I am pleased to share the Company's report card for FY 2021-22 which we exited on asteady and stable note despite a multitude of macro challenges prevailing in both thedomestic and global markets. The pandemic-led disruptions and the inflationary rawmaterial pressures impacted demand and restricted overall volume growth in our corebusiness during the year. However the uptick in demand and ofitake in the Europeanmarkets helped stabilise growth for SHK as Europe witnessed double-digit growth for ouracquired businesses during the year. The Emerging markets also contributed to the steadyperformance on our revenue front driven largely by healthy demand which we seesustaining in the coming quarters. In India we saw improved wins from the large FMCGcustomers which helped offset the subdued contribution from smaller customers.
OUR TOTAL INCOME FOR THE YEAR WAS HIGHER AT 17.6% AT Rs 1581.7 CRORE WHILE EBITDASTOOD AT Rs 232.1 CRORE. THE COST PRESSURES RESULTING FROM THE GLOBAL RAW MATERIALINFLATION AND SUPPLY CHAIN CONSTRAINTS IMPACTED MARGIN PERFORMANCE WHICH WE MITIGATED BYUNDERTAKING CALIBRATED PRICE HIKES IN COLLABORATION WITH CUSTOMERS. OUR PRUDENT INVENTORYMANAGEMENT LED TO SOME INCREASE IN THE WORKING CAPITAL BUT IT ENABLED US TO ENSURE SUPPLYCONTINUITY FOR OUR CUSTOMERS IN AN EXTREMELY CHALLENGING ENVIRONMENT - A FEAT THAT HASBEEN WELL APPRECIATED BY OUR STAKEHOLDERS.
Our total income for the year was higher at 17.6% at Rs 1581.7 crore while EBITDAstood at Rs 232.14 crore. The cost pressures resulting from the global raw materialinflation and supply chain constraints impacted margin performance which we mitigated byundertaking calibrated price hikes in collaboration with customers. Our prudent inventorymanagement led to some increase in the working capital but it enabled us to ensure supplycontinuity for our customers in an extremely challenging environment - a feat that hasbeen well appreciated by our stakeholders.
With the pandemic situation easing and inflationary trends also on a downward curve wewill now focus on scaling back our inventory days to the original levels over the next 6-9months and striking a healthy balance between stock levels and supply chain demands. Thisis in line with our approach of adapting our strategy with agility to the evolvingexternal trends.
Taking a closer look at FY 2021-22 we see that the tangible results of our structuredinterventions and our various business initiatives supported our efforts to maintainstability in performance amid the challenging macro environment. These have also infused asense of optimism in our growth prospects for the coming years.
The challenges in the environment did not derail our growth and expansion plans and weundertook several focussed measures to enhance our global market presence augment ourniche offerings and expand our customer segments through the year. Our efforts were aimedat steering accelerated growth for the Company in the medium to longer term
Our focus on inventory management helped keep the gross margin erosion relatively incheck in comparison with the industry while enabling supply chain continuity
Our participation in the global RFP (Request for Proposal) continued to progress welland has set the stage for SHK to harness more global opportunities to drive the next legof growth for us. We remain optimistic about the multi-year business potential from thisglobal tender
We moved with agility to revive operations at our Mahad facility which was hit byfloods following unprecedented rains in Maharashtra that led to suspension of production.This helped ensure that there was no consequent loss of business
We partnered with Apollo Hospital and other local hospitals to fully vaccinate all ouremployees and their families. We also extended the vaccination drive to employees'relatives and secondary manpower and their relatives
Getting seamlessly back to office
SHK has always been committed to the welfare and wellbeing of its people who weconsider to be equal partners in our journey of growth and value creation. As businessstarted getting back to normal after the second wave of COVID-19 had abated by the secondquarter of the fiscal we put in place new guidelines and protocols to accommodate the B2W(Back to Workplace) initiative. As a mark of appreciation for their support and commitmentduring the work-from-home period we also accorded special recognition to people acrossour sites and offices.
Prior to the reopening of the offices emergency response teams were installed toensure smooth and uninterrupted operations while maintaining the health safety andwelfare of our people. Besides formulation of SOPs for compliance training in COVIDfriendly behaviour was provided and COVID core committees were formed across sites toenable the safety security and wellbeing of employees. Sensor/card reader basedattendance system sanitisation bio bubble transport facility etc. were some of the othermeasures taken to keep our people protected at all times.
We also tied up with labs and hospitals for testing of employees across sites andoffices at frequent intervals in addition to the vaccination drive undertaken acrosssites. In addition we obtained a Group Term Insurance Policy of Rs 25 lakh for allemployees to meet COVID-related exigencies.
Key Financial Highlights
A strategically focussed inventory policy coupled with better product mix and ourability to pass on price increases kept SHK on track with positive performance during FY2021-22 despite the challenging macro environment. Our efforts translated intominimisation of the impact on gross margins and enabled us to maintain steadyprofitability margins. Our Europe business delivered robust growth on the back of improvedclient wins in the Italian and other European markets. In India better wins from thelarge FMCG customers helped keep the overall domestic growth at moderate levels.
On a consolidated basis our revenue from operations grew by 18.3% to Rs 1564 crore inFY 2021-22. Domestic core Fragrance revenues reported a 7.3% year-on-year growth whileorganic growth in the Flavour division was a healthy 14.4% over the previous year. Despitethe challenging inflationary pressures the Company managed to deliver 14.7% EBITDAmargin. PAT also increased marginally by around 3% even though adjusted PAT was lower atRs 105 crore.
All our acquired businesses including Creative Flavours and Fragrances SpA (CFF)Italy Nova Fragranze Srl Italy Holland Aromatics BV Netherlands and NuTaste Food andDrink Labs Private Limited India delivered strong performance during the year. On a fullyear basis CFF's core fragrance business grew by 21% year-on-year during the fiscal.
I am also happy to share that the Board of Directors have recommended a dividend of Rs0.75 per equity share of the Company.
Key Operational Highlights
At Keva we have been consistently working towards sustainable long-term growth acrossour business segments in our key geographies. FY 2021-22 witnessed a scaling up of ourefforts to further enhance our operational strength. Healthy wins across markets aided bytargeted initiatives and participation in Global Request for Proposal (RFP) kept ourstrategic growth and expansion plans on track during the year.
A key development I am pleased to share with you is that your Company which wasearlier shortlisted by a large global FMCG MNC as one of the registered suppliers offragrances is now participating in the global RFP. We will engage with the MNC on aninteractive pitch for commercial tender submission in line with its strategy ofassociating more deeply with large global MNCs.
Another major step furthering our growth plans is the acquisition of Holland AromaticsBV and NuTaste Food and Drink Labs Private Limited through the Company's wholly- ownedsubsidiaries - Keva Europe BV and Keva Flavours Private Limited. The acquisition ofHolland Aromatics BV a Netherlands- based niche fragrance manufacturer brings onboard ahigh potential company with strong local presence in Europe and complements our CFFbusiness. It will strengthen our endeavour to tap upon diverse customer segments rangingfrom local MNCs and particularly assist us in our endeavours to take global MNC business.Holland Aromatics' export business in Indonesia will also help propel our 3-I strategy.This synergistic acquisition will further equip the Company with additional capacity toplay within the Group for effectively addressing the requirements of large projects.
NuTaste Food and Drink Labs Private Limited paves the way for our further expansioninto high potential Flavour categories such as syrups sauces seasoning fruitpreparations and other such premium grade products. It will give us accelerated momentumfor growth in the fast-moving FMCG sector particularly the QSR space which we arestrategically focussing on as a key area of future growth. NuTaste's complementary set ofproducts will enable us to cater to the entire requirements of the FMCG bakeryconfectionery and pharma sectors. The acquisition complements our Flavour business andwill help us grow this segment beyond the traditional R&D-led Flavour usage for usein large canteens and some of the mid-sized food delivery and food companies which utiliseFlavours in a ready- to-use form. This gives us another growth opportunity for ourFlavours business.
Scaling our Sustainability Proposition
At Keva we have articulated a long-term growth strategy that goes beyond businessexcellence and profitability and is equally if not more focussed on creating asustainable platform for holistic and inclusive value creation for the long term. Over thepast few years we have consistently aligned ourselves to the UN Sustainable DevelopmentGoals with the aim of reducing emissions under Scope 1 - (Direct Greenhouse emissions)& Scope 2 (Indirect Greenhouse emissions) by cutting down on energy consumptionpromoting efficiencies minimising waste and adopting recycling practices across theorganisation. We have now stepped up our sustainability efforts and drawn up a 5-yearroadmap to lower our carbon footprint and create a more enabling environment forsustainable future growth.
The way ahead...
As we power ahead on our sustainable growth trajectory our efforts will be focussed onadding geographies and customers to expand the outreach of our business and make it morevalue accretive for all our stakeholders. While the challenges of the past one yearcontinue to linger on we are confident that as an organisation with strong customerintimacy innovation and product base we shall find new and bigger opportunities forgrowth in the months to come. We believe it is these attributes that will differentiatethe men from the boys in this business and will provide us the differentiation needed topush forward with our plans to stay on course with doubledigit growth.
Going forward the nature of inflation (triggered by rising energy cost) may put aspanner in Europe's strong growth trajectory of the past two years but we see the growthagain picking up after a slight pause. The Middle East and South Asia markets incontrast appear to be on the way to pick up the expected slack from Europe on the back ofthe economic recovery driven by oil prices. India is also clearly headed for a high growthtrend giving us a sense of optimism about the next fiscal.
In terms of segments Fine Fragrance and Beauty which fell behind to some extentduring the pandemic is likely to bounce back as a segment of growth the world over. Thepandemic has increased awareness and improved the distribution of packaged food globallyand we expect an exponential growth in the Flavours and Food businesses especially in thedomestic market.
Another positive factor that is likely to aid SHK's growth in the near future is thefinal wave of consolidation that seems to be taking place currently in the industry. Themerger of DSM and Firmenich to establish a leading creation and innovation partner innutrition beauty and well-being signals a shift in the industry strategy which is movingtowards smaller players in the chemical industry merging into the large corporates. Thisaugurs well for mid-sized companies like ours leaving us space to grow and capture theniche created by this consolidation.
Our focus in the months ahead will be on expanding and augmenting our customer outreachto steer our sustained double-digit CAGR. We shall continue to move forward on ouracquisition strategy which has aided the Company's growth in the past to further expandour customer base across geographies. Our active participation in large MNC tenderprocesses will further pave the way for SHK to become a notable player in the globalF&F industry with the global MNC contract for which we have tendered expected todistinguish SHK in terms of affordability and cost structure vis-a-vis global players.
On this positive note I would like to take this opportunity to thank our employeesthe management business channel partners investors shareholders and all otherstakeholders for the trust and support they continue to extend to us in our onwardjourney. With their cooperation I am confident of staying on course with our long-termsustainable growth plans.
A KEY DEVELOPMENT I AM PLEASED TO SHARE WITH YOU IS THAT YOUR COMPANY WHICH WASEARLIER SHORTLISTED BY A LARGE GLOBAL FMCG MNC AS ONE OF THE REGISTERED SUPPLIERS OFFRAGRANCES IS NOW PARTICIPATING IN THE GLOBAL RFP. WE WILL ENGAGE WITH THE MNC ON ANINTERACTIVE PITCH FOR COMMERCIAL TENDER SUBMISSION IN LINE WITH ITS STRATEGY OFASSOCIATING MORE DEEPLY WITH LARGE GLOBAL MNCs.
Whole-time Director & Group CEO