Ultramarine & Pigments

Ultramarine 62nd AGM Notes-

Ultramarine Pigments-

Ultramarine Pigments is mainly into ultramarine blue and violet pigments, it has manufacturing plants at Ambattur and Ranipet.

Started two subsidiaries Ultramarine specialty chemicals and ultramarine fine chemicals (Set up subsidiaries because the company was gaining some sort of tax benefit)

Subsidiary activities in Naidupet

Compitetion-

Ferro (Nubiola) has been in existence for a long time now, and the company doesn’t see any kind of threat from this competitor.

Huebach Pigments Private Limited, based out of Gujarat, can try to sell products at a loss to gain market share, will they be successful in gaining market share?

Ultramarine says many companies tried, but they were not successful.

Possible Margin expansion due to reduction in Logistics and energy costs-

During COVID, logistics costs increased, and right now costs are back to pre-COVID or below pre-COVID levels.

Energy costs are mainly LNG, LNG went up to Rs 130 per kg and is now back to Rs 80 per kg.

Pigments customer geography-

The US and Korea contribute 30–35% of the market share in pigments. Pigments are sold through distributors.

Surfactants customers geography-

Customers are very well disaggregated in surfactant space.

Pigments –

80 percent of sales to the master-batch industry

Ultramarine blue pigment is also used in making other pigments.

Example: Ultramarine blue is used in every Kia car you see out there, white goods, etc.

Company has 13% of the world market share.

The company is foraying into mixing metal oxide (450 t).

Ultramarine blue cost – 350 to 600 per kg

Mixed Metal oxides costs 650 to 1200 per kg.

Pigments bottom-line contribution is 25–30%.

The company expects revenue degrowth in FY24 in the pigment space.

Surfactants-

There are two types of surfactants- commodity and semi-commodity. The company is trying to get onto the semi-commodity and specialty surfactant sides, where margins are comparatively better than commodity surfactants.

ITES-

Medical billing and some publishing

Margins are better in this division when compared to other players.

The company is not bothered by revenue growth in this segment, it cares only about margins and the bottom line, and it will continue to do so.

Others –

3–4 years for the capacity to be fully utilised.

There are some raw material supply issues, and the company is working on them.

The company is more focused on the bottom line than the top line and expects good growth in the bottom line in the next 3–4 years.

Promoter stake has reduced from 52% to 42% in the last 3 years due to sales by non-operating promoters.

A bad debt of 3.1 crore was written off (US distributor). The company is trying to recover it, but there are very low chances.

The branded detergents segment is currently loss-making, but the company will continue to pursue operations as the loss is very minimal.

6 new products: mixed metal oxides and specialty surfactants (ingredients in laundry), products are in the trial balloon phase and are developed by an in-house R&D team.

Right now, the company does not have any vacant land, in fact, if there is further need, the company will look to buy 40–50 acres of land in Tamil Nadu.

No plans to list on the NSE

There are no plans for share buybacks, and the dividend policy will remain unchanged.

The company has been kind enough to give approval for the plant visit.

Disclaimer – Invested