Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CCL Products (India) Ltd (BOM:519600, Financial) achieved a turnover of INR773 crores in Q1 FY25, an 18% increase from the previous year's corresponding quarter.
- The company's net profit grew by 18% to INR71.4 crores compared to the previous year.
- EBITDA increased by 23% to INR131.6 crores, and profit before tax (PBT) grew by 25.5% to INR87.18 crores.
- The domestic market showed strong performance with a gross turnover of INR90.5 crores, with branded sales contributing INR65 crores.
- The company is expanding its distribution network and marketing activities, particularly in the UK market, to build its brand presence.
Negative Points
- Depreciation expenses decreased from INR31 crores to INR23 crores due to a revised depreciation policy, which may indicate lower future asset value.
- Gross debt increased from INR1,620 crores in March 2024 to INR1,885 crores, primarily due to higher working capital requirements.
- Despite a 15% to 16% volume growth, the company faces challenges with high coffee prices, which have not yet led to increased inventory levels among clients.
- The company is experiencing volatility in coffee prices, particularly due to mixed crop situations in Brazil and Vietnam, making future price predictions difficult.
- The company's working capital cycle has increased due to longer logistics timelines, adding pressure on interest costs and financial management.
Q & A Highlights
Highlights of CCL Products (India) Ltd (BOM:519600) Q1 FY25 Earnings Call
Q: Can you explain the minor growth in other expenses and the decrease in depreciation?
A: The decrease in depreciation is due to a revision in the depreciation policy for vending machines, reducing the period from 10 years to 3 years. This resulted in a provision adjustment in the previous year, causing a reduction in the current quarter.
Q: What is the current amount of gross debt, and can you bifurcate it between working capital and CapEx?
A: The gross debt at the end of Q1 is INR1,885 crores, with INR1,200 crores attributed to working capital and INR675 crores to term loans.
Q: Can you provide an update on volume growth and inventory levels among global retailers?
A: Volume growth for the quarter was around 15% to 16%. However, global retailers have not increased their inventory levels due to high coffee prices.
Q: How are coffee prices and crop situations affecting the market?
A: Coffee prices remain volatile due to mixed crop reports from Brazil and Vietnam. Despite expectations of price corrections, the market remains unpredictable.
Q: What is the capacity utilization in India and Vietnam?
A: India’s new food and beverage capacity is in the stabilization phase with low utilization. Other capacities in India are running almost full, while Vietnam's first line is at full capacity and the second line at 50%.
Q: How is the branded business in India performing?
A: The branded business achieved INR65 crores in sales, growing at 45% to 50%. The overall India business is expected to cross INR300 crores this year.
Q: What are the expectations for margins given the current coffee price scenario?
A: Margins are expected to remain stable, driven by volume growth rather than margin improvement. Long-term contracts are still challenging due to high coffee prices.
Q: Can you provide insights into client additions and wallet share?
A: The company added 10 to 15 new clients, with efforts to increase wallet share among existing clients. The focus is on qualitative client additions for long-term relationships.
Q: What is the strategy for the newly launched coffee brands in Europe?
A: The strategy focuses on gaining listings in modern retail and building brand awareness through social media and localized activities. The goal is to regain momentum for the brand.
Q: What is the current cost of debt and expectations for the year-end debt level?
A: The current cost of debt is around 8.25% for working capital. The year-end debt level is expected to be around INR2,200 crores, assuming current coffee prices.
Q: How is the company managing inventory days and working capital cycles?
A: Inventory days have increased due to sourcing from Brazil, which offers lower prices but longer logistics timelines. All inventory buildup is backed by confirmed contracts, and the situation is expected to improve as coffee prices stabilize.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
