Expect 25% growth in sales this year, 20% EBITDA margin: Astec

Astec Lifesciences--producer of agrochemicals and pharmaceutical intermediates --expects a 25 percent increase in sales for this year and a 20 percent operating profit margin, the company's Managing Director Ashok Hiremath told CNBC-TV18.He said underlying performance of the company was excellent. As per the old accounting standards, company's sales increased 34 percent and the change in margin was purely because of the change in the accounting standards. "So it is not a loss of the profit but it is a deferment of the profit to the next quarter", he clarified.

He also said debt has reduced and that rating agency ICRA has upgraded the company's credit rating by 2 notches. This should further help lower borrowing costs, he said.              

Hiremath said the orderbook was strong and that he expects the domestic growth to pick up.Below is the verbatim transcript of Ashok Hiremath’s interview to Latha Venkatesh & Sonia Shenoy on CNBC-TV18.Sonia: Can you tell us what led to this decline in your operational performance and what is the expectation hereon?A: I would like to clarify that our underlying performance was actually excellent. If you look at our underlying performance as per the old accounting standards our sales went up by 34 percent and the profit before tax (PBT) as well had gone up significantly. However, because of the new accounting standards there is a change in the way you recognise revenues.Under the new standards you have to recognise revenues after the material is received at the customers destination and therefore many of the export sales that we did in June were not recognised as sales in June and the corresponding profit which was associated with that has also deferred to the next quarter.I would clarify that our underlying performance was better, but the decline in margin is purely because of the change in the accounting standards. So, it not at a loss of profit, it is a deferment of the profit to the next quarter.Latha: What should be assume as a normal run rate for the company either speaking yearly or speaking quarterly on the revenues and on the earnings before interest, taxes, depreciation and amortization (EBITDA)?A: The underlying EBITDA was in excess of 20 percent and the revenue growth was 34 percent like-for-like under the old accounting standards. So, we see that the underlying EBITDA will be in that range going forward.Sonia: What is the margin that you hope to clock in?A: We hope to clock in EBITDA margins of 20 percent going forward. The overall sales for the year should be up by about 25 percent.Latha: Is that a kind of compound annual growth rate (CAGR) we can expect? I mean you all have had a scintillating performance, so should we expect 25 as your revenue CAGR?A: This is what we are aiming to do, yes.Latha: EBITDA?A: Corresponding EBITDA growth should be in the same range of 20 to 25 percent.Sonia: Can you tell us a little more about the geographic moves as well? How are some of these verticals doing? Europe contributes around 15 percent, America around 15 percent are you seeing any kind of demand pickup, what is the situation there?A: We are seeing a stronger growth in demand in the US; even Australia, which has suffered from bad climatic conditions for many years is doing well. Of course the Indian monsoons are looking very good.Latha: We understand that the share of the top 10 customers is high. Is that a worry?A: I don’t believe that it is concentrated in any single company. I think there is enough diversity over there so that I don’t think we have any risk of loss of revenue because of single customers demand.Latha: How will the India market do? Will its share in your overall pie go up this year?A: Our export order book is also very strong, so we see a good amount of growth in the exports. I think that the proportion of 50 percent exports, 50 percent domestic will be maintained.Latha: What is your cash on the books, what is your debt?A: Our debt is about Rs 100 crore now. Net worth is about Rs 100 crore and in fact our debt has come down. Recently ICRA has upgraded us two notches in terms of our credit ratings. So, by virtue of that we would be seeing a significant improvement in our borrowing cost.Latha: Should we expect inorganic moves? Would you even be looking to buy other units or companies?A: Potentially, if there are good opportunities out there we are always open to it.Sonia: You did say that a 25 percent sales growth is what you are expecting for the next year. Can you break that up for us between exports and domestics?A: I don’t have the number exactly how much of that would come out of exports and how much out of domestic but all I can say is that the order book is strong. The domestic market also now should be picking up and therefore my guess is that it will be a similar growth rate.Latha: Margins for both domestic and foreign markets are similar?A: It is more product specific. Some of the products on both the segments have high and lower margins but overall if you see it could be similar.