Conference Call with Ester Industries Management and Analysts on Q4FY20 and Full Year Earnings Performance and Outlook. Listen to the full earnings transcript.
Key Highlights from Management
Despite the nationwide lockdown due to Covid-19 pandemic at the end of the year, we have reported a strong financial performance during the fiscal. The profitability growth was largely driven by robust performance of our Film & Specialty Polymers businesses. Specialty Polymer business has had one of its best performances till date on the back of good demand and consistent product off-take.
The performance of both MB03 and innovative PBT showed marked improvement over the previous year. While Covid19 may have moderated growth momentum for a few months, we are confident of catching up soon, as business fundamentals continue to be structurally strong. We are also confident of even better prospects & outlook for the business going forward on the back of certain high margin products under development.
Film business continued to perform well on the back of increasing volumes and realizations. A strong demand from our International clients also contributed to the overall growth of the business. Through various initiatives, we were able to enhance productivity on sustainable basis by about 11%. In addition to enhanced production, improved margins have contributed towards significantly improved profitability of the SBU.
We are continuously taking initiatives to further enhance productivity over the coming years. Further our attempts towards improving the product mix by increasing the share of value added products should help us maintain the momentum.
As regards Engineering Plastics SBU, though performance during FY 20 is better than FY 19, the business continues to face challenges that are aggravated by the Covid19 outbreak, primarily on account of slowdown in the auto as well as electrical & electronic sectors. This SBU is likely to face challenges in the near term amidst Covid 19 pandemic in terms of lower volume offtake.
We are nonetheless undertaking steps towards reviving the business. We do not expect return to normalcy before second half of the current financial year. Given enhanced demand for packaged food & other items, there is a need to enhance capacity in Film SBU. Due to uncertainties created by Covid19, we had put on hold the implementation of the expansion announced in March 2020, but active steps are now being taken to begin the implementation of this project. We continue to repose confidence in the potential and resilience of the business
Strong performance of Film & Specialty polymers businesses resulted in higher profitability growth in FY20 Increasing volume & enhanced margins in Film business led to significantly improved profitability.
Stellar performance from high margin Specialty Polymers business – 85% volume growth, 140% revenue growth, 28X profitability expansion Strong operational performance, coupled with improved efficiencies and lower interest outgo contributed to 3x profitability in FY20.
Ester is diligently working towards continuously deleveraging its balance sheet and improving its leverage ratios. Total interest bearing debt as on 31st March 2020 stood at Rs. 142 crores comprising of interest bearing working capital of Rs. 68 crores and Term Debt amounting to Rs. 74 crores.
Interest bearing WC liabilities stood at Rs. 68 crores as at 31st March 2020 as compared to Rs. 99 crores as at 31st Dec 2019. Total Outside Liabilities (TOL) : Tangible Net Worth (TNW) ratio stood at 0.62 as at 31st March 2020 as compared to 0.74 as at 31st December 2019.
Out of the total Rs. 23.83 crores that will become due for payment in FY 2010-21, the company has already repaid Rs. 8.14 crore during April- June 15, 2020. Another Rs. 2.03 crore will be repaid on 30th June 2020. Given its strong financial & liquidity position; the company has decided not to avail the benefits of Reserve Bank of India’s moratorium scheme with respect to loan repayment.
The Board of Directors at its meeting held on 17th June 2020, has recommended final dividend of Rs. 2.50/- per equity share for the year ended on 31 March 2020, subject to the approval of the shareholders of the company in the forthcoming Annual General Meeting Further, the Board of Directors has also approved a formal dividend distribution policy which shall be effective and applicable for dividend from financial year 2020-21 onwards.
As per the policy, Ester shall endeavor to declare/recommend total dividend amount (both interim and final dividend) including applicable tax upto 20% of the annual Profits after Tax (PAT) of the company in any financial year
