmaceuticals – Growth Drivers
46 Pharmaceuticals – Growth Drivers Pharma Intermediates for Active Pharmaceuticals Innovator & Generics Xanthine Derivates Ingredients (APIs) Company (Caffeine & Others) • 48 commercial APIs with 33 EDMF, 28 • CRAMs activity focused on intermediates • Doubled capacities to cater to demand USDMF and
Slide 47: Segmental overview
47 Segmental overview Speciality Home & Personal Pharmaceuticals Chemicals Care Polymer & additives Active Pharmaceutical Agrochemicals & intermediates Non-ionic Surfactants Ingredients (APIs) Dyes, Pigments, Paints & Printing Inks Pharma Intermediates Fuel Additives, Rubber Intermediates for Innova
Slide 48: Home & Personal Care Chemicals
48 Home & Personal Care Chemicals Facilities One unit each at Pithampur (Madhya Pradesh) & at Silvassa End User Industry FMCGs – Shampoos, Anti-Dandruff Shampoos, Disinfectants, Hand & Body wash, Dish Wash, Detergents Bars & Powders, Soaps, Tooth Powders & Paste etc. Salient Features • Relatively lo
Slide 49: Key Investment Theme
49 Key Investment Theme Clear Path to Value Creation Economies of Scale and Operational Efficiency: • Highly Backward Integrated and gainful usage of Global Partner of by-products, ensuring Choice Leadership Increasing focus De-risked portfolio – engagements with excellence – steady supply of on hig
Slide 50: Key Financials
\ AARTI INDUSTRIES LIMITED Key Financials
Slide 51: Q2 FY19 Highlights
Q2 FY19 Highlights Financial ▪ Rupee volatility impact – – As part of its strategy to safeguard business against currency risks, the Company had entered into forward contracts to hedge its exports contracts. In Q2FY19, revenues, EBIDTA and PBT were impacted by Rs 22.59 cr losses on such contracts. –
Slide 52: Q2 & H1FY19 P&L (Standalone)
Q2 & H1FY19 P&L (Standalone) Y-o-Y Q-o-Q Particulars H1 FY19 H1 FY18 Growth Q2 FY19 Q2 FY18 Growth (Rs. Crore) (%) (%) Gross Income from Operations • Strong volume growth, Exports additional benefit from the expanding contribution of higher % of Total Income value products and geographic de-risking.
Slide 53: Q2 & H1FY19 – Speciality Chemicals (Standalone)
Q2 & H1FY19 – Speciality Chemicals (Standalone) • Volume growth of 10% • Higher capacity utilization across various units • Continuing geographical shift in production to India leading to higher demand even from domestic end-users (Rs. 53
Slide 54: Q2 & H1FY19– Pharma & HPC (Standalone)
Q2 & H1FY19– Pharma & HPC (Standalone) • Continuing expansion in margins • Expanding business volumes across markets and operating leverage – expected to sustain momentum • Since major fixed costs already built-in, incremental volumes will result in significant increase in segmental profits • Focusi
Slide 55: 5 year financial performance
5 year financial performance
Slide 56: Revenue Performance (Consolidated)
Revenue Performance (Consolidated) Operating revenues have Deep engagement with grown on the back of CAGR: 9.7% global customers in strong volume growth in Speciality chemicals and key business segments pharma. In addition, part of and better product mix. domestic revenues are Top line is a function
Slide 57: EBIT Performance (Consolidated)
EBIT Performance (Consolidated) Higher growth relative to revenue highlights value addition delivered CAGR: 15.9 % by AIL CAGR: 14.% CAGR: 27.4% (Rs. Crore)
Slide 58: Financial Highlights – (Consolidated)
Financial Highlights – (Consolidated) EBITDA & Net Profit (Rs. Cr.) Earnings Per Share (EPS)
Slide 59: FY18 P&L (Consolidated)
FY18 P&L (Consolidated) Y-o-Y Particulars FY18 FY17 Growth (Rs. Crore) (%) Gross Income from Operations 3,813.83 3,165.44 20.5% EBITDA 706.89 655.45 7.8% EBITDA Margin* 18.5% 20.7% EBIT 560.6 532.9 5.2% EBIT Margin* 14.7% 16.8% PAT 332.96 315.78 5.4% PAT Margin* 8.7% 10.0% EPS (Rs.) 40.95 38.45 25%
Slide 60: Balance Sheet (Consolidated)
Balance Sheet (Consolidated) Particulars As on As on (Rs. Crore) Mar 31, 2018 Mar 31, 2017 Shareholders Funds 1,655 1,426 • Strong execution of growth-oriented investments Net Debt 2,080 1,561 resulted in positive impact on returns on capital Net Block of Fixed Assets 1,996 1,695 • Debt/Equity has b
Slide 61: CSR Initiatives
61 CSR Initiatives Research & Water Development Aarti Industries is a Conservation for social uplift responsible and Environment Promoters of the corporate citizen company have set Cluster and engaged in Rural aside Development approximately 40 Eradication of community welfare Hunger and through Pov
Slide 62: CSR Initiatives
62 CSR Initiatives Involved in various CSR initiatives with specific focus on Health, Education & Women Empowerment.
Slide 63: Chairman’s Message
63 Chairman’s Message “India is being seen as a hub for Chemical Manufacturing which can be seen as an exiting opportunity; however Sustainability and Responsible Growth remains our top priority. Over the last decade this singular evolution – from an Indian company servicing global markets to what i
Slide 64: Aarti Industries was featured in the ‘Global Thought Leader’s’ series on Reuters
Aarti Industries was featured in the ‘Global Thought Leader’s’ series on Reuters In this video series, the leadership team at Aarti Industries representing the chemical industry speaks about the challenges faced by the world and how Aarti Industries with its purpose ‘Right Chemistry for Brighter Tom
Slide 65: Contact Us
65 Contact Us For further information please log on to www.aarti-industries.com or contact: Mr. Chetan Gandhi / Mr. Raj Sarraf Aarti Industries Limited Tel: +91 22 6797 6666 Email: info@aarti-industries.com Shiv Muttoo / Varun Divadkar CDR India Tel: +91 22 6645 1207/1223 Email: shiv@cdr-india.com v
Slide 66: Thank You
\ AARTI INDUSTRIES LIMITED Thank You