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Last Updated : Aug 07, 2015 03:04 PM IST | Source: CNBC-TV18

Order execution to boost volume, profits in FY16: Aarti Ind

In an interview with CNBC-TV18, Rajendra Gogri, CMD of Aarti Industries said execution of projects will boost volume growth and profits this year.

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Low Benzene price, an important crude raw material, led to weak topline growth in the June quarter, Rajendra Gogri, CMD of Aarti Industries said.

Chemical manufacturer Aarti Industries’ net profit grew 47 percent to Rs 60.90 crore in the first quarter. However, total income declined 7.7 percent to Rs 683.07 crore year-on-year.

In an interview with CNBC-TV18, Gogri said despite revenue fall, there has been close to 10 percent volume growth in the company’s specialty segment. The company’s operating margin expanded 400 basis points (bps) due to this decline in Benzene price, he said.

Discussing 41 percent reduction in the company’s home segment, Gogri said: “We are trying to change the product mix that has also resulted in some volume reduction, but efforts are to increase EBIT from the segment.”

The company is working on process stabalising in its pharmaceutical business, Gogri said.

Going forward, he does not expect further fall in Benzene prices. Gogri expects higher profits with execution of projects and volume growth.

Below is the transcript of Rajendra Gogri's interview with Ekta Batra & Anuj Singhal on CNBC-TV18.

Anuj: Your speciality chemical revenues were down quite a bit and that forms bulk of your overall revenues. Could you tell us what happened here in terms of topline growth and what is the outlook?

A: One of our major raw material benzene is from crude and the benzene price for last year Q1 was about 83 whereas this year Q1 was 53. This led to decrease in topline, but overall we had about 10 percent volume growth in speciality segment. This has also boosted our EBIT from speciality segment by about 20 percent. So, there was a volume growth, but crude decrease has reduced the topline.

Ekta: The crude decline has impacted your margins on a positive standpoint. It is up close to 400 bps on a year-on-year basis. Tell us the key raw materials, which saw decline that might be crude derivatives. Do you expect further declines because of crude prices being lower than what your inventory might have been in this quarter?

A: Benzene is our major raw material and Q1 benzene average price was 53. It will go down and that will improve our operating margin as a percentage, but inventory is expected to be limited because we do not expect sharp reduce of pricing from this level of 53.

Anuj: Would it be fair to assume that this kind of profit growth is not sustainable?

A: Profit growth is because of volumes. We had about 10 percent volume growth in speciality chemicals. So we expect continuous volume growth because of completion of various projects and increase in volume, which is driving the profits and not the decrease in crude prices. Crude price doesn't have any direct impact on the profitability.

Ekta: I was quite intrigued by your home and personal care revenue. You have a segment. Can you tell us what that particular segment does, why were revenues down 41 percent year on year and what might the outlook be?

A: Home and personal care is more catering to fast moving consumer goods (FMCG) usage and prices of crude based raw material has gone down. We are trying to change the product mix that has also resulted in some volume reduction, but efforts are to increase EBIT from that segment.

Ekta: Similarly for the pharma segment. What is your key ingredient in terms of manufacturing there?

A: Pharmaceutical is not crude related, so overall we had a volume growth in pharma but we are doing a lot of process stabilizing, which has affected the operating profit of pharma as compared to the last year.

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First Published on Aug 7, 2015 01:07 pm
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