descon oxychem limited
TRANSCRIPT
Imran Qureshi – CEO M. Saqib Abbas - [email protected] [email protected]+92 322 7707198 +92 322 4491716
DESCON OXYCHEM LIMITEDInvestor Presentation
June 2020
TABLE OF
Introduction
Production Overview
Business overview
Growth drivers
Financial overview
CONTENT
Corporate overview
3
Group profile
• Annual revenue over half a billion USD.
• Descon has been in business for over 4 decades.
4
Core values
5
Company video
TodayWe are a leading company in the Pakistan Hydrogen Peroxide market
TomorrowWe are determined to:
▪ Strengthen our domestic market leadership position
▪ Establish a footprint in new segments & regional markets
▪ Achieve success through winning together with our customers driven by
best cost propositions, motivated people and effective teamwork
6
Company profile
VisionWinning together with our customers, our ambition is to enhance local and regional footprint while delivering
sustainable value to all stakeholders.
About Descon Oxychem
Incorporated 2004
Status Listed at PSX (2008)
Commercial production 2009
Major business Manufacturing of H2O2
Name-plate capacity
Initial
Post BMR
28,000 MT
39,294 MT
Production – Post BMR 41,300 MT
Paid-up capital PKR 1.5 billion
Ambition 2023
7
Goals and culture
Continuous
ImprovementLeadership Accountability
TeamworkOpen to
communicationSafety
Profitable Sales Growth
Engaged Employees
Manufacturing Excellence
OUR GOALS
▪ Openness & Honesty
▪ Corporate Governance
▪ Innovation
▪ Performance Culture
▪ Sense of Urgency
▪ Customer Delight
▪ Lowest cost producer
▪ Energy for change
▪ Diversity & Inclusiveness
▪ Diversification
OUR PRIORITIES
OUR FOUNDATIONS
Delivering sustainable value to customers, employees & shareholders
A Framework for our Future
9
Board of directors
Taimur Dawood, Chairman
▪ MD of Gray Mackenzie Engineering Services BV, the Netherlands
▪ >15 years of work experience in product marketing, project finance, strategy
development. and implementation, turnaround mgt., and M&A
▪ In 2001-2011, successfully ran Descon Chemicals as CEO
▪ Industrial Engineering degree from Purdue University and MBA from Columbia
University (both in US)
Asif Qadir, Independent Director
▪ Director of Thal and Tri-Pack Films; CEO of Engro Polymer Trading; and Chairman
at Inbox Business Tech and Unicol Pvt
▪ Sits at the board of numerous institutions, including the SEC and PSX
▪ Previously worked as Director & SVP of Engro Corp.
▪ Undergraduate degree from Columbia University
Farooq Nazir, Director
▪ Worked with PWC and EY before his stint at Unilever, where he embarked on a
management career that included executive and management roles across 3
continents
▪ Joined Tetley GB in London and took up board responsibility for the company’s
joint venture in Pakistan
▪ Experienced in strategic, financial and risk management
Mehreen Dawood, Director
▪ Runs a furniture business manufacturing semi-classic designs furniture for high-end
segments
▪ Has investments in various Descon Companies
▪ Philanthropist and a member of Marie Adelaide Leprosy Center, Citizen
Foundation, and Family Foundation
Faisal Dawood, Director
▪ Vice-Chair of Descon Engineering
▪ Served in management roles in the engineering and chemicals divisions of Descon
around the world
▪ Holds a Bachelor’s degree in Materials Science and Engineering from Cornwell
University and an MBA from Columbia University
Ali Asrar Hossain Aga, Independent Director
▪ Managing Partner & Head of Industrial Practice at Ward Howell International
▪ Previously worked and served on the board of ICI Pakistan and was the CEO of
the Soda Ash Business
▪ Has a degree in Chemical Engineering from the University of Punjab and an MBA
from Drexel University
Haroon Waheed, Independent Director
▪ Recognized Business HR Leader with 30 plus years of broad based Multinational
and Local functional business experience.
▪ CEO and Managing Partner at SYNGRO Consulting Pvt. Limited
▪ Worked as Group Head HR at Fatima Group
▪ Holds LL.M from Monash University, Melbourne, Australia.
Imran Qureshi, Director and CEO
▪ 20 years experience in the chemicals industry
▪ Worked as MD of J&P Coats Pakistan, as Business Manager Performance
Coatings of AkzoNobel Coatings, and Business Manager with ICI Paints
▪ Bachelor of Engineering degree from NED University, Karachi
▪ MBA from Southeastern University (Washington D.C.)
10
Management team
Imran Qureshi, Chief Executive Officer
▪ 20 years experience in the chemicals industry
▪ Worked as MD of J&P Coats Pakistan, as Business Manager
Performance Coatings of AkzoNobel Coatings, and Business
Manager with ICI Paints
▪ Bachelor of Engineering degree from NED University, Karachi
▪ MBA from Southeastern University (Washington D.C.)
M Saqib Abbas, Chief Financial Officer
▪ ICAP Member having rich experience in financial
planning, business partnering, stakeholder management
and risk management.
▪ Joined Descon in 2013 and appointed DOL’s CFO in
2015
▪ Worked as Head of Finance & Accounts with MFI for over
4 years.M Mushfiq Hussain, Works Manager
▪ Chemical engineer with more than 17 years experience of in
Pakistan’s large scale process industries.
▪ His career spanned through functions like Operations, Project
Startup / Commissioning & Health, Safety & Environment in the
fertilizer industry. Driving Manufacturing Excellence @ DOL.
Aqsa Rustam, HR Business Partner
▪ Certified HR Business Professional and holds a Bachelor
degree in Management and Business Computing with
total work experience of 8 years.
▪ Associated with multiple MNCs like Beiersdorf Pakistan, a
leading Personal care company, Nestle Pakistan and
INTECH Process Automation
Adil Akbar – RSM(North)Over 10 years of experience of Sales &
Marketing in Chemical Sector
Fawad-Ul-Islam Hirani RSM(South)Over 12 years of experience in Textile /
Chemical Sector
Ali Kamal Pasha - Manager (BD)Over 10 years experience of Sales &
Marketing in Chemical Sector
11
Key Partners
External Auditors
Internal Auditors
Credit Rating Agency
Key Financing Partner
Share Registrar
12
Milestones
2004 2009 2011 2016
2017 2018 2019 2020
▪ Incorporated as Private Company under Companies Ordinance 1984
▪ Got listed on KSE▪ Start of Commercial
Production
▪ ISO 9001 certification - SGS
▪ First PAT of PKR 180 Million
▪ Continues Plant Debottlenecking
▪ 2nd PAT of PKR 45 Million
▪ Highest Production achieved of 34,697 MT
▪ ISO 18001, ISO 14001 Certification by - SGS
▪ Early Complete Repayment of Syndicate Facility
▪ Plant Capacity Expansion by 25% approved by the Board
▪ Manufacturing Excellence Program Launched
▪ 7-Million Safe Man Hours & Zero TRIR
▪ First Ordinary dividend of 10%
▪ Launch of Aseptox (Food Grade & Beverages product –Tetra Pak)
▪ Launch of SaniDol –Multipurpose Disinfectant and Sanitizer
▪ Manufacturing Excellence giving Energy and Chemical Savings
▪ Highest PAT of PKR 418M & first accumulated profit reported.
▪ Cash Dividend 10%, Bonus Shares 16%
13
Shareholder Structure
Major Shareholders (as of Jun-20) No. of Shares %
DEL CHEMICALS (PRIVATE) LIMITED (CDC) 52,033,550 34.4847
DESCON ENGINEERING LIMITED 48,888,866 32.4006
EVLI EMERGING FRONTIER FUND (CDC) 9,927,000 6.5790
DESCON CORPORATION (PVT.) LIMITED 8,725,250 5.7826
LOCAL / JOINT STOCK COMPANIES 25,888,157 17.1571
MUTAL FUNDS – CDC 3,811,500 2.5260
OTHERS / ASSOCIATED COMPANIES 1,614,543 1.0700
Total 100.0
Business strategy
15
Manufacturing
➢ HSE – move towards system - based organization.
➢ Become lowest cost producer
Sales & Marketing
➢ Process improvements to meet quality requirements of food-grade & export market
➢ Retention & realignment of critical customer base
➢ Reduce reliance on textile segment
➢ Marketing of hydrogen peroxide through digital platforms
Human Capital
➢ Business partnering to deliver strategy through right talent
➢ Talent factory / capability building through Talent Assessment Program
➢ Embedded code of business ethics & conduct across DOL
Finance & Governance
➢ Strengthen control environment by strong oversight of risk, compliance and code of corporate governance
➢ Optimize the cost of capital and leveraging.
16
Geographic footprint
17
COVID-19 business impact and measures
• With Textile closure (contributing 80% of sales), business quickly responded to the available
opportunity & launched “SaniDol”, a multipurpose sanitizer / disinfectant on March 2020.
• The launch was possible with business not going for the lockdown even for a day and the
cross functional team was put in place to deliver SaniDol.
• Sales Team was strengthened by moving technical people into it
• Social Media was used successfully to promote the product
• CSR was also used to create a positive image for the Company as well as the Group
• Donated around 33 MT of product to various Government Institutions
• Crude prices also helped the Company to improve margins in last quarter.
18
COVID-19 disinfectant opportunity – List of Customers
19
DOL DONATED 33 MT OF SANIDOL
➢ Ministry of Health - GOVT of Punjab 10 MT ➢ IG Punjab Police 2.5 MT
➢ CCPO Office Lahore 2.5 MT➢ IG Motorways and Highways 2.5 MT
Value chain
20
Suppliers Customers
21
Capacity expansion
Currently undergoing capacity expansion of 8400 MT P.A (25%) to maintain leadership position
Estimated project cost is around PKR 1.3 billion
100% of the project ordering has been completed
Capacity is expected to come online by 2nd
quarter of current FY.
Plant is expected to achieve further efficiencies in energy and chemical indices.
22
Risk Management
The objective of the ERM is to ensure that:
❖ Significant risks are identified, measured, analyzed and monitored;
❖ Sufficient, timely and accurate information is reported to the ERMC and Board Audit Committee; and
❖ Responses to identified risks are appropriately formulated and implemented in an effective and efficient manner.
RISKS RISKS RESPONSE
Market Risk (COVID-19)
Plant Expansion
Turnover in Critical Positions.
Plant Reliability
New Entrants
Robust launch of SaniDol.
Frequent Project Reviews
Finalized Robust Replacement Strategy.
Manufacturing Excellence & PKR 84 M were realized in FY19-20.
Entry into New Segments
Export Market access with Tetra Pak
23
Works Overview
24
Production volumes
20.1 29.7 27.8 26.3 32.5 32.1 32.2 34.6 33.2 30.8 33.90
10,000
20,000
30,000
40,000
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Production Trends Linear (Production Trends)
Production Trend (MT)
Production process
Oxidation
Working solution
with dissolved
Hydrogen
peroxide
Hydrogenated
Working
solution
ExtractionHydrogen
Peroxide
WaterSeparationand drying
Demineralized
water
Separated
Water
Hydrogenation
Filtration
Degassing
Filtration
Regeneration
Regenerated working solution
Hydrogen
Hydrogen
Pd Catalyst
Recycle
catalyst
Oxygen
26
Health and safety (HS)
Health and safety philosophy HS Way Forward 2022
HS Philosophy
Culture, Leadership &
Governance
Risk Recognition &
Mitigation
Manage Continuous
Improvement
1
2
3
Enhance line responsibility &
ownership
HSE Management system upgradation
DOL HSE Culture step transformation
Introduce sustainability targets for business continuity
3
2
1
4
27
Health and safety (HS)
HS development process
System review
All procedures and systems
were reviewed, with an
approach to develop the
complete understanding of
existing practices
Field visits
Site visits were conducted to
identify the gaps in field,
whereas interaction at shop floor
level was ensured
Interviews
Workshops with all
departments were
undertaken & inputs were
taken from shop floor level
Each training session ended
with a thorough debrief to
identify the overlap and
gaps in HSE systems
GL sessions
Series of sessions were
conducted individually with all
GLs to identify potential areas
for an improvement
Gap analysis
Based on the initial gap analysis
and the priority areas set by the
management, HSE Roadmap
developed. Current systems are
aligned with DuPont’s safety
management system to bring about
a cultural transformation at our site
5431 2
28
ESG & Sustainability
Policies and Practices Certifications
ISO 14001OHSAS 18001
ISO 9001
29
ESG & Sustainability
UN Sustainable Development Goals
1. Health, Safety & Well-being
• Zero TRIR without LTI
• Implement HSE roadmap by 2022
• Training manhours/employee : 4 per month
• ISO 45001 Certification by 2021
2. Energy Management
• Reduce NG index : 3% by 2023
• Reduce power index : 5% by 2023
3. Renewable Energy
• Renewable energy mix : 10% by 2023
4. Chemical Consumptions
• Bring chemical indices inline with Chematur guidelines by 2023.
5. Water Management
• Reduce water consumption : 10% by 2023 compliance on hazardous & non-hazardous wastes with EPA & PEPA.
8. Gender Equality
• 10% female employees at works by 2023
6. Waste Handling
• 100% compliance on hazardous & non-hazardous wastes with EPA & PEPA
Competitive landscape and market share
31
Market share: Pakistan Unique Competitive Advantages
▪ Plant Technology, Chematur (DOL) vs Chinese (SPL)
▪ Capacity utilization is @ 117% (DOL) vs 82% (SPL)
▪ Cost of production is 25% less then SPL.
▪ DOL is increasing production capacity by 25%
50%34,000
32%22,000
18%12,000
Imports
Dominance in growing and undersupplied local market
32
Partnerships and joint ventures
Partnerships Business Proposition
✓ Locally-available product✓ Cost or working capital✓ Quick delivery and service✓ Safety
✓ Business growth✓ Improved yield✓ Opportunity for export
✓ Foreign exchange saving✓ Export opportunity✓ Taxes and employment
✓ Services business growth✓ Customer satisfaction✓ Tetra Pak seen as full-service provider
Development & Validation Aseptox 35
Marketing alliance
33
Product applications
Current Applications Potential Applications
Mining
An oxidant, recovery agent or oxygen source
Textile
Environmentally-friendly chemical used as bleaching
agent
Cosmetics Livestock
PoultryWater
treatment
Food and beverages
Disinfection (antimicrobial agent)
34
Business outlook
- Keep striving towards being the Lowest cost producer (energy conservation and efficiency
projects).
- Keep the plant running at an Optimum level without any unplanned breakdowns.
- Achievement of optimum sales mix post expansion.
- Retention of critical Human Resources.
- Development of plans for entering into down streams and up streams products.
- Generation of maximum returns for the stakeholders.
36
Dividend policy, history and capital raising
CAPITAL RAISES
Foundation (2008)
2008
Capital – PKR 1 Billion
Syndicate Loan -1.4 Billion
2011
Inter-co Loan – PKR 409 M
2013
Inter-co Loan – PKR 710 M
DIVIDEND HISTORY
Year Preference Ordinary Bonus Shares
2020 PKR 150 Million 16%
2019 PKR 184 Million PKR 102 Million
2018 PKR 264 Million
Dividend Policy Statement
Company’s fundamental policy for allocating profits for dividenddistribution purposes is to generate appropriate returns forshareholders while enhancing its financial position and operationalfoundations. Specifically, the Company aims to pay stable dividendsin consideration of the balance of unappropriated profits. Indeciding whether to propose a dividend and determining thedividend amount, the Board will comply with the legalrequirements, take into account the Company’s financial position,its operational needs, its capital expenditure requirements, itsliquidity position, general business conditions and any restrictionspursuant to its contractualarrangements within its key contracts and financing documents.
Financial highlights
37
1,409 1,582 1,961 2,088 2,705 2,642 -
500
1,000
1,500
2,000
2,500
3,000
2015 2016 2017 2018 2019 2020
Revenues (PKR m)
Revenues Linear (Revenues)
299 382 529 633 835 866
19%
24%27%
30% 31%33%
0%
5%
10%
15%
20%
25%
30%
35%
-
100
200
300
400
500
600
700
800
900
1,000
2015 2016 2017 2018 2019 2020
EBITDA (PRK m)
EBITDA EBITDA Margin
Financial highlights
38
(119)
45 205 322 394 418 -8%
3%
10%
15% 15% 16%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
(200)
-
200
400
600
800
1,000
2015 2016 2017 2018 2019 2020
Net profit (PKR m)
Net Profit NP margin
268 343 507 616 831 861
19%22%
26%
30% 31%33%
0%
5%
10%
15%
20%
25%
30%
35%
-
200
400
600
800
1,000
2015 2016 2017 2018 2019 2020
Gross Profit (PKR m)
Gross profit GP margin
Financial highlights
39
(643) (607) (403) (344) (236)
182
(800)
(700)
(600)
(500)
(400)
(300)
(200)
(100)
-
100
200
300
2015 2016 2017 2018 2019 2020
Retained Earnings (PRK m)
RE Linear (RE)
40
Important Ratios
2015 2016 2017 2018 2019 2020
Earning Per Share (1.17) 0.44 2.01 3.16 3.87 3.42
Price Per Share 4.72 6.03 18.35 19.30 28.81 29.85
P/E ratio NA 13.67 9.13 6.11 9.31 8.73
-31%
3%
12%
18%
50%
22%
6%
13%
20%26%
37%
28%
-40%
-20%
0%
20%
40%
60%
2015 2016 2017 2018 2019 2020
Return on equity Return on capital employed
41
Debt and Equity ratios
83%
7%
49%
10%
17%
93%
100% 100%
51%
90%
0%
20%
40%
60%
80%
100%
2015 2016 2017 2018 2019 2020Debt Equity
THANK YOU
Q&A