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Last Updated : Nov 08, 2016 01:04 PM IST | Source: CNBC-TV18

Asahi Songwon looks to raise capacity utilisation target to 90%

In conversation with CNBC-TV18, Gokul Jaykrishna, Joint MD, Asahi Songwon Colors, said topline growth is coming from increased volume and capacity utilisation.

Asahi Songwon, manufacturer of pigments and derivatives in India, has net profit of Rs 702.5 crore in the quarter ended September, a rise from Rs 540.8 crore in the year ago period.  

In conversation with CNBC-TV18, Gokul Jaykrishna, Joint MD, Asahi Songwon Colors, said topline growth is coming from increased volume and capacity utilisation.

Giving a positive outlook on the second half of this fiscal, Jaykrishna said second half of this fiscal year should be good. The company has added two new products and has launched one successfully.

He also said the last quarter was dull but the company had a record quarter this year and company will maintain this in the next two quarters.

Company's capacity utilisation is at 75 percent and the target is 90 percent.

Below is the verbatim transcript of Gokul Jaykrishna’s interview to Nigel D’souza and Reema Tendulkar on CNBC-TV18.

Nigel: In terms of your numbers, they look quite good actually, topline growth of close to around 14 percent. Break that up for us in terms of pricing as well as volumes. And also, could you tell us what is your current capacity utilisation?

A: We had a good quarter this time. Actually this quarter has been a record quarter for us. Our topline has grown by 14 percent, the bottomline has grown by 30 percent and our earnings before interest, depreciation and amortisation (EBITDA) has grown by 35 percent. To answer your question on the breakup of the topline growth, it is coming mostly from increased volume and capacity utilisation. When I spoke to your guys last quarter, I told you that we are working on improving our utilisation of our production facilities and we have successfully done that. On the pricing front, the raw material and finished goods prices have been steady, so there is no volume growth coming from there. So, the turnover growth is coming from the volume growth and not from the prices.

Reema: You had also earlier guided for a 25 percent growth in your revenues for FY17 if I am not mistaken. But in the first half of the year, you have only achieved a 10 percent growth. What is the full year going to look like in terms of revenues and margins for you?

A: I had guided for about a 20 percent odd growth in the top and bottomline and we are sticking with that kind of a guidance because though the last quarter was a little dull, we have had a record quarter this quarter and we are hoping that we would be able to maintain this over the next two quarters. If we do that then we are good for a 20 percent growth.

Nigel: So, second half of the year is going to be fantastic then.

A: Should be good hopefully. We are working towards it. We are doing quite a few innovative things. Last when I spoke to CNBC-TV18, I had said that we are adding two new products, so one of them has now already been launched successfully and we have already gotten good orders for that product. That should start adding on to increase EBITDA margins. We have been able to increase our EBITDA margins from 16.2 percent from previous corresponding quarter to 19.2 percent. So, we hope to consolidate this and probably even, we were guiding for about 18-19 percent EBITDA margins, but we are hoping that now, the way things are going this quarter, we should be probably improving that to 20 percent or even a little higher than that going forward.

Reema: You spoke about an increase in your capacity utilisation. What is the number for the quarter gone by and can you improve it further?

A: We are at about 75 percent utilisation now which is not that great. We were at 65 percent, so we have improved utilisation from 65 to 75 percent and our target is 90 percent. So, certainly we are looking to improve that further. And that is just on the volume side. If at all we are supported by the market trends as the prices start going up on the back of crude oil pricing, we should see some additional kicker into it.

Nigel: So, second half of the year, you are saying that you are going to do capacity utilisation of 90 percent?

A: No, that is our target. So, the section of the year should be about 80-82 percent. 90 percent I am referring to longer-term target. That is for the next fiscal year.

Nigel: Some of your big clients, they are expanding capacity, so definitely they are going to be asking you for more amount of product for them. Now, are you looking at any kind of acquisitions across the globe domestically? Could you throw some colour on that in the near future, maybe in the next year, year and a half? Is that somewhere in the pipeline?

A: To answer your first question, yes, out of the four of our major customers, two of them are doing really well. And particularly, the business in America has been doing very well, so our exports to the US are increasing. And we are hoping to eat more into the US market now and that way, increase our topline going forward. And on the second front, on going forward, we have a lot of cash because we have improved our cash management and we are looking at possible growth in business whether it is organic or inorganic, I cannot comment at this point of time. But we are possibly looking at some inorganic opportunities. But nothing on the lines right now, so I cannot really comment on it.

Nigel: So, your capacity is 10,000 tonnes approximately, what is your target in the next couple of years?

A: As I said, the core capacity of the main business which is CPC Blue Crude business is 10,000 tonnes and we hope to go to 90 percent utilisation in the next couple of years. We should be, volume wise, doing about 9,000 tonnes of CPC Blue Crude which would make us one of the largest CPC Blue Crude manufacturers in the world. Apart from that, we have already gone into value added segments such as Alpha Blue for which the plant has just been commissioned last month and for Beta 15:4 and 15:3 of course we are doing very well for 5-7 years. So we hope to consolidate that further as well.

Reema: So, what is the cash currently on your books and for any potential acquisition, is the cash sufficient as you currently hold or would you look to raise some money as well?

A: We have about Rs 25 crore plus on hand on the books which is free and net of that, we are of course debt free. So, we have a good opportunity to either expand organically or even inorganically. So, we are looking at both opportunities. Even on the inorganic front, we have cash on the books. We are looking at acquiring a new plot of land somewhere where we can do some future expansions or high performance pigments as well.

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First Published on Nov 8, 2016 12:35 pm
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