Time Technoplast Limited (TIMETECHNO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Time Technoplast Q4 FY '20 Earnings Conference Call hosted by ICICI Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Jigar Shah from ICICI Securities. Thank you, and over to you, sir.

Thank you, Lizan. Good afternoon, everyone. On behalf of ICICI Securities, I would like to welcome all of you to the 4Q FY '20 and FY '20 earnings conference call for Time Tenchnoplast Limited. From the company, we have with us the key senior management, including Mr. Anil Jain, MD and CEO; Mr. Kevin Rubin, Director, Finance; Mr. Sandeep Modi, Senior VP, Accounts and Corporate Planning; and Mr. Himan Soni, Head Legal and Company Secretary of Time Group. I would now like to hand over the call to the management for their opening comments, post which we will open the floor for Q&A. Thank you, and over to you, sir.

Yes. Thank you very much. My colleagues have already been introduced. So good in trends. We are here to discuss about our financial results for Q4 and also for the full year of '19 -- 2019 '20. Before we start the process, I think it is important for us to know that we are meeting in the background of the lowest our GDP growth in quarter 4 as the overall economy. Also the impact of COVID, which almost watched away the month of March. And also the disruption in logistics because weekends were not available and not to forget about the exit of the labor -- to margin labor to decided to re decrease. So being pretty challenging quarter, I must say that quite a few of these situations are full country, of course, in a different degree. So that is a bad one. I would like to talk about our Q4 results. So the net sales consolidated stood at INR 917 crores as against INR 1,084 crores. The EBITDA was at INR 119 crores as against INR 172 crores. EAO was INR 38 crores as against INR 74 crores, and the cash profit was INR 77 crores as against INR 114 crores. So there has been a shortfall in revenue. And the margins in Q2 fiscal year 2020 due to lock down on account of other things. I would also like to remind you that if you look at our historical numbers, 2Q always has been the biggest quarter for us. This contributes something like 30% to 35% of our NV turnover. And that is exactly where we had a situation developing, as I mentioned. During FY '20, the net stood at INR 3,580 crores as against INR 3,567 crores. EBITDA was at INR 501 crores as against INR 527 crores. PAT INR 169 crores as against INR 203 crores, and the cash profit was at INR 331 crores, which is against INR 354 crores. It will also be important to note here that until the end of Q3, we were well on our way to achieve what we had forecasted in the beginning of the year, but the Q4 on played as the call stock. So the net sales grew marginally by 2%, in India, it was [ 52% ] overseas was 2%. Of course, the volume growth was 4% in year of 4% and overseas was 5%. I think the difference between the value on volume growth was essentially with the drop in the prices of raw materials. EBITDA decreased by 5%, but a negative growth of 17%, and cash profit was lower by 7%. The major segments, which reflected due to COVID-19 is the PE pipe, but that's been a one single disappointment for us as we had expected is substantial between the value and volume growth was essentially due to drop in the prices of raw materials. EBITDA decreased by 5%, a negative growth of 17%, and cash profit was lower by 7%. The major segments, which reflected due to COVID-19 is the PE pipe, but that's been a one single disappointment for us, as we had expected a substantial growth in that segment in the last years. We are expecting it to be about INR 400 crores to INR 450 crores. We ended up doing only about ...

INR 293 crores.

INR 293 crores. So there has been a single product segment, which did not work at all, right? In terms of the EBITDA, we saw the margin would to be about 14% as against -- I'm talking about consolidated. Margin is 14% as against 14.77%, down by 77 basis points. Net profit margin also decreased by 96 basis points, which is 2.72% percent as against 5.68%. The value-added product, it was about 3% of we expect them to be half in FY '20 as compared to FY '19. The share of value-added now product is 20% as the total of -- and last week, it was about 20 -- 19% The work is -- the work continues in the same ratio, 75% was the local businesses in India and overseas was 29%. So we saw more or less the same kind of movement both in India and overseas. EBITDA margin in India was about 13.1%. However, the EBITDA margin overseas in 13.76%. But we plan that the EBITDA margin still get better PAT deposits rate in that area. In terms of polymer, unless it's compared with product, the polymer products remained 71%, and they grew by about 0.3%. And the composite product contributed 29%, with only about 75%. Like I said, CPI business was the one, which was very badly affected in the last year, owing to the state government not being able to provide funds for the project. As we know that we do not supply anything directly to the government. But our customers, let's say, current CEO, or our GCLO, so he tried to whoever, let's say the contract to the government. And most of these water projects are 85% financed by recent government in 15, 16 by the state governments. In the last quarter -- or in fact, throughout the year, but more pronounced in the last quarter, both the center government and Ted government cannot provide funds for these projects. So we have the orders, we still have this orders. But the dispatches were affected because we didn't want to take the risk of supplying without come from the increment, knowing well that the payments may get delayed. So that the ride to a drop in and the phase of PE type. So the total debt of the company were about INR 832 crores as against INR 830 crores at the end of last year where was the margin decrease of INR 8 crores. Of course, it is not better but in the month of March, payment selections were quite late and that is impacting that. With this, I would like to put on the floor side -- I give it back to [indiscernible] and then we can start the questions. Thank you thank you.

[Operator Instructions] The first question from the line of Jigar Shah from ICICI Securities.

Sir, my first question is related to how much sales have we lost in Q4 due to this lockdown? And secondly, on how we are doing currently in May and June as compared to previous year's Q1?

Okay. So the net impact that we are effect, of course, at the Q4, we have lost something like INR 190 crores in terms of the top line. And that EBITDA level, we lost about INR 45 crores. I think the reason was two fold. One, of course, the Q2 was not as big as we normally expect every year, where we normally have our large -- highest turnover. And I think that was the function of overall GDP growth in the last quarter. But the gain that actually came on update was this COVID situation. Both [indiscernible] and also overseas where we have could not get the payment from our customers because they were not ready to receive it because of [indiscernible]. Or even if we had the order enhanced the complete logistics go down. So we could not reach out. And I guess like we suffered, our customers suffered too. There are a lot of workers the contact level stopped coming. And they also become aware of the fact that the state of this product may not be as strong and they did not want to go or inventory at tops. So that is the impact in charge that we have actually suffered. But our INR 190 crores, the large part is being spike. And in fact, we have started with [indiscernible] inventory of pipes because in the last quarter, the government could not provide the sense to pay the price. So that is the last to you. Of course, for the present -- for the current financial year, of course, I may not have the comparative numbers, but I can give you an overall team that happened was the complete disaster because nothing was allowed to work admist lockdown, people movement was also stopped. And the migrant labor immediately stopped the work. As you know, that most of our factories are located in industrial areas, where we have to largely depend upon migrant labor because the local either is not available or is too expense. So [indiscernible] was very, very badly impacted. In the main program -- on the later part of me still started moving up a little bit. So in some cases, we could get the clearance for starting the operation with a lot of conditions of PAs that we have to have worker living inside your factory would provide them for, of course, the month, we did the follow, but these are very to burden. The biggest move was that we lost almost all our workers who are dealing with us and what we will be experienced in the NIC because they ran away to their native place [indiscernible]. We have to have people locally and then gain them up, which is a real change to offer. So the man that June has come back in that right. But then in the last week of June also, we saw this sudden lock down that different governments in Etinde were allowed on Damon, we had a carbonate. So now you cannot say, I mean, you can work today, but we cannot be sure that you will be able to go the next day. As we see my factory in demand has been close down at the local exitation because one of our security guys has been tested positive. Now because of that on the factory. Just the collector and it does it keep it close to 2 days and that we can start. So these are challenging on. I mean on one figure, but [indiscernible] .

The next question is from the line of Vikas Sharda from NPE assets.

Please could you talk us what is the situation in the international plants now? I mean, India is still going through the second share of the lockdown, but how is it within the international plans?

Yes. I think at compares that the internet business is [indiscernible] the local one. I mean, frankly, the government there on the economy involved. Unlike in India, there's [indiscernible] would just lighter protect stop the operation. And it's very difficult to we draw the product once we are giving it to them. The whole [indiscernible] is picking up better press we have also keep it in mind that there are first to go in the lock down a lot down, I clear coming out of that one. But yes, there are a lot of [indiscernible]. So by example, Bahrain and Saudi Arabia is still under lockdown. Dubai, you can do only half a day, only you can work in the day but not in the night. Thailand is still a place of some low complaints. So we are -- but we are not at that what we have in India.

All right. So I mean ...

Sorry, I was just saying the U.S. operation, I was expecting that to be terrible because of the number of cases and the debt we have been seen but supply is the least maybe they don't regard COVID-19 because it comes from China.

Yes. I mean, that appears to be the case. And sir, one thing, I mean your composite cylinders business should be the least impact is on the demand side because of the situation?

Yes, I mean, no the problem was that first 2 months -- I mean, we had the orders, but we cannot execute. As you know, our major customer is neighboring countries where we sell it by those we rise the material. But in the meantime, the rest all closed down. So for almost 1.5, 2 months attest up and in the meantime, Barasso Randy. So finally, in the last 10 days, we have been able to deliver that large quantity of cylinder. And as on the red, we have given a repeat order for the same quantity where I can give a quantity about 100 cylinder. We have a promoter that there is a the same number as we did last year. But having lost almost 2 months, we will have to see whether we would be able to do enough. But yes, you're right. Our Inda business should not be as badly affected otherwise.

Okay. And sir, quickly, I mean you mentioned that value-added products grew 3% Y-o-Y for FY '20. Could you split it out between the 3 key value-added products? How was it the performance for the three?

In the -- there's a margin increase, of course. As you see that sort of 19% is now contributing 20%. But there's not much of a change in terms of calendar

INR 190 crores.

INR 190 crores is what we did as against there is a margin increase only. I believe INR 376 crores as against INR 371 crores. And MOX was a little lower because INR 118 crores against INR 110 crores. The most is actually, normally, people stop those MOX starting from December, January, February, March. But in the month of March, the demanding where the MOX Stocktake place at that time. But it was still over that we should be able to get in this year. So that will not be a total loss.

Okay. But any particular reasons for slower growth in composite cylinders and except the 1-month or 15 days of disruption in the business?

No. As a matter that we are now getting very good traction from Europe. And maybe I would talk to you on one-on-one. We are now open up a very big geography, which has a substantially large requirement, and we should actually be starting the business from them as well. So I don't see the demand would be as much a problem, unless, of course, we see the second bond of worm virus. But otherwise, otherwise, we are -- we should be reasonably comfortable.

The next question is from the line of Harsha from Dimensional Securities.

So I wanted to understand, which are the underlying industry there very seller good to industries which are doing well and industries where you are seeing the demand has not yet recovered or certain industries where you are seeing impact growth. So can you just elaborate on that?

Yes. I can tell you, the pharmaceutical has been extremely well. So the food industry doing pretty well. So we are doing a good job there. Even Fine chemicals pesticides, insecticides, are doing well. I think the rural economy is doing fairly well, construction chemical is a disaster. They are not doing well at all. I think because the construction activity has stopped or not happening at all. In [indiscernible] Hopital has been very -- export has been stopped. So that is a bit of a problem. Otherwise, they would buy a lot of packaging products. But textile is also being very poorly and off demand. So I guess tendentious also our GDP driven businesses. So the industry, which are not doing well therefore, we will not be binding to that where our packaging news. But to ask the question that would be doing very well as we enter into the business after product, the PAT from India will pick up. We have already seen the signs of exports picking up. And the reason is simple. A lot of companies are shifting a talk about mathematic companies who are our customers. They want ships come up their manufacturing from China to other countries, which is let to India, Indonesia, Thailand, et cetera, and we sell detron there, so they will require strategy locally. But we are very excited that this should be benefited by that, we already got initial indications. And we certainly would find that some companies will shift out of China and find low-cost production areas. I don't know about India whether we are ready to receive the investment because of our heated net nil. But even if they come to Malaysia, Indonesia, Thailand, Vetnam or Taiwan, we are present in all 3 countries. And I'm sure we will be able to reap those benefits.

Yes. Got it. Correct. And have you seen any advanced inquiry of what you're talking about shifting or manufacturing base from [indiscernible]

Yes, yes, yes. The first one to do is the macmahon company. That's, for example, a European chemical company through a plant in India, Indonesia, Malaysia and China. And now they make certain products in China, they say. Now we will not produce it in China, and we would like to produce it in India. Right. And therefore, they were record packages, but they have already started testing our packaging for that product and have given a 3-month period to be ready. Another interesting thing that is happening, and I forget to mention, is the situation that we are seeing on the Northern front. Army normally buys drones every 2 or 3 years, basically for taking aviation fuel to very difficult areas and mitigants, et cetera, commence milk or whatever. So whenever there's one high situation, the demand suddenly comes up from them. We are already getting an indication that, that will be happening. So that is another sector, of course, nobody wants the wall to take place, but they've kept the aspers ready to support posters.

Okay. Okay. So actually, I was coming to that only. So given the current situation between India and China, I just wanted to understand how much are you dealing with then? Is there a certain proportion of raw material which you import from there. So could you share something on that part?

Yes, I tell you something very interesting, and we get this information from our ORP units who are in touch with the local customers there. Some of that, there is a certain version in buying in from China. And it is not announced in Europe proinvest in America because they're still struggling to find their feet in the ground. So but they are not going to China to buy the things. And I started looking for the tellers of the producers in other low-cost production areas. So China would be suffering because of this negative bulk that they have created. And of course, India was one of their favorites markets where they were dumbing whole a lot of chemicals because of the free duty and ready to being laid. I think Government of India is dealing with them on both the front, here the beauty might really grow up. And secondly, it is almost impossible to clear a component coming from China, so-called 100% check would mean that your container cannot come out of the code for at least 2 months. And that will give us a lot of [indiscernible] and detention. So we have found that the local traders who are buying chemicals from China and selling it in India are now turning towards the Indian manufacturers for buying the product. But we would be able to start our packaging to them. Yes.

Okay. Okay. Sure. Sure. And can you give us some outlook on the raw material prices? I mean, we saw the Brent crude falling from $60 to -- $14, $15 and average back to $40, $42. So how did it impact your procurement prices of your raw material?

The raw material is hovering around the same levels. We have seen a drop in demomatic prices in the average raw material price. Of course -- now they have started picking up a little bit. But I guess that is we expect the price of polymers to be more or less stable with their innovative buyers.

Okay. And do you expect any inventory loss on the inventories that you're getting?

They are now easing and you know that. The foreign exchange is also in -- as again, we alias around INR 70 to INR 71, [indiscernible] is between INR 70, INR 60, INR 77. So whatever price down by 7%, 8% cataldo, that has been compensated by OE. So don't expect any kind of the inventory also like that?

No we are not. We are not expecting any inventory. Yes. So as a invent it could be a little bit more because we are continuing that it is delayed because of for basin production.

The next question is from the line of Ravi Sharma from CGI and Mutual Fund.

I have 2,3 questions. First [indiscernible] the deal from the Q1 [indiscernible] , how do you expect Q1 FY '21 in terms of top line and margin

Sir, we are not able to hear you ...

You're not able to hear you clearly. Can you just step back a little bit

Am I audible now?

Okay. Yes, right.

Yes. So given that Q1 was -- we assume the impact of shutdown, how you expect FY '21 in terms of margin performance. [indiscernible]

Okay. I still couldn't hear it clearly, but compatible little, I could understand. You are uncaring about how we have seen '21 and the margins thereof, right?

Yes, yes.

Right. Okay. So let's put it this way. Our Altese operations are reasonably well of course, I would say, they're back to what they used to be. So we have a challenge. But I'm expecting in the H2, that would really be back to Q1, they of course will be doing so well. Q2, they will ramp-up and Q3 and Q4 [indiscernible] sometimes [indiscernible] paid stocks virtual tax rate coming in. We would expect other things nothing to get stable in quarter 2. And quarter and quarter 4, in any case, are strong for us. And I think the impact of exports and the local industry is coming back. So the one thing even today, let me tell you, quite a few of our customers are not able to start their operations because they also don't have data. The context labor is going to be. So semi cut, they're also calling them up and making them back to come to us. And that means, in Q2, they will also get stabilize. So Q1, not suggest, Q2 will be fair. And I think in Q3 and Q4, we should be equate to what we are expecting.

Okay. In terms of margins?

You have a lot more output than your fixed cost impact of margin. So in Q1 and Q2, we might see a little bit of a pressure on the margins. But if the demand picks up in Q3 and Q4, and especially for exports, et cetera, I think we should be back to near-normal EBITDA margin that we have seen in the past. It is very difficult for anybody to say how -- because you know that they have declared lock down to 31st July. I mean nobody was expecting that to happen. And we have made all the arrangements, thinking that large be that normal, but didn't happen. So right now, they're so many moving pieces. But I'll be able to answer your question a bit more intelligently at the end of Q1 results that will we come for the content.

Sir secondly, in your value-added products, do you expect a change in mix in -- for this year, at least that is your value ad products change to be higher in the mix or lower in the mix? What are the dynamics that you are taking right now?

I think just that you ask you this question is favorite. You see, one of our value-add product is contested. Right. And I told you that we have orders, so probably we'll get new orders. That's not really a big deal, but we see a lot of production for 2 months. So that affect the margin a little drop in it. But interestingly, and I think my colleagues have already talked to you about CNG cylinders, right? We have been working for the last 1.5 years, almost 2 years on CNG cylinders compared with both for CapEx and also for onboard applications. And normally, it takes about 3 years to get that rule from peso. I'm very happy to tell you that our -- as cat cylinder has been approved, we are still waiting for the service fiscal issues. Now that has a huge, huge potential. And thanks to government of India. They have increased the size of fuel to a point where a lot of people are not wanting to change over to CNG. So the number of changing gas stations will go up. And then will require the caskets to bring CNG from their mobile stations. And there is a very large requirement of caskets. And to use the value-accretive business for us, I am expecting that in Q3 onwards, that product will come in the market for us. And I can promise you then we now looking back because nobody else can make that product in India. And I think worldwide, there are only 3 companies in including us who have brought that product.

No. And sir, last question from my side is our view on both on any repayment and CapEx this year?

Yes, our debt does remain more or less the same. In '19/'20, we expect the debt a bit more at the end of this. And at the end of this year, we have provided, even last year, we had planned a CapEx of INR 200 crores, but we stopped that 150 -- INR 135 crores. This year, we have planned a CapEx of INR 100 crores. And you know that our maintenance CapEx up is about INR 75 to INR 80 and then from automation, et cetera. So you can say that we are stepping down our CapEx completely. We use our accruals to reduce the debt.

Next question is from the line of Amruta Bi from Digit Insurance.

For most of my questions have been answered. Just a couple of a [indiscernible] first of all, I wanted to understand the CapEx guidance again, again, the return on the line. As I mentioned, it would be INR 100 crores for FY '21, around INR 75 crores to INR 80 crores in maintaining Capex?