Navin Fluorine International : Q1 FY23 Earnings Call Transcript

"Navin Fluorine International Limited Q1 FY-23

Earnings Conference Call"

July 25, 2022

MANAGEMENT: MR. RADHESH WELLING - MANAGING DIRECTOR - NAVIN FLUORINE INTERNATIONAL LIMITED

MR. B. K. BANSAL - CHIEF FINANCIAL OFFICER - NAVIN FLUORINE INTERNATIONAL LIMITED

MODERATOR: MS. RASIKA SAWANT - ORIENT CAPITAL, INVESTOR RELATIONS PARTNER

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	Navin Fluorine International Limited
	July 25, 2022
Moderator:	Ladies and gentlemen, good day, and welcome to the Navin Fluorine International Limited Q1
	FY23 Earnings Conference Call.
	As a reminder, all participants' lines will be in listen-only mode and there will be an opportunity
	for you to ask questions after the opening remarks concludes. Should you need assistance during
	the conference call, please signal an operator by pressing '*' then '0' on your touchtone phone.
	Please note this conference is being recorded.
	I would now like to hand the conference over to Ms. Rasika Sawant from Orient Capital, Investor
	Relations Partner. Thank you, and over to you, Ma'am.
Rasika Sawant:	Thank you, and welcome to the Q1 FY23 Earning Conference Call. Today, on this call, we have
	Mr. Radhesh Welling - Managing Director of Navin Fluorine International Limited along with
	Senior Management Team.
	This conference call may contain forward-looking statements about the Company, which are
	based on beliefs, opinions and expectations as of today. Actual results may differ materially.
	These statements are not the guarantees of future performance and involve risks and
	uncertainties that are difficult to predict. A detailed safe harbor statement is given on page
	number two of the Annual Report of the Company which has been uploaded on the stock
	exchange and Company's website as well.
	With this, I now hand over the call to Mr. Radhesh Welling for his opening remark. Over to you,
	sir.
Radhesh Welling:	Hello everyone. Good morning to you, and I hope you all and your families are doing well.
	Warm welcome to all the participants. I am joined by Mr. B. K. Bansal - the Chief Financial of
	Navin Fluorine and Orient Capital, our Investor Relations Partner. I hope you all got an
	opportunity to go through our financial results and investor presentation, which have been
	uploaded on the stock exchange as well as Company's website.
	Before I move on to discuss the quarterly performance, let me take you through some of the key
	highlights and developments in the Company.
	At Navin Fluorine, one of our overarching responsibilities is execution excellence and comprises
	the ability to commission new capacities with plants and projects towards desired outcomes. I
	am happy to report that we inaugurated manufacturing plant for Honeywell International at
	Dahej on 12th July. Trial supplies have already started and commercial supplies will come in
	soon.
	As you all know, we received Board approval for this project on February 25th, 2020, and the
	entire country went into lockdown from March 2020 onwards. Also, this was a complete
	greenfield project where we had to first get the land ready and then start working on specific

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Navin Fluorine International Limited

July 25, 2022

manufacturing plants. We have managed to successfully complete this large and complex project through three tough phases of COVID-19 pandemic.

Setting land in around two years is demonstration of our strong technical capabilities and our commitment to growing our partnership with Honeywell. The next generation product out of this facility has a very low global warming potential (GWP) and no ozone depletion potential, thereby helping customers lower their carbon footprint and improve energy efficiency without sacrificing end product performance.

From this financial year, we have redefined our business units and implemented a new organizational structure with very clear three BUs each headed by operating CEO with full P&L responsibilities. The three business units would be High Performance Product, CDMO, that is Contract Development and Manufacturing Organization, and Specialty Chemicals. High Performance Products business would include erstwhile inorganic fluoride, refrigerant gas and high-performance products.

I am also very pleased to inform you all that we have appointed Mr. Partha Roychowdhury as CEO of our HPP business. As some of you might know, Partha worked with Navin from 1995 to 2016 and was the CFO in his last role. He understands the Company and business very well, and I am very happy he is back at Navin Fluorine.

Let me now take you through the operating performance for Q1 FY23, and then Mr. Bansal will update you on the financial performance:

Operating revenue stood at Rs. 386.8 crore, a growth of 23% on Y-on-Y basis. We recorded highest ever quarterly sales in Specialty Chemicals of Rs. 176 crore.

Operating EBITDA stood at 29.9 crores, growth of 28% on Y-on-Y basis. Despite several headwinds, we managed to achieve operating EBITDA margin of around 26%. Operating PBT stood at 88.1 crore with a growth of 32% on Y-on-Y basis.

Now moving on to discuss the operating performance of each business unit:

Our Specialty Chemicals business continues to deliver strong performance driven by strong partnerships. We achieved record quarterly revenue in this business unit in the last quarter and reported revenue growth of 32% on Y-on-Y basis at Rs. 176 crore for Q1 FY23. The growth of this business is driven and will continue to be driven by significant improvement in the new business pipeline. The segment has very strong pipeline of growth in line with our 3Ps principle: product, platform and partnerships. The revenue contribution from international business is about 48% and 52% is from our domestic operations.

Our HPP business grew by 33% in Q1 FY23 to Rs.152 crores compared to same period last year. From this quarter onwards, we have merged our erstwhile Inorganic Fluorides and Refrigerant Gas business and the new HPP business into new High Performance Product business vertical.

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Navin Fluorine International Limited

July 25, 2022

The growth in this unit for this quarter was driven by higher volumes as well as strong pricing in Inorganic as well as Refrigerant Gases business.

We are working on identifying new opportunities in our Inorganic as well as in the Industrial Gases portfolio. Revenue from the new upgraded graded plant for Honeywell will start from Q2 FY23. The international business contributed about 22%, whereas balance 78% is from our domestic operations.

Board has approved debottlenecking of Rs. 80 crores for a new molecule in this business unit at Surat. Manufacturing of this product will start from July 2023.

Our CDMO reported revenue of Rs. 59 crore in Q1 FY23. As we have already highlighted in the past, it's unfortunately difficult to assess performance of this business on a quarter-on-quarter basis. Our focus in this business continues to be on expansion of new project pipeline and further diversifying customer base. In this regards, we successfully completed an important plant audit for one of our large US-based companies and have already received first order from them. Work on the cGMP3 plant capacity expansion is scheduled to be finished on schedule in Q3 FY23, and we are working on preparing business case for cGMP4.

Now let me give you a quick update on our ongoing CAPEX programs, which we have announced in the last many months.

All our projects in Dahej, that's MPP, the one for dedicated plant for agrochemical customer, and one for the important building block are progressing well. Our plan is to commission MPP in stages from Q2 onwards, the dedicated agrochemical facility by December 2022 and the final project by December 2023.

We have also undertaken a large infrastructure upgradation project in Surat wherein we are investing in our R&D and pilot plants. All these investments are clear demonstration of the confidence Board has in the operating team and also of the operating team in the sustainable and profitable growth prospects for Navin Fluorine.

I will now hand over the line to Mr. Bansal to give you brief on the financial performance of the Company. Thank you.

B. K. Bansal:Thank you, Mr. Radhesh, and very good morning to all the participants. I will share the highlights of our performance in Q1 FY23, following which we will be happy to take questions from you all.

On the performance of Q1 FY23, as Mr. Radhesh has said that Company has reported net revenue from operations of Rs. 386.80 crore as against Rs. 313.9 crore in the same quarter of previous year showing a growth of 23%. Our EBITDA margin is Rs. 99.9 crore in Q1 as against 78 crore in Q1 FY22, a jump of 28%. It reaffirms our pricing power. Despite increasing input cost, we have been able to outperform on the margin front. Despite several headwinds, we

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