Thread by @ValueEducator

#SHKelkar Q3 2022 Concall Highlights

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Operational Highlights

1. Revenues from operations stood at Rs. 396.6 crore in Q3FY22 as against Rs. 375.4 crore in Q3FY21, higher by 5.6%

2. EBITDA margins remained stable on a sequential basis at 15.8% translating to EBITDA of 63.8 crore

3. Gross margins in 9M FY22 stood at 41.4%

4. Q3 FY22 revenues growth was driven on the back of rebound in consumer demand led by discretionary items and new client wins.

5. While the domestic core fragrance segment delivered healthy performance, sales in Southeast Asia region continued to be affected by the Covid surge and is yet to recover

6. The Company saw cost pressures on account of global inflation in raw materials and supply chain constraints, which impacted margin performance during the period.

In order to efficiently mitigate cost pressures, SHK is collaboratively working across customer segments and has been undertaking price hikes

7. Unless the debt is brought down to 2x of EBITDA, company will not look in for further acquisitions

8. CFF & Nova delivered growth on the back of stable demand and volume off-take in the Italian and European markets

9. With undertaking current acquisitions, net debt is expected around 550Cr in coming quarter

10. Cost of debt is between 3-3.5%

11. Target to maintain ROCE above 20%

Segment performance

Fragrance Division

1. The Fragrance division delivered a stable performance during Q3 & 9M FY22 despite raw material disruptions in the industry

2. Client wins across geographies continue to remain healthy

3. 91% of revenue i.e.360.7 Cr was contributed by fragrance division

4. EBITDA margins in the segment contracted by 100bps on YoY basis, margins stood at 14.2%

Region wise contribution

India- 55%, Europe- 26% and RoW- 19%

Domestic fragrance revenue grew by 11.6% YoY

Flavours Division

Margins were impacted on account of the raw material inflation
9% of revenue i.e.35.9 Cr was contributed by flavours division
EBITDA margins stood at 11.1% in Q3FY22 as against 11.3% in Q3FY21

Region wise contribution

India- 41%, Europe- 1% and RoW- 59%

Domestic flavours business grew by 3.8% whereas Europe contracted by 81.3% on YoY basis

New Acquisitions - Holland Aromatics

1. 62% of the stake has been acquired upon closure of the transaction on January 25, 2022 and the balance 38% shall be acquired in two tranches of 19% stake each over the next two years

2. The consideration for the acquisition of 62% stake is Euros 13.02 million. SHK funded the investment through local debt raised in Europe in order to avail the benefit of lower interest costs

3. The acquisition of Holland Aromatic will help to access and strengthen the client portfolio in the Indonesia region.

NuTaste Food and Drink Labs Pvt. Ltd.
SHK acquired a 100% stake at a total consideration of Rs. 13.25 crore.

SHK funded the investment through a combination of debt and internal accruals

4. The acquisition will accelerates the momentum of SHK’s flavour business and further brings on-board a solid and reputed customer base across the fast-growing FMCG & QSR space

5. The NuTaste is into chocolate, bakery and confectionery flavours, which will help in offering complimentary basket of products in concentrates and ready to use flavours to FMCG companies and nutrition supplements and flavours for beverages, pharmaceutical and bakery industry

Participation in Global RFPs

1. SHK is participating in a global RFP (Request for Proposal) and will engage with MNCs on an interactive pitch for commercial tender submission

2. Such global tender participation is in line with the Company’s strategy of more deeply associating with large global MNCs

3. The global RPF tender is what the company is looking forward and expects 5-7% value of the tender to be reflected in business