Q4 20/21

May 4, 2021

Quarterly report

Good morning, ladies and gentlemen. Welcome to the Q4 FY 'twenty one Earnings Conference Call of Alcon Castel Oil Limited. As a reminder, all participant lines will be in the listen only mode. And there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to mister Mayank Vaswani from CDR India. Thank you, and over to you, sir. Thank you, Luzanne. Good day, everyone, and thank you for joining us on Alicon Cashflow Limited's q four and FY twenty one earnings conference call. We have with us on the call today mister Rajiv Sikanth, group CEO mister Bimal Gupta, group CFO mister Shekhar Dravid, COO at Alicon mister Andrea Chaim, managing director of Illichman Castloy and mister Rajiv Gupta, head of domestic business at Alicon Castelloy Limited. Mister Vimal Gupta will start the call and cover the financial performance for the quarter and year, following which mister Dravid will walk us through the operating highlights. In order to share a more granular view of initiatives towards both the global and domestic markets, we also have mister Andriyas Hai and then mister Rajiv Gupta to provide insights on these areas. Mister Sikhan will then cover business developments, following which we will have the forum open for a q and a session. Before we begin, I would like to point out that some of the statements made in today's call may be forward looking in nature, and a disclaimer to this effect has been included in the earnings presentation shared with all of you earlier. I would now like to hand over the floor to Mr. Vinay Gupta for his opening remarks. Over to you, sir. Good morning to all our investors. I hope that all of you and your need near and dear ones are safe and well given the severity of the second wave. Thank you for taking our time to join our earnings call. The LVcon team drives immense gratification that despite loss of lockdown induced business volumes in the first half of the year, we were able to record growth in the second half that erased the effect of the deep recession in the first half. We ended the full year with healthy contributions from the Indian operations and our European subsidiary. We have delivered a robust performance this quarter as total revenues from the operations on a consolidated basis was at INR $3.23 crores in quarter four FY 'twenty one, higher by 63% year on year basis. Even on a sequential quarter basis, total revenue from operations grew by 20%. I am pleased to share that this has been the highest ever revenues reported by Elicon in a quarter. The growth during the period was driven by improved volume, growth supported by healthy realizations and richer product mix. Volumes were driven by strong performance in our domestic auto business, robust pickup in international business and improving contribution from the EV segment. Before this, our strongest quarter was Q4 FY 'nineteen, and we have been able to realign our performance to our longer term growth objective, which is a reflection of all strategic measures that we have undertaken over the last several years. Domestic revenues during quarter four FY 'twenty one were higher by 66% year on year basis, while international revenues, including those from our European subsidiary, Pilotman, grew by 56% year on year basis as OEM customers scaled up their production schedules. In Q4 FY 'twenty one, export and international business accounted for 23% of our revenues, while 77% was contributed by domestic revenues. Our auto business contributed to 92% of the total revenues for the quarter, and revenues from our non auto business stood at 8%. During the quarter, our subsidiary company, Itmann, received a retrospective sales price claim of INR 2.5 crores from customer related divisions in sales price. Having demonstrated the ability to ramp up volumes, this customer has given us enhanced supply schedule in the coming months at this higher price. This order puts us in a good position to showcase our technical capabilities to other customers and two seventy bps on a quarter to quarter basis. Our savings and cost optimization initiatives, coupled with a richer sales mix and uptick in Profit after tax for quarter four FY 'twenty one stood at INR 25.36 crore with a margin of 7.8%. This has improved substantially compared to the loss of INR 5.84 crore in quarter four FY 'twenty. Going to the lockdown announced in March 2020, we have also reported very strong growth in PAT on a sequential basis as it has more than doubled from quarter three FY 'twenty one. Another earning feature of our performance that I would like to share with you is that our focus on managing our working capital efficient Sir, your voice is breaking up. Hello? Yes. But now it's it's clear? Yes, sir. Thank you. This is progressing within the time line prescribed by the regulators. The funds from these proceeds will support our growth initiatives and will also enhance our liquidity and balance sheet position. As we look ahead, we are concisely following a measured and calibrated capital allocation strategy. With imminent stock business momentum and solid new wind company we will also have to appropriately fill up our melting and machining capacity and may have to undertake investments in developing capacities for special purpose equipment and process improvements depending upon customer requirements. The company will be concisely I trust all of you are well and staying safe. I will share with you some of the claims we placed in the quarter four. On the domestic, during the quarter, sales across OEMs witnessed a rebound from a low base with a strong demand emanating from a pandemic driven preference for our personal mobility and the new launches. Passenger vehicles and two wheeler sales continued to report healthy improvement in sales on a month over month basis. Commercial vehicles also saw increased sales on the back of improved sentiments, heavier price rates and improving demand from road construction and mining. The major pinpoint has been higher fuel costs. On the international front, most of our key export geographies in The U. S. And Europe reportedly healthy auto sales despite lockdown constraints in some of the parts of Europe during the quarter due to the concerns surrounding the second and third wave of COVID cases. We are quite encouraged to have reported a strong performance in the fourth quarter. There has been a lot of efforts undertaken over the last few quarters and years to position ourselves then to capitalize on the growth trends in the global auto industry. The results that we see this quarter and the momentum of the quarter ahead has been contributed by our five key strategic growth pillars. The first being our auto business, So overall in FY 'twenty one, we added 39 parts from 13 existing customers in domestic and 42 parts added from nine existing customers in exports. On the urban area side, we are witnessing improved sales across both two wheeler and four wheeler categories. Additionally, we have also seen some supporting reforms, favorable policies announced such as performance lift is interesting who supply onwards to JLR in the EV space. This is one of the examples where we have capitalized on the opportunity provided in this space. We believe our experience in aluminum castings will provide us an opportunity to become one of the frontrunners in the EV space. Recently, we also provided OEMs with thermal engineering solutions for the e mobility sector. Let me provide a brief overview of the applicability of these solutions. Gives us competitive technical know how. We have already partnered with Bosch and Samsung for this thermal management solution and have gained significant exposure in the European market. We are leveraging our IP and are now partnering with Dana Corporation to develop products embedded with ready to use technology. Few years ago, we were ramping up our process and R and D capabilities, and now we have successfully demonstrated a niche solution offering and look forward to capitalizing on more such opportunities from our customers in this space. Of INR twenty six point three With this strength in EV's pace, our target is to increase the contribution of EV into this portfolio. Now to the third growth pillar, being a technology agnostic platform. Across both IC and EV platforms and would remain relevant should there be emergence of any alternative technology, too. Our aim is to ensure that we gain relevance in interesting and accretive niche of these products by leveraging our core competencies. For example, previously, components such as the chassis and suspension components in combustion engines were in four steel, but we are increasing focus towards the light weighting driven by electric mobility. These components are now changing over to aluminum. This brings in another growth opportunity for Alicon. In addition, we are also getting increased inquiries from other OEMs for development of frames and control arms following successful completion of our orders with JLR for the same product booked for the market. I'm happy to share that we have also received RFQ for the new generation vehicle of JR. On the non auto segment, of FY 'twenty one. However, these actions undertaken by the government, we are hopeful that the second wave will be controlled. Across the company, we remain committed to employee safety and continues to follow strict adherence to social distancing, hygiene protocols and safety. On this note, I would like now to hand it over to Mr. Andrea Pham to throw light on our global business. Thank you, Pravik, and warm welcome to all of you. I will briefly cover the development on our international business. This quarter, Fasterloy has enhanced its contribution in the group financial performance. Those of you who are familiar with the Alicon story would know that EliteMAN merged into the Alicon Group in May 2010. EliteMAN was originally founded in 1929 in Austria, which is a plant in Slovakia from where it serves market clients across Europe. Since the European markets has been more readily accepting of electric vehicles, the development in these markets has witnessed a head start. There is a greater acceptance of EVs and better infrastructure at present. The Eastman facility is catering to demand for Samsung, Bosch and Mirador, which has helped scale up the volumes in this quarter. Further, some of the leading OEMs like JLR have been fairly aggressive in the EV adoption and the stated target to be 100% electric by 2024, '20 '20 '5. It's likely to unlock more opportunities for ELISMAN in the coming months. This will be a key contributor to the vision of the group to increase the contribution of the EV in this portfolio. In quarter four twenty twenty one, we have added three new parts from four global customers such as Titanic, Edgewood, Male and Itung. And in financial year 2021, we have added 42 new parts with nine global customers with three new logo additions from Flextonic, Ashworth and Mercedes. International business, including sales from Yigman contributed to about 23% of our total revenues in quarter four twenty twenty one. Appointment of our global representatives in U. S. And European market, mainly CBS in U. S. And Kipafi in Europe has helped Alicon to penetrate in global business more effectively and now has to start with showing the size of the directions in business wins in these regions as given pace in line with our global business strategy. Adding these teams in closing proximity to customers has elevated connectivity with existing customers and opened up opportunities to my new customers future business. Apart from the increased penetration in European customers, the entry into global supply chains enhanced their prospects for approximate markets. We are working on partnering with TSI in U. S, entering in the markets in Mexico and Brazil as well as delivering our entry into the Japanese market. We expect on it. Further, our engagement with players like Telenex and Eaton will lead to development programs for the Indian business. In addition, there are niche opportunities emerging in The Middle East, China and South Korea to significantly elevate the global footprint in the group. On this note, I would like now to hand over to Mr. Rasif Gupta, who will cover developments in the domestic business for the quarter. Thank you, Andrea. Good day, everyone. The domestic auto industry saw a sharp rebound with sales volumes increasing 27% year on year in quarter four FY 'twenty one. Across the industry, most OEMs are now operating at near normal utilization levels despite raw material inflation. From an industry perspective, sales of tractors, two wheeler, passenger vehicles and commercial vehicles remained strong during the quarter. Now coming to the performance. The overall positive momentum in the domestic auto industry has had a favorable impact on the domestic volumes of sales. Elecon was able to grow the domestic sales by 66% year on year in quarter four 'twenty one, outpacing the growth of the domestic industry. We have made good progress in building up volume sales to commercial vehicles and the three wheeler customers in addition to our strong hold of two wheelers and four wheelers. During quarter four, we added eight parts from a leading domestic customer. And in quarter 'twenty in fiscal year 'twenty one, we have added 39 new parts with 12 domestic customers and three new logo agents. So on the whole, we have reported an encouraging growth in the domestic auto segment during the quarter, led by improving demand on account of pent up sales, selective push and higher preference towards personal mobility. We are witnessing a good level of inquiries and bookings in the market and are hopeful that improving macros will further support this momentum. The Scarpet's policy, CLI linked scheme and improved allocation towards road infrastructure of the world for auto sector and will help boost consumption going forward. On this note, I would now request our group CEO, Mr. Rajeev Sikhan, to share with you in perspective on Elecon performance. Thank you, Rajiv. Thank you. I welcome all our investors. Thank you for joining the call. I hope you and your family members are well and safe. Family My colleagues have shared with you the details of our performance and perspective on the operating environment. I would just like to add I would also like to say that my deep, thank you to my own team, Telecom, who has stood at this juncture It stands for the plus and resilience and real optimism across all our organizations. This approach, even in our digital year, has enabled us as an organization to adapt Our multi pronged focus towards strengthening our existing customer base, adding new clients across markets and ramping up of our product market We expanded our portfolio of products towards high margin and value add categories to serve the needs of our customers, both in domestic and export markets. During the year, we announced significant order wins with multiple OEMs. This provides an healthy growth visibility for years to come. Our business fundamentals are strong and intact, and we are proactively engaging with the customers to ensure we fast track scale up performance going forward. We are also ensuring that all our people, all our blue collar, white collar are well taken care of in this extremely challenging environment and are having a deep communication with all of them on a On this note, we will be happy to take your questions now. Thank you all. Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Participants, I request that you use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question key assembles. The first question is from the line of Saurabh Jain from Fushil Finance. Please go ahead. Good day, everyone. Of all, I hope all of you and people around you are safe and doing well. Secondly, many congratulations for the wonderful set of numbers. I have few questions, sir. First is looking at the results hello? I audible? Yes. At the results, Lichtman has yeah. Yeah. Lichtman has done quite well this quarter. The top line of, almost, 40 crores and the EBITDA margin above 18%. This is probably the first time we saw that number as against a little over 11% in the previous quarter. What got us to reach these levels, on top line and margin? And is there any one off in this? How much of that is sustainable going forward? Thank you, sir. So about the eight months, first of all, this was a special quarter when we started the major supplies for the EV segment. And there was initial higher level of demand from the customer. So that has given us the improved bottom top line as well as the bottom line. So on the going forward, the volumes are increasing, and we are hoping that the the in the coming year, 2122, we see improved bottom top line levels as well as on the bottom line. Definitely, the this was a special quarter that in our notes also, we have explained a special price given by the customer around 2.5 crore that has impacted further for the q four. But overall, when we see that improvement in the top line of equipment, so definitely, there is an improvement in the bottom line and the margins also. And if you see the previous years of equipment performance, so up to that level, they were at almost at breakeven. So after that, when the volumes rose, so definitely, is a good improvement we see in the bottom line in the margins. I think I answered your question, sir. Okay. Yeah. So how much of this $43.44 crores of the revenue came from this new EV business? Approximately 40% is from the EV. Okay. Okay. Sir, the same is true for the stand alone business as well. We recorded the highest ever margins. And can we assume that we can sustain this 15% kind of margin for the full year and to perhaps improve next year from these levels? Yes. Definitely, please remember that in our earlier call also, we are explaining that when we are taking off and moving towards the new businesses, their margins are high. So that is the start now from the quarter four of twenty twenty one. So definitely, there will be improvement in the margins in the coming quarters that we will see when we have the normal size of the business. Okay. I have a couple of more questions, so I'll get back in the queue. Okay. Okay. Thank you. We'll move on to the next question that is from the line of Rohit Ori from Progressive shares. Please go ahead. Sir, two questions which are related to the developments at property at Cairde. If you can just give us a highlight as to what exactly is happening there. So at this moment, we have kept on hold because what now we are more focused to utilize our existing facilities. And because we do also know that when we go to a new location. So for that, in the new location, we have a lot of fixed cost and investments in the nonproductive equipment like land and building, such type of things we have to develop. So present in the current year, we are more focused on to utilize existing facilities and improve our the output from the present facilities. So you feel that there is still more time and you are able to swipe the assets which are with the current plant and the current capacity utilization is ample enough for you to not go to care and go and explore that property? Yeah. At this moment. Yeah. And what is the current capacity utilization that you have? Current capacity utilization is around 70% from in 2021. But looking at looking at the capacity utilization from the client, we we will be around 8080% we will reach it by by next financial year. Okay. And, sir, your presentation speaks about a program to reduce the interest cost. So can you elaborate what exactly are you trying to do, or what is on your schedule that that you have chopped up to get the margin slightly higher from here despite the new product launches that you have done? Yes. This is a tool. The interest cost mainly our main main focus is on the investment side, how to optimize our existing facilities and second side on the you have seen that in the last year, how we are more focused to reduce our working capital. So now furthermore, pressure we are putting to renegotiate our payment terms with the customers where some money is that all these things. So for that, we will see improvement in the working capital cycle as well as on the investment side. And second is now the interest rates because we are renegotiating with whatever the opportunities are there to reduce our interest rates so that we are putting pressure to the lenders. So all the efforts, so we have opportunities out there, we are putting up all these things. Okay. So this is the kind of a long shot. Are you looking at any fundraising plans as such to kind of boost the operations of the four plants or maybe the property at Cairde as well? For the property at Cairde, that we already expect is a little bit of decline, but already, this fundraising is in the plan, and you know that already we have had and that this QRP. So that is in progress. Okay. This property is owned by us. Right? The property I said is in the bookshop, Alicon, and they are the owners. Right? It's not on lease? Yes. Yes. Okay. Okay. So thank you. I'll get back in with you. Thanks a lot. Thank you. The next question is from the line of Pritesh Chedha from Lucky Investment Managers. Please go ahead. Yes, sir. The utilization number which you gave for FY '21 at about 70%, does it mean that quarter four was actually a % utilization for us? It was not it was not. What we have taken up in last last year that multi 72 choosing the output per machine has been increased. So all these have given us output from the existing capacity. So still, I mentioned that in the partial '4 also, it's not within the range of 70 to 22%. So so, sir, the annual cannot be 70%. Right? This quarter four is 70% at three hundred and twenty four hours. Sir, yes, sir. Yes. The other quarter were not normal. Sir, when you are referring to the utilization number, you are referring to quarter four utilization? That's what you are mentioning? Yes. Yes. Okay. So then that explains the confusion. My second question is on the order wins that we have got and we have announced, you know, in the past quarter as well, what would be the progress there and how much of those new order wins would be executable in '22 and '23 in terms of value? In quarter four, we have added some total of 21 parts, which will give us an average sales of 38 crores, and the project value for these parts are INR 190 crores. No. So not that's not my question. My question is whatever order wins we have announced so far in the last one year, there are different different orders. There are, then there was lifetime, can lot of orders. And there is a lifetime value of those orders, and you would have got something in quarter four also. I just wanted to know how much of those new orders in terms of annual execution is slated in FY '22 and '23 by value. So, basically, new order executable in '22 and '23, if you could share that number. Yeah. In 2122, with these new businesses what we have bought, we are projecting to sales three eighty two crore. In 2223, this will realize to 605 crore. So you are saying that you will execute 400 crore of incremental business in FY '22, and you'll execute 600 crore of business incrementally in f y twenty three. That's how we are putting it? Right. Sir, this number differs from what it was, let's say, a call which was done on December 18, where it was mentioned that the out of the total orders that we have got, 80 crores is executable in 2200 '60 crores in executable in '23. So I am asking for the annual execution of new orders, sir. I am not asking for the lifetime values. So whatever orders were not there in '21 becomes a new order. Right? The projections which were recorded with December call, those were based on business at which we have captured it in last two years and got it all done up into development center ramp up. I should add this INR 400 crores of new business on INR 800 crores of revenue that we have done So you can do about 1,200 crores of revenue in '22. And then we go to something like 1,415 hundred crores of revenue in '23. Yes. Okay. My last question is, in the quarter four, we see your company outpacing the volume growth of the Hold on. Yes. Yes. Of course, this is only the takeaway is that it depends on what will be the localized lockdown, which we are now seeing. So Rajiv is giving basically on the figure, which will be a normal business year. Yes, sir. So that's not only will be a differential. Thank you. Yes, sir. Yes. The part of the outpacing of the vehicle growth, you know, we are exposed to PV and CV to a large CV two wheeler and CV to a lot of extent. So what explains this outfitting of the industry growth? Any specific comments that you have when we look at the auto growth and when we look at your revenue growth, Q o Q or Y o Y, whichever way is completely different. So any comments there? Yes. If you talk about the quarter four performance, as Rajeev said, we were above the industry growth. The industry has business of growth of 27, and we were at 54. And the reason we were able to perform better from a from the industry was a new business what we have added. With the whenever we have a, you know, this issue, mostly we have single source. So we work on flexibility and enable this by providing this flexibility to our customer. Okay. Okay. Okay. Thank you very much, sir. Thank you. All the best, Insur. Thank you. Thank you. The next question is from the line of Deepak Pudat from Safire Capital. Please go ahead. Thank you very much, sir, for the opportunity. So just wanted to understand, what is the mister Pudat. Sir, we're not able to hear you clearly. Hello? Yes, sir. I just wanted to understand, sir, what's the capacity utilization you'll be targeting in FY '22? '70 '5 to 21%. Seventy five to 80%? Not 82. Because it will be between 70 to 75. I will wait without 75. 70 percent, if I heard it correctly. Right? 72%. Seven seventy two %. Okay. Okay. Fair enough. Fair enough. Okay. Yeah. That's it for me. Thank you, ma'am. Thank you. The next question is from the line of Raghunandan Anil from MT Global. Please go ahead. Congratulations, sir. Wonderful performance. Q four earnings is higher than the full year FY '21 numbers. So just a couple of questions. Firstly, on sales to EV customers, how much is the share of revenue currently for EVs? And if you can give some color on what is the pending order book? Just wanted to better understand how you see the contribution rising in FY twenty twenty two, twenty twenty three now that we have set an endeavor of 25% over the next few years? Talking about the EV, the last year, the contribution was 8%. This year, we are targeting 9%, and eventually, it's going to increase over the year. Particularly, if we talk about volume, in India, we feel that the contribution is very low. Yes. We have gained that momentum with our European subsidiary, wherein the dealer has picked up very well. So very closely, we are watching how the trend is changing in EV and IC. As per the research, what we know at this moment, the EV contribution is 13%. By '25, it will reach up to 30%. So we have defined very clearly. And last quarter also, we have good Last year also, we have done quite well in the easy stage. We're getting a lot of businesses in this particular this particular stage. So, yes, we have defined and we have revisited our targets because we have noticed that the market is shrinking and there's a lot of disruption coming up. Immediately, we are getting high value addition. And as we mentioned about the USP of the about the common engineering, which this solution we are giving to our customers, and this will help us to grab our share in this particular area. Thank you, sir. Wishing you all the best. My second question was on working capital. Receivables have been reduced. Has receivables still stand at about one hundred and thirty nine days? Just wanted to understand how, what is the comfortable level and what is the expected target, for the company? I remember you had indicated that you are working towards a few pending settlements with customers and can also use discounting and as as an option to reduce the working capital level. So, Vimal, sir, if you can comment a little on that? Yes. Definitely. Because now we are more focused on this, but on the other side, have to see the dividend. Because we are growing in the export market. We are always the payment terms are longer. But definitely, from these, whatever we are having, so we are focused maybe in the range of hundred ten to hundred fifteen days at least for this year we are targeting. Thank you, sir. Thank you so much. Just one clarification. Would you be able to share the volume and the machining ratio for f I twenty one? If you have it handy, otherwise, I'll take it later. We will give you a letter. Yeah. No problem, sir. Thank you, and I'll come back in the queue. Thank you. The next question is from the line of Aditya Makalia from HDFC Mutual Fund. Please go ahead. Yeah. Hi. This is Aditya from HDFC Securities. I just had one question. You know, you did mention that the use of aluminum in the two wheelers, which is two wheeler EVs, will go up from five kVs to something like 12 to 13 kVs. Now I wanted to know when the realization come down because of the aluminum usage will go up so much. Thanks. Basically, working as as you know that we are working with after, then this is realized that we are supplying around in EVM that will be an opportunity for Alicon. Yeah. No. No. I get that. Obviously, the you are going to get more orders. But the per kg realization, will it be lower in the case of a GTS compared to ICE? Because if you're supplying five kgs of aluminum component that goes mainly in the engine, you know, for a ICE vehicle. But perhaps for an EV, the the, you know, the aluminum content may be used for chassis and other products, so the realization will come down is what I was understanding. No. There's a you know, these parts qualify in a certain segment which we have defined inside our group. And these are the segments where the value addition has been explained earlier. The value addition per kg is moving up. And so this comes in that kind of a basket where the whole movement has moved slightly up year on year. Okay. Got it. So we can maybe take it offline later as well. Thank you. Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to management for the closing comments. So I thank everybody once again for joining us today, and I wish you all all are safe, your families are safe, and let's hope the whole pandemic, the intensity is muted. We are seeing in Maratha over the last three weeks that there's a reduced testing rate showing both that, and hopefully, for the another test that's gonna show sooner or later. And I wish you all the way there for the day. Thank you very much. Thank Thank you. Ladies and gentlemen, on behalf of Alcon Capital Oil Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Thank you.