Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Astral Ltd (BOM:532830, Financial) achieved a 16% volume growth, surpassing their guidance of 15%.
- The Guwahati plant is fully operational, and the Hyderabad plant is set to start commercial production by the end of August 2024.
- The adhesive business in India saw a healthy growth of 14% with a stable EBITDA margin of 16%.
- The company launched Astral Paint in Gujarat and Karnataka, with positive initial market responses.
- Gross profit margins reached an all-time high of over 40% during the quarter.
Negative Points
- The UK adhesive operations experienced a negative growth of 5% in top line and a drop in EBITDA to 2.5% due to elections and slower job market growth.
- The EBITDA margin for the paint business dropped from 17% to 10% due to additional launch costs.
- Employee and other costs increased, impacting the EBITDA margin despite high gross profit margins.
- The company faced challenges in passing on PVC price increases to the market, affecting inventory gains.
- The bathware business has not yet reached the break-even point, impacting overall EBITDA.
Q & A Highlights
Q: This 15% volume growth that we are saying, I think previously we are looking at 15% to 20% kind of range. So given the fluctuations in the PVC prices, so is it possible that maybe if second quarter onwards that we can -- there is a chance to revise this upwards of 15% would be kind of max that right now we are looking at? And also now particularly July, how was the kind of demand or maybe if you can give some idea in terms of the volume, how was --?
A: So like you see the history that whenever the polymer price goes up, the demand picked up, it is not a genuine demand, but it's just stocking demand. For the genuine demand will be the secondary sale. Primary demand keep coming up and down. So whenever polymer price goes up, primary demand goes up, whenever polymer price come down, primary demand comes down. So that is the normal phenomena. And to some extent, secondary also get affected with the price fluctuation. We have seen in the past also whenever prices gone down, the demand has come down, but the moment INR1 or INR2 or INR3 polymer price goes up, the pent-up demand come back. So I think on a basis of one month or so, it is very, very difficult for anyone to predict what is going to be there for the full year basis. And that is why we say that right now we are sticking to this volume. And if any change will be there, genuinely any uptick or slowdown will be the -- last year also you see, we guided 15% volume. And on a half year wages, we revised the guidance to 20%, and we ended with 25%. So we are very sincerely communicating to our investors the reality of the market. This year also we have not given the two high guidance, we have given only 15%-plus kind of guidance because we know there is a highly volatility will be there in the market. Otherwise, we could have guided you more also. But we don't want it to do that way. That's why we have given the guidance 15%-plus. 15% can be anything, 16%, 17%, 18%, 19%, 20%, anything 15% to 20% number. So we have to see how our peak quarters are going to perform. If our peak quarters are going to give us good results, then I think should not be any problem. We can achieve even more number also than the 15%. So 15%-plus guidance we have given. So we have stick to right on that. As far as July is concerned, yeah, you are right, absolutely. July's slow because the polymers are coming down. Another INR2 to INR3, everyone is expecting that the market price will go down and that is already reflected in the street and every dealers and distributor know thing. But beyond that seems difficult to go down immediate basis. And if anything positive come out from the [VIA] side or antidumping duty side, there are high probability the polymer price start going up also. Similarly, the antidumping side of CPVC also can support in the increase in the price in the coming time also. So these all are subjective and that is the reason we have given the ranges, so it is very, very difficult to monitor on a quarterly basis. But on a yearly basis, yeah, we are quite confident that we will be delivering 15%-plus.
Q: And secondly, in terms of Q2, is there a possibility that we can see the inventory losses?
A: At this stage, we don't see any inventory losses. If further polymer goes down, yeah, that can be a probability of loss. But at this stage, when I'm talking to today, it doesn't look that the inventory losses will be there.
Q: And a couple of data points. Bathware Q1 revenue and EBITDA loss was how much and CapEx, how much we have done for full year we were looking at [INR300 crore], that remains intact?
A: So Bathware we have already given the press release, we have done close to about INR26 crore of revenue, which is why on Y-o-Y basis, if you see, it is a 90% jump. But that is not the right way to evaluate 90%. It looks very good number, but the base is very low. And as far as CapEx is concerned, we have not done any CapEx into the bathware side because sanitaryware is completely outsourcing. And as far as the [costage] is concernced comes, already Jamnagar plant is operational. So we have not done any CapEx and we have not given a guidance of INR300 crore. We have said, we will be -- Sandeep-bhai also said in the initial remarks that we should be doing between INR100 crore to INR125 crores revenue this year.
Q: No, I'm saying the full year at company level consol level in terms of the CapEx guidance?
A: Yes. CapEx guidance will be somewhere around INR350 crore on a full year.
Q: And then bathware, this quarter, how much EBITDA loss?
A: It is very difficult to work out exact loss because earlier it was a separate segment, but now our plumbing product mix where we are using the brass element. We have started manufacturing this all brass ring in-house at our Jamnagar plant. So now, that is clubbed with the plumbing business. So very difficult to arrive at that exact number, but it will be very low.
Sandeep Engineer - Astral Ltd - Chairman of the Board, Managing Director: It is very low and there is no CapEx going to (technical difficulty) business for this full fiscal year. We have enough capacity in Jamanagar in the enitire range.
Q: Okay. And lastly, sir, on the paint full year, how much revenue we are looking at in terms of margin? I think previously we said 14%, 15% kind of a margin, so that for FY25 remains the same?
A: So this year margin will be little lower, as I communicated in first quarter also because of launch and all employee cost because our revenue has not started, but expenditure have started. That's why margin has come down. And second half also one or two more state may open. So in that also will take some initial cost, but we will be maintaining double-digit kind of margin.
Q: And revenue for full year --
Operator: Mr. Shah, may we request you to --
Hiranand Savlani - Astral Ltd
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
