Interview with Fineotex Chemical Ltd

Scaling up high margin speciality chemicals orders from both our core textile segment and the new business segment has strengthened our momentum, opines Aarti Jhunjhunwala, Executive Director, Fineotex Chemical Ltd (FCL).

In Q2FY22, sales of Fineotex Chemical skyrocketed by 99.80 per cent on a year-on-year basis and net profit rose 27.19 per cent to Rs 10.29 crore. What factors have contributed the most to help you outperform?

The second quarter was an impactful one. For us at Fineotex, our double-digit gains in sales and jump in earnings mean that the depressing days of the chemical industry faced during the Covid-19 pandemic are behind us. Our results have rebounded and we are back on track with our growth story. We are now more positive than ever and have achieved volume growth across all regions and segments compared with the second quarter of 2020. The textile segment which predominantly contributes to our revenue (90%), saw an uptick in demand. We have the entire range of solutions from pre-treatment, dyeing, printing, finishing across all substrates, whether it's cotton, wool, polyester, nylon, towels, etc.

Textile is already booming and will continue to grow. There are ambitious expansion plans at several customers’ end too. This trend will only amplify. Customers are looking at expanding their supplies and because of the “China plus one” factor, India is a great option. We have been able to have very healthy gross margins, EBITDA margins and an increase in revenue because of the increase in wallet share with existing customers. We have added several new customers with the new certifications and the sustainable product range which is in place now.

What measures are you implementing to safeguard profit margins from cost pressures due to a hike in raw material prices and supply chain challenges?

FCL’s gross margins have increased and our EBITDA margins have also improved. We have passed on a small price hike to customers. We factor in the raw material price hike and always hedge our requirement quantity three months in advance from our suppliers. The company also keeps alternate suppliers of the same raw material to get maximum advantage of the on-time supply of raw material during shortages or crisis. But, yes, it’s true that due to ocean freight increase, the raw material price has spiked.

Fineotex Chemical has entered into a strategic collaboration with Eurodye-CTC (Belgium) to commercialize speciality chemicals for the Indian market. Can you throw some light on the same?

With this exclusive tie-up for the Indian region, Fineotex will add to its portfolio specialized pre-treatment and dyeing products for the cotton-synthetic and woollen fibre/fabric/yarn along with the existing Indian business operation The exclusive collaboration will facilitate an efficient production system and distribution network across the Indian textile market.

Additionally, the collaboration includes technology transfers apart from tapping into the Eurodye-CTC’s existing business through Fineotex under this synergy. At its end, Eurodye-CTC will capitalize on Fineotex’s special technical services for its existing customers too. Globally certified products of Eurodye-CTC will find a huge demand from Indian companies. Eurodye-CTC has REACH registration, Bluesign certification & GOTS-6 certification for a large selection of its product range.

What are your growth levers?

Scaling up high margin speciality chemicals orders from both our core textile segment as well as the new business segment has aided the growth and helped us strengthen our momentum. Our new facility at Ambernath, Mumbai, has started production recently. This unit will cater to our existing textile specialities and the fast-growing home care and hygiene and drilling specialities business. This has augmented our capacity by 36,000 MT. The plant is completely automated with state-of-the-art technology and complies with the highest level of sustainability standards. The plant will mainly cater to home care/hygiene and drilling speciality chemicals while supplementing requirements of textile chemicals.

What is your earnings outlook for the upcoming quarters?

In the quarter ended 30 September, 2022, the company had an outstanding performance with 75% revenue growth with an increase in the EBITDA by 83 basis points. This is, despite the challenges faced in the global supply chain disruption and the container shortages. The current quarter, i.e. Q3FY22 and Q4FY22 are also looking exciting enough and we are certain about achieving better growth numbers with our added capacity.