Freight rates not yet normalised, remains elevated, says Fine Organic

24 August 2022

The situation with respect to recent sharp increase in freight and forwarding expenses still remained dynamic and freight rates were not yet normalised, the chairman and managing director of Fine Organic Industries Ltd, Mukesh Shah, said in the company's annual shareholders meeting on Tuesday.

The specialty chemicals company which makes food emsulsifiers, and polymer, rubber and other additives had seen freight and forwarding expenses rise sharply in 2021-22 (Apr-Mar) "due to increase in sea freight cost brought by the shortage of containers and global supply chain disruption."

Shah said that sustainable operating margins in the future could only be ascertained later based on the next few years performance and global business environment and that the company's short term endeavour was to maintain operating margin in the range of 18-20%.

Fine Organic Industries' consolidated operating margin, as denoted by the earnings before interest, tax, depreciation and amortisation margin, went up sequentially in the June quarter to 28.7% from 25.8%. The operating profit rose 35% on quarter to 2.1 bln rupees.

The operating costs showed a sequential rise of 17% to 5.3 bln rupees, data from Informist Corporate Fundamental Database showed, but a higher increase of 21% in net sales to 7.5 bln rupees enabled the company to record an operating profit growth.

Shah said that the June quarter rise in revenue was "primarily attributed to better realization across the product segments and some increase in volumes." He pointed out that the company got some opportunities to grab upon due to global supply chain disruptions which resulted in a surge of export demand for the company's products.

Global supply chain disruption like, inadequate availability of Raw Materials,  shortage of containers and other challenges brought by macro-economic factors,  have given us some opportunities to grab upon which also resulted in surged  export demands.

The share of exports to total revenue jumped to 70% in the June quarter from 60% in the whole of 2021-22.

Fine Organic Industries, according to its recent investor presentation, exports oleochemical based additives to 75 countries and is its largest producer in India.

Shah said that the company didn't know how long the challenging global situation will remain for it exploit new opportunities in the export market.