Jubilant Ingrevia Q4FY22 Highlights

Segment Wise Highlights

Speciality Chemicals Segment

In the Specialty Chemicals segment the company delivered strong growth led by healthy demand across industry segments. Successfully commissioned Phase-1 of the Diketene and Derivatives manufacturing unit at the Gajraula facility.
Specialty Chemicals revenue grew by 35% on YoY basis driven by higher volume across product segments
Sales to Agro Chemical customers during the quarter grew to 37% of Revenue from 28% earlier registering a growth of 81% YoY
Revenue from Nutrition end use also improved during the quarter
EBITDA during the quarter increased by 17% YoY basis while the margins decreased to 18.2% from 21.1% in Q4FY21 mainly driven by higher input cost which they are in the process of passing on.
Sharp increase in key input prices for speciality chemicals were partially passed on successfully by the end of the quarter.
Speciality Chemicals overall revenue for FY22 grew by 24% over previous year FY21 mainly due to volume growth of 16%. This growth has come from both the domestic market as well as the international market.
During the quarter the company has signed a three years CDMO contract worth Rs 270 Cr with one of their innovative pharma companies in the international market.

Nutrition & Health Solutions

In Nutrition & Health Solution the company improved the profitability due to higher price realization and improved volume in North America.
The Nutrition & Health Solutions segment recorded modest growth of 3% driven by higher price and increased share of the North american market to 19% as against 14% last year same quarter.
Sharp increase in key input prices for nutrition and health solution segments were partially passed on successfully by the end of quarter.
The company’s focus is to maximize niacinamide share in niche segments like food and cosmetics and is giving positive results.
During the quarter the volume in the food and cosmetics segment grew significantly over last year’s same quarter.
EBITDA during the quarter grew by 18% on YoY basis. Also EBITDA Margin during the quarter was higher by 308 bps to 24.4% versus 21.4% over previous year in FY21 due to better price realization.
The Nutrition & Health Solutions segment overall revenue for FY22 grew by 22% over previous year FY21 mainly due to volume growth of 9%.
Revenue in North America and the European Union grew significantly by 78% and 65% respectively.
Food and cosmetics revenue has gone up significantly with 48% and 56% respectively.
Continue to focus on improving their market share in niche segments like food and cosmetics and to enhance their market share in the North American market.
Animal nutrition business continues making efforts to increase share of facility premixes through various initiatives.

Chemical Intermediates

(Company has renamed their lifescience chemical business as chemical intermediates)

In the Chemical Intermediates Segment, the company continued the higher sales with Pharmaceutical and Agrochemical customers and recorded healthy growth in the EU. Though profitability of the Acetyls business during Q4 was impacted due to sharp and consistent correction in Acetic Acid prices impacting our inventory, the overall impact of Acetic Acid price on profitability for full year FY22 was not significant.
The management ensured to maintain their per ton margin in chemical intermediates segment

Revenue of chemical intermediates during the quarter grew by 18% on YoY basis. This growth was driven by higher price of acetic anhydride and ethyl acetate mainly due to higher price of feedstock.
Revenue during the quarter from Europe and Japan has gone up significantly on YoY basis.
EBITDA was impacted YoY basis mainly due to impact of acetic acid price on their inventory led by sharp correction in acetic acid price during the quarter. However overall impact of acetic acid price on profitability for full year FY22 was not significant.
EBITDA Margin stood at 4.6%.
Overall revenue of chemical intermediates for FY22 grew by 61% over previous year FY21 due to volume growth of acetic anhydride as well as overall price realization both in acetic anhydride and ethyl acetate with the result overall EBITDA also grew by 77% in FY22 over previous year FY21.
Despite the challenging situation the company maintained domestic market leadership for acetic anhydride and ethyl acetate and successfully increased their market presence in Europe and Asia for acetic anhydride.

Outlook and growth capex plans

Continued to focus on completing the ongoing capex along with the debottlenecking of capacities for existing products and successfully commissioned Phase-1 of the Diketene and Derivatives manufacturing unit at the Gajraula facility.
They have also commissioned their food grade acetic acid plant during present quarter i.e., Q1FY23. In this plant they will produce acetic acid from renewable feedstock based green ethanol.
Out of Rs 2050 Cr investment plan, the company committed investment in projects worth Rs. 800 Crore till date and now they plan to invest about Rs. 1,250 Crore to be committed between FY23 & FY24 to expand their newly added chemistry platforms like Diketene and Agro Actives further strengthen the leadership in chosen areas of product portfolios including CDMO projects.
The company has committed capex worth Rs 800 Cr so far. All plants within this investment plan will be commissioned by FY24 and have a potential of incremental peak revenue Rs 1750 Cr at current prices.
In addition, they also plan to enter into Fluorinated derivatives, Fungicides (Agro Actives) and Grain based Specialty Ethanol as new business platforms.Planned completion and commissioning of all these new plants is expected by FY25, and these plants have a potential to bring incremental peak revenue of Rs 2,750 Crore at current prices.
Post completion of this overall growth related capital investments of total Rs. 2,050 Crore, at their optimum utilization the company is aspiring to achieve overall annual revenue of Rs 9,500+ Crore, this will also improve Revenue mix of Specialty and Nutrition segments and others to 65% from 46% in FY22, which is going to be the key driver for overall margin improvements of Jubilant Ingrevia Ltd.
Estimated Cash Outflow for FY’23 will be around Rs.550 Cr and for FY’24 & FY’25 will be Rs.650 Cr. & Rs.600 Cr. respectively. These capex cash out flow are intended to be funded through internal accruals along with reduction in debt.

Financial Highlights

Revenue grew by 20% from Rs 1078 Cr to Rs 1296 Cr on YoY basis, driven by growth in Speciality Chemicals and Chemical intermediate product segments. Similarly Revenue from operations grew from Rs 3491 Cr in FY21 to Rs 4949 Cr in FY22 witnessing a growth of 42%.
EBITDA during the quarter declined to Rs 152 Crore as compared to Rs 203 Cr in Q4FY21 which is lower by 25%
EBITDA Margin stood at 11.7% in Q4FY22 as compared to 18.8% in Q4FY21 mainly due to impact of Acetic acid prices on our inventory and sharp increase in key input prices for Speciality Chemicals and Nutrition & Health Solutions segment which were passed on partially during the quarter.
The EBITDA for FY22 was at Rs 863 Cr as compared to Rs 627 Cr during FY21 with a growth of 38%.
PAT during the quarter was at Rs 69 Cr as against Rs 95 Cr in QFY21 witnessing a decline of 28%. PAT for FY22 was Rs 477 Cr as against Rs 316 Cr in FY21 witnessing a growth of 51%.

Q&A Highlights

Breakup of Rs 1250 Cr Incremental Investment

Speciality Chemicals – Rs 750 Cr

Nutrition and Health Solution- Rs 200 Cr

Chemical Intermediates- Rs 300 Cr

They have a plant of fluorination where they are using HF and they are making the fluorinated derivatives which they want to further expand because the fluorinated derivatives demand is going up.
Acetic acid prices are more or less in the same range as it was in the last quarter. There is no major change in acetic acid price.
Cost pressure on acetic acid given that crude prices are gone up- Acetic acid prices are already at a higher level, they have adjusted to the cost increase which has happened in the crude and other raw material.
Existing customers (innovator international customer) are asking them to develop new products and supply them. We keep doing value addition in the existing product range so investments are required for making those derivatives – value added products. There are new platforms which they have been working on in R&D for almost 3-4 years in the past those are now being implemented one by one and that is based on the customer demand. Everything is driven from the customer demand whether it is value addition of the existing product or customer requirements or the new place.
Earlier investment plan was of Rs 950 Cr. Out of that Rs 800 Cr has been invested. FY22 cash outflow is close to Rs 243 Cr because most of the capex has been approved during the year and cash outflow will start happening in this year (FY23).
Board has approved Rs 800 Cr capex. Out of Rs 800 Cr some are still ongoing.

Estimated Cash Outflow for FY’23 will be around Rs.550 Cr and for FY’24 & FY’25 will be Rs.650 Cr. & Rs.600 Cr. respectively.
Once the company brings these new capital investments with value-added products the management expects their margins to be improving specifically in the speciality chemical segment.
In the short term there might be an impact on margins.
There has been some delay in passing on the input prices in speciality chemicals that has affected the current quarter margins.
The input cost which is raw material as well as the utility prices are still very high and there is no settling down on the input prices so definitely the improvement in volume and revenue will happen but margin might not increase because of high input prices.
Jubilant Ingrevia is a chemistry driven manufacturing organization. The company is dealing with global scale products. They are having market leadership in all these products.
They are focussing more on speciality chemicals and nutrition and health solution segments which definitely improve the current margins.
Focussing on:

Sustainability and safety in the operation
Ensuring that whatever they are planning comes on time so that they can deliver the projects on time
Closely look at the cost and continuous improvement to make sure that we are competitive in market

They are developing new products for their international customers where fluorination chemistry is involved. They have developed the product in R&D and are scaling it up. Because of the demand coming up on a commercial scale we will have to put up the commercial plant of fluorinated derivatives.
They are very strong globally in pyridine derivatives. They have a very large facility of chlorinated pyridine as well as brominated pyridine. Now customers have been asking them to develop fluorinated pyridine so they have developed a couple of products and they have been successful at a small scale running HF based fluorinated facility which has successfully delivered the product at a smaller scale. Now because the customer demand is going up they will have to bring a commercial scale facility of HF based fluorination of fluorinated pyridines.
The products are specifically developed for international customers. They are very specific CDMO types of projects. They are more innovative molecules.
Today Ingrevia has one non-GMP intermediate facility for cdm, two GMP facilities for cdmo. Recently expanding one more GMP facility for cdmo

They are going for greenfield gmp facility for cdmo, also adding two multipurpose plants for cdm. Therefore growth in cdmo is going to be significant in the future

Once the investment plan is complete and everything is ready by FY25 ramping up will not take more than 2 years.
Consuming a large volume of green ethanol to make derivatives which are used in our chemical intermediate, gradient derivative business as well as in the nutrition business. So the company is saving a large amount of carbon footprint.
The company is producing ethanol even today and it is selling ethanol to ebp program and also for some specific uses of pharmaceutical and agrochemicals. Sometimes they also use their captive ethanol but yes our volumes are very large so they have to import.
The management expects a double digit volume growth in the chemical intermediates segment.
In the speciality chemicals segment, the major business to the extent of 65-70% is coming from Agrochemical and Pharma. The volume of agrochemicals is showing a very positive trend. Pharma had a little softer trend in the last 2-3 quarters. These are the two key segments. Other than this the company is into antimicrobial segments and into cosmetics segment. Those segments are also showing positive trends and they are also adding some of the intermediates in these two segments. But Agro and pharma are going to be the key segments,
The Diketene derivative plant has been commissioned. They have also produced two commercial products. Two more are going to be commercialized very soon. With these 3-4 products management estimates to use the full capacity during the current financial year in which the volumes would be between 7000-8000 tons.
Other expenses have shot up from Rs 123 Cr to Rs 163 Cr

Reason:

There was a reclassification from an expense to other income the delta impact is impacting.
The other reason was the increase in the freight charges and for this quarter they had some maintenance charges so that maintenance expense has come.
In Q4 we have certain write offs, you do physical verification and everything so those expenses are also there

Therefore, Q4 other expenses are high.

Diketene has 3 key uses:

Dyes and Pigment industry
Agrochemical
Pharmaceutical
Antimicrobial (Consists of value added products)

The company is also developing molecules for the second phase of diketene derivatives and even getting into the other segments of end users.

Jubilant Ingrevia is globally the largest producer in pyridine and pre-pyridine derivatives. Pyridine chemistry is giving much much higher opportunity in future.

Agro actives and fluorinated derivatives are all coming out of the basic pyridine chemistry capability which the company has been working on for many years. In the last 30 years Jubilant Ingrevia is the cheapest cost producer in the world.