Himadri Speciality Chemical (500184) Q4 08/09 earnings summary

Executive summary

• Revenue and EBITDA grew despite a severe downturn in downstream markets; net profit fell sharply after inventory write-downs and foreign-exchange losses.

• Strategy centered on forward integration, product diversification, export growth and capacity expansion across coal tar pitch, carbon black, SNF and advanced carbon materials.

Financial highlights

• FY08-09 net sales rose 3.37% to Rs. 37,548.33 lacs; EBITDA increased 11.84% to Rs. 14,568.50 lacs.

• Profit after tax declined 43.60% to Rs. 4,677.65 lacs, reflecting a Rs. 3,060.21-lac inventory write-down and Rs. 1,716.37-lac foreign-exchange loss.

• Exports grew 70.87% to Rs. 7,805.70 lacs; export share rose to 17.93% from 10.62%, while domestic sales declined to Rs. 35,732.84 lacs.

• Q1 FY09-10 revenue fell 7.25% YoY to Rs. 8,487 lacs, but EBITDA rose 7.42% to Rs. 3,737 lacs and post-tax profit advanced 7.95% to Rs. 2,268 lacs.

Outlook and guidance

• Management expected FY09-10 and subsequent growth, supported by higher capacity, new higher-value products and expansion of domestic aluminium demand.

• SNF demand was forecast to grow 25% annually over five years; planned SNF capacity was 18,000 TPA, with expansion targeted for commissioning by December 2009.

• Coal tar distillation capacity at Mahistikry was being expanded from 91,000 MT to 172,000 MT annually; the China project planned 100,000 TPA of pitch capacity.

• Planned advanced-carbon-material development included moving from carbonisation to graphitisation, with direct lithium-ion battery market access as the objective.