Content on this page requires a newer version of Adobe Flash Player.

Get Adobe Flash player

ir-homeeproc

Email This Print This Financials

Full year Financial Statement And Dividend Announcement for the Year Ended 31 March 2017

Financials Archive

Get Adobe Reader Note: Files are in Adobe (PDF) format.
Please download the free Adobe Acrobat Reader to view these documents.

Income Statement

Balance Sheet

Review of Performance

The principal activities of the Group are (i) manufacturing of Pigments, Agrochemicals, Basic Chemicals (Caustic Chlorine and Caustic Potash) (ii) trading of Pigments and its intermediates (iii) trading of Agrochemicals, Technical, Intermediates products and Small Packing.

Review of results for the year ended on 31 March, 2017

Revenue - Group

Group revenue for FY 2017 increased by 6.6% from Rs. 13170.39 million in FY 2016 to Rs. 14035.90 million in FY 2017.

Breakdown of Revenue by Product

Breakdown of Exports Sales by Product

Breakdown of Domestic Sales by Product

Reasons for Increase / (Decrease) in Sales

  1. Export sales of Pigment Division increased by 12.10% due to higher realization of CPC Blue and quantity sales.
  2. Export sales of Agrochemical Division increased marginally by 0.4% .
  3. Export sales of Basic Chemicals increased by 106.6% due to new export customers.
  4. Domestic sales of Pigment Division increased by 31.2% because of higher quantity sales of Alpha Blue and Beta Blue.
  5. Domestic sales of Agrochemical Division increased by 32.1 % due to increase in sale quantity of 2, 4D and Cypermethrin.
  6. Domestic sales of Caustic Chlorine Division decreased by 3.6 % due to less quantity sales and reduction in ECU during the year.

Revenue - Company

Company revenue for FY 2017 increased by Rs. 825.08 million i.e.by 8.8% from Rs. 9428.08 million in FY 2016 to Rs. 10253.16 million in FY 2017.

BREAKDOWN OF REVENUE BY PRODUCT

Breakdown of Exports Sales by Product

Breakdown of Domestic Sales by Product

Reasons for Increase / (Decrease) in Sales

  1. Export sales of Pigment Division increased marginally by 2.9%.
  2. Export sales of Agrochemical Division increased marginally by 0.5%.
  3. Export sales of Trading Division decreased by 21.2% due to less export orders.
  4. Domestic Sales of Pigment Division increased by 31.2% mainly due to higher quantity sales of CPC Blue & Beta Blue.
  5. Domestic Sales of Agrochemical Division increased by 32.1 % due to increase in sale quantity of 2,4D and Cypermethrin.
  6. Domestic Sales of Trading Division decreased by 35.5% mainly due to less quantity sales.

Gross profit - Group

The gross profit decreased by 3.7% from Rs. 3014.50 million in FY 2016 to Rs. 2903.33 million in FY 2017. The gross profit margin decreased from to 22.9% in FY 2016 to 20.7% in FY 2017.

Breakdown of Gross Profit by Division

Reasons for Increase / (Decrease) in GP Margin

GP of Pigment

The gross profit of Pigment Division increased by 11.6% due to higher quantity sales of Alpha Blue and Beta Blue. While GP margin decreased marginally from 20.9% in FY 2016 to 19.9% in FY 2017 due to pressure on sales prices of Alpha and Beta Blue.

GP of Agrochemical

The gross profit of Agrochemical Division decreased by 12.3% . because of pressure on sales prices. The GP margin decreased from -20.4% in FY 2016 to 16.2% in FY 2017 due to decrease in Sales Quantity of Zeta Cypermethrin and MPB.The Raw material consumption also increased.

GP of Caustic Chlorine

The gross profit of Caustic Chlorine Division decreased by 10.5%. This is due to decrease in Production and Sales quantity. The GP margin decreased from 33.7% in FY 2016 to 30.4% in FY 2017 due to decrease in ECU.

Gross profit - Company

The gross profit at Company level decreased marginally by 1.3% from Rs. 1767.75 million in FY 2016 to Rs. 1745.37 million in FY 2017. The gross profit margin decreased from 18.7% in FY 2016 to 17.0% in FY 2017. The main contributories for decrease in gross profits is Agrochemical and Trading division.

BREAKDOWN OF GROSS PROFIT BY DIVISION

Reasons for increase / (decrease) in GP margin

GP margin of Pigment

The amount of gross profit of Pigment Division increased by 11.6% due to higher quantity sales of Alpha Blue and Beta Blue. The GP margin increased marginally from 18.4 % in FY 2016 to 18.6% in FY 2017.

GP of Agrochemical

The amount of gross profit of Agrochemical Division decreased by 12.3%. because of pressure on sales prices. The GP margin decreased from 20.4% in FY 2016 to 16.2 % in FY 2017 due to decrease in Sales Quantity of Zeta Cypermethrin and MPB. The Raw material consumption also increased.

OTHER OPERATING INCOME – GROUP & COMPANY

Other operating income of the Group and the Company which consists mainly of export benefits such as Focus Product Market Incentive Scheme, duty drawback, etc. has increased by Rs. 48.74 million and Rs. 49.22 million in FY 2017 respectively mainly due to increase in export incentive rate and introduction of new scheme MEIS and Duty Drawback Benefit.

DISTRIBUTION, ADMINISTRATIVE AND OTHER OPERATING EXPENSES - GROUP & COMPANY

Distribution expenses

Distribution expenses of Group increased by Rs. 31.57 million, i.e. by 3.9% and the Company increased by Rs. 20.33 million i.e. by 2.9%. This is in proportion to increase in Domestic sales during the year.

Administrative expenses – Group & Company

Administrative expenses of Group increased by Rs. 27.18 million i.e. by 10.5% mainly due to increase in rates & taxes, legal & professional fees and payment of performance bonus to Working Director and at Company level decreased by Rs. 55.62 million i.e. by 19.5%.This is on account of Diminution in value of investment of wholly owned subsidiary in the previous year.

Other Operating Expenses

Other operating expenses decreased mainly on account of favourable in foreign currency exchange adjustment. The fluctuations in the exchange rate of the Indian Rupee against the US dollar and mark to market on derivatives are main contributory. Other operating expenses reflect income in current and previous financial year.

Finance costs

Finance costs of the Group during FY 2017 decreased by Rs. 129.11 million, i.e. by 20.2% at Company level decreased by Rs. 55.85 million i.e. by 13.3% the reason being capitalization of interest, reduction in rate of interest and repayment of Term Loan.

Income from investments

During the year the Group and Company level income from investment is Nil

Taxation

Income tax of the Group increased by Rs.44.29 million in FY 2017 and at the Company level increased by Rs. 105.66 million in FY 2017 due to increase in profit.

Interest in Subsidiaries

  1. Meghmani Organics USA Inc., is a 100% wholly owned subsidiary of the Company. The Company is in the trading business.
  2. Meghmani Europe BVBA is a 100% wholly owned subsidiary of the Company. The Company is in the trading business.
  3. Meghmani Finechem Limited (MFL) is a company formed to set up Rs. 555 Crore Caustic Chlorine project. Meghmani Organics Limited holds 57% of the Equity.
  4. P T Meghmani Indonesia is a 100% wholly owned subsidiary of the Company set up for the trading purpose.
  5. Meghmani Overseas FZE, Sharjah is a 100% wholly owned subsidiary of the Company. The Company is in the trading business.

SGX Rule 716

As per Rule 716, we declare that no one of the above Subsidiaries or Associates is listed on any of the Stock Exchanges.

Other Comprehensive income.

Other comprehensive income (OCI) is defined as comprising ‘items of income and expense (including reclassification adjustments) that are not recognised in profit or loss.

BALANCE SHEET

Trade receivables

The balance of Group Trade Receivables increased marginally by Rs. 39.76 million, i.e. by 1.2% and at the Company level by Rs. 29.03 million i.e. by 1.0%. The receivables turnover ratio decreased from 91 days as at 31 March 2016 to 86 days as at 31 March 2017. The decrease in receivable turnover ratio indicates improvement in collection.

Inventories

The Group Inventories for FY 2017 decreased by Rs. 708.97 million and at the Company level by Rs. 548.35 million. The Finished Goods and Raw material Inventories decreased.

Property, Plant and Equipments

Property, Plant and Equipment at Group level decreased by Rs. 301.18 million and at Company level decreased by Rs. 53.79 million in FY 2017 respectively

Bank Borrowings and Long Term Loan

Bank borrowings (current and non current liabilities) in FY 2017 at Group level decreased by Rs 1093.75 million This is mainly due to repayment of term loan while at the Company level it decreased by Rs. 507.10 million.

Trade payables

Trade Payables of Group decreased by Rs. 271.48 million in FY 2017 while that of Company level by Rs. 49.23 million. This indicates decrease in payable for material and services.

Other payables

The Other Payables of Group increased by Rs 73.68 million in FY 2017 while that of Company decreased by Rs. 1.75 million.

Cash flow statement

During the year, the Group generated positive cash flows of Rs. 1907.39 million while Company generated Rs. 685.63 million from operating activities.

FINANCIAL ANALYSIS – GROUP LEVEL

Commentary

1) INDUSTRY STRUCTURE: –

Pigments:-

Pigments are classified as either organic or inorganic. Organic pigments include azo pigments, which contain a nitrogen group; they account for most of the organic red, orange, and yellow pigments. Copper phthalocyanines provide brilliant, strong blues and greens that are unusually colourfast for organic colours. Some pigments, such as fluorescent ones, are simply dyes that have been rendered insoluble by chemical reaction. Traditionally organic pigments are used as mass colorants. They are popular in plastics, synthetic fibres and as surface coatings-paints and inks. In recent years, the organic pigments are used for hi-tech applications that include photo-reprographics, opto-electronic displays and optical data storage.

Organic Pigments Market Dynamics :-

Major factors driving growth of the organic pigments market include their increasing use in plastic, paint, coatings and textile industries.

Moreover, upswing in number of textile industries and increasing demand of plastic products owing to various macro-economic factors is expected to boost the demand of organic pigments, in turn, fuelling the growth of global organic pigments market over the forecast period.

Manufacture of organic pigments with good light fastness property is gaining traction among global manufacturers. Besides, developing countries such as China & India are shifting towards becoming the center of global organic pigments market, both from the demand and supply side. Moreover, owing to their ability to providing a wide color spectrum compared to their inorganic counterpart, organic pigments are expected to substitute inorganic pigments for some specific applications over the coming years.

Organic Pigments Market: Segmentation :-

Global organic pigments market is segmented on the basis of source of production and application.

  • On the basis of production source, global organic pigments market is categorized into natural and synthetic segments.
  • On the basis of application, global organic pigments market is segmented into paints and coatings, plastics, printing inks, textiles, cosmetics, food, chemical, and others.

Organic Pigments Market: Regional Outlook :-

Global organic pigments market is segmented into seven key regions namely North America, Latin America, Eastern Europe, Western Europe, Asia-Pacific Excluding Japan (APEJ), Japan and Middle East and Africa (MEA). Upsurge in development of textile & plastic industries in Asia-pacific is expected to boost the demand of organic pigments market in the region by 2026 end.

Overview of the global organic pigments market :-

Organic pigments have peculiarly unique properties that ensure hues that other kinds of pigments fail to produce. They are used to provide metallic finishes and elastic properties. Owing to superior property, organic pigments are highly preferred in specialized applications in the original equipment manufacturers (OEMs), refinished, and high-end automobile industries. Organic pigments are also being used to improve aesthetics and the functional values in both paints and plastics segments. These pigments are used in paints that can protect against harsh weather, dampness, corrosion, fungi, and other destructive influences on the building. Moreover, some of them are also used as a plasticizer dampened powders that allow functional advantages such as light reflection, heat reflection, opacity, and gas and vapor barrier. With paints and coatings with low VOC content gaining prominence, the market for organic pigments is expected to witness massive growth during the forecast period.

In terms of geography, Asia Pacific (APAC) is the largest and dominating region in the global market due to the presence of several manufacturers who offer pigments at lower costs in comparison with other regions. APAC is anticipated to lead the market in terms of consumption over the next four years due to increase in infrastructural activities that require paints and coatings with functional benefits. Moreover, the sustainability factor of organic pigments is expected to drive the overall market globally throughout the predicted period.

Competitive landscape and key vendors

The global organic pigments market is extremely competitive owing to the presence of several vendors both at international and regional levels. BASF, Clariant, DIC, Heubach, and LANXESS are some of the global vendors who primarily dominate the market.

The printing inks segment was the largest application segment of organic pigments in 2016 and will continue its dominance during the forecast period. Organic pigments are preferred in printing inks because of their brilliance and rich tinctorial strength. Disazo pigments and naphthol AS pigments are the commonly used organic pigments in the manufacture of printing inks.

Moreover, the rapidly changing consumer demands, along with the growing importance of packaging as a means of branding and advertising, have increased the applications of organic pigments in the packaging sector; which will further drive the market growth for organic pigments for printing inks.

Based on in-depth research, TMR projects the global pigments market to exhibit a moderate CAGR of 3.8% between 2015 and 2023. If the projection holds true, the global pigments market will reach US$31.98 bn by 2023, from a valuation of US$22.86 bn in 2014. Volumewise the market is expected to report a CAGR of 2.9% during the forecast period (Source: - Transparency Market Research)

Organic Pigment business (coloured) is estimated to be close US $ 6 billion market, of which Phthlocyanine, Azo and High Performance Pigment are main areas. In case of Phthlocyanine pigments, market size is in the range of 20% i.e. about US $ 1 to 1.25 billion in size. In its latest study, Ceresana forecasts global revenues generated with pigments to increase to US$34.2 billion in 2020.

In its latest study, Ceresana forecasts global revenues generated with pigments to increase to US$34.2 billion in 2020. The main factors that are contributing to the growth in the industry are increase in demand for high performance pigments (HPP), growth in end-user industries and increasing preference for environmentally-friendly products.

The paints & coatings industry is recording significant growth due to growing infrastructure. According to the industry estimates, the global demand for paints & coating is anticipated to grow at a CAGR of 5.4% during the next five years. Printing ink is another application of the colorants market. The demand for printing ink is driven by various factors such as technological developments and increasing demand for digital inks.

ASIA PACIFIC REGION TO REMAIN FASTEST GROWING

The report confirmed that the Asia Pacific region is anticipated to witness highest regional gains at over 5% CAGR.

Pigment market growth in Asia Pacific is primarily driven by the automotive and construction industries, as well as increasing manufacturing and infrastructure development (specifically in China and India). Asia-Pacific region, organic pigment demand is expected to reach 316.2 thousand MT by 2018, at a high CAGR of 6.6% from 2013 to 2018. The key countries covered in Asia-Pacific Pigments Market are China, India and othersEastern Europe, the Middle East and South America will see demand rise by more than 3% p.a. each as well and thus contribute to the positive development of the pigment industry. The rather saturated markets in Western Europe and North America will slowly return onto a growth path after they suffered losses in the past couple of years. (Source: Crersana.)

1) AGROCHEMICALS - INDUSTRY STRUCTURE:-

There are broadly 5 categories of crop protection products:

  1. Insecticides: Manage the pest population below the economic threshold level
  2. Fungicides: Prevent the economic damage due to fungal attack on crops
  3. Herbicides: Prevent/ inhibit/ destroy the growth of unwanted plants in a crop field
  4. Bio pesticides: These are derived from natural substances like plants, animals, bacteria & certain minerals. These are non-toxic & environmental friendly
  5. Plant growth regulatorsIndia’s agrochemical industry can be divided into producers of technical agrochemicals - the bulk actives - and formulators who compound actives in forms that enable use.

In India, there are about 125 technical grade manufacturers (10 multinationals), 800 formulators, over 145,000 distributors. 60 technical grade pesticides are being manufactured indigenously.

Many technical producers are forward-integrated into formulations, unlike in the pharmaceutical industry where there are who make nothing but active pharmaceutical ingredients (APIs).

2) GLOBAL AGROCHEMICALS MARKET:-

The global agrochemicals market is estimated to reach USD 265.04 Billion by 2022 at a CAGR of 4.51%. Factors like growing demand for food and consumer awareness, changing agrochemicals usage patterns, advantages of fertilizers and pesticides in crop production, increasing horticulture industries are the drivers for the market.

Development in technology to boost farm production with increasing government investments in agriculture to increase crop yields provides huge opportunities to this market. Asia-Pacific dominates the global agrochemicals market, accounting for major share in overall market and expected to remain the largest market in the near future due to the increasing demand for food crops from its key countries such as China and India

Lucintel's research indicates that developing countries such as China and India are demanding higher volumes of nutritious food, which will increase demand for agrochemicals. Agrochemicals have significantly increased farm productivity in both developed and developing countries.

Growth in revenue is expected to be higher than volume, owing to the increasing cost of pesticides. Development and registration of a pesticide active ingredient is one of the biggest components of cost for a pesticide company.

Presently, the cost of innovation and registration of an active ingredient is about $200 million, which is a 25% increase from 2000. Companies spend extensively on the research and development of new chemicals and improving the performance of the existing ones.

The pressure, therefore, is for the agriculture industry to increase yields per acre, which can be achieved through increased usage of agrochemical products.

As the study indicates, a large untapped market, shrinking of arable land in recent years, increasing demand for food grain production, and increasing population are anticipated to drive the global agrochemicals industry. The industry is expected to face certain challenges such as regulatory standards to reduce toxicity, high inventory, low profit margins, and patent expirations.

The global market has been witnessing lot of technological advancements and developments over the past few years. The changing buyers’ preferences, stringent environmental regulations, changing weather conditions, increased agricultural trade and improved farming practices are triggering the innovations and research efforts of the industry.

North America dominates the global herbicide market and has the largest market share in terms of volume and revenue. Europe is the second largest market for herbicides. North America and Europe are mature markets and are dominated by a few major players. To survive intense competition, companies in this region are focused on new product development.

The global agrochemicals industry experienced robust growth over the last five years but is expected to experience moderate CAGR of 5.4% over next five years (2012-2017) and reach approximately US $262 billion in 2017. New product development and innovation at competitive prices are anticipated to drive the agrochemicals industry.

3) INDIAN MARKET:-

Insecticides are largest sub-segment of agrochemicals with 60% market share whereas herbicides with 16% market share are the fastest growing segment in India. Other segments are rodenticides/ nematocides with 15% and 4%, respectively.

India is fourth largest producer of agrochemicals worldwide, after United States, Japan and China. Indian Agrochemical industry is valued at USD 4.76 billion in FY15 and is estimated to grow at a CAGR of 12% to reach USD 8.38 billion by FY19. Out of this, the domestic market is ~USD 2.43 billion in FY15. Almost 50% is constituted by exports, which is expected to grow by 16% CAGR to reach USD 4.87 billion by FY19, resulting in 60% market share in Agrochemical industry. On the other hand, domestic market will grow at ~8% CAGR to reach USD 3.57 billion by FY19. Indian Agrochemical consumption is one of the lowest in the world (0.6kg/ha). Compared to agrochemical usage, India's fertilizer consumption (~144 kg/ha) is much higher than the global average (~122 kg/ha). This reflects a large potential for agrochemical usage in India.

Availability of cheap labour and low processing costs offers opportunity for MNCs to setup their manufacturing hubs in India for their export markets. The sector is also driven by huge opportunity for contract manufacturing and research for Indian players due to large availability of technically skilled labour.

Indian population is expected to be 1.4 billion by 2020. The increasing population, coupled with growing income will generate increased demand for food grains and non-food grain crops. Therefore, Indian agriculture has to achieve and maintain a consistent and higher growth rate of 4 per cent per annum.

Agrochemicals play a critical role in ensuring food and nutrition security of the nation. With estimated 355 MMTPA (million metric tonne per annum) food grain requirement by 2030 from current 253 MMTPA, efficient usage of crop protection products and solutions for Indian agriculture are the need of the hour. In order to realise the true potential, industry, government and regulatory bodies need to work in tandem and embrace digital technologies to further improve farmer connect,”

(Source :- National Conference on Agrochemicals 2016 in New Delhi.)

The Companies in this sector should increase their investment in the field of research and development of agrochemicals which in turn will spur the exports increasing competitiveness in the global scenario.

The demand is also seasonal. India due to its inherent strength of low cost manufacturing and qualified low cost manpower is a net exporter of pesticides to countries such as USA and some European and African Countries.

Outlook for FY 2018

Raw Material Price

The volatility in foreign exchange market, increase in crude oil prices and raw material prices may impact on finished goods prices, as a result, our profitability is likely to be affected in 1Q FY 2018.

Market Price

The global markets for Pigment and Agrochemical products are improving, while Caustic Chlorine ECU have shown sign of improvement.

Profitability

The Group and Company revenue for FY 2017 has increased due to higher production. We expect to see the improvements in revenue from our Agro – III Plant and Dahej SEZ Pigment Plant.

The Market Dynamics are changing rapidly. While Net Profit after tax at Group and Company level has increased in FY 2017. The Group Profitability may be affected due to unpredictable market trends, rupee/dollar exchange rate and crude oil prices Fluctuation in ECU prices of Caustic Chlorine.

The erratic monsoon season might have impact on the sales and profitability of Agrochemicals in 1Q FY 2018