Release Date: August 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Balkrishna Industries Ltd (BOM:502355, Financial) reported a 24% year-on-year growth in sales volume for Q1 FY25.
- The company's stand-alone revenue for the quarter stood at INR2,741 crores, registering a growth of 30% year-on-year.
- Stand-alone EBITDA for the quarter was INR714 crores, showing a growth of 47% year-on-year, with a margin of 26.04%.
- Profit after tax for the quarter was recorded at INR477 crores, a growth of 53% year-on-year.
- The company has continued to extend its power requirements through renewable energy, with five megawatts of wind power and seven megawatts of solar power operational across its plants.
Negative Points
- Despite strong Q1 performance, the company is facing macro challenges such as recessionary fears in the USA, geopolitical tensions, and inflationary raw material costs.
- Freight costs are expected to increase in the coming quarters, impacting overall expenses.
- Commodity prices are also rising, with an anticipated 2% to 3% increase in raw material costs.
- The company has not been able to take any price hikes to offset increased costs due to weak market demand.
- Channel inventory is increasing, indicating a potential slowdown in demand for the remainder of the year.
Q & A Highlights
Highlights from Balkrishna Industries Ltd (BOM:502355) Q1 FY25 Earnings Call
Q: Can you provide guidance on volume growth for the entire year?
A: We anticipate minor growth from last year. Despite strong Q1 performance, we expect tepid demand for the remainder of the year due to macro challenges. - Rajiv Poddar, Joint Managing Director
Q: How do you expect freight and commodity costs to impact the coming quarters?
A: Freight costs have been negotiated lower for the last quarter but are expected to rise in the coming quarter. Commodity prices are also increasing, with raw material costs expected to rise by 2% to 3%. - Rajiv Poddar, Joint Managing Director
Q: Have you taken any price hikes to offset increased costs?
A: No price hikes have been taken yet. We are assessing market conditions to determine what can be passed on to customers. - Rajiv Poddar, Joint Managing Director
Q: Can you explain the higher CapEx for the new OTR range compared to previous expansions?
A: The higher CapEx is due to the focus on mining tires and additional utility requirements for future needs. - Rajiv Poddar, Joint Managing Director
Q: What is the outlook for the European Union deforestation regulation (EUDR) compliance?
A: We need to ensure that natural rubber used in EU supplies does not come from deforested land post-December 2020 and adheres to local laws. This will have a marginal impact on costs. - Rajiv Poddar, Joint Managing Director
Q: What is the expected impact of cost inflation on margins in Q2?
A: We expect to maintain EBITDA margins around 24.8% for the full year, despite cost pressures. - Rajiv Poddar, Joint Managing Director
Q: How are retail volumes trending on the ground?
A: Retail volumes are weak, with channel inventory buildup contributing to the current demand softness. - Rajiv Poddar, Joint Managing Director
Q: What is the status of the specialty carbon black project?
A: The project is progressing well and is on track to commence operations in the first half of this fiscal year. - Rajiv Poddar, Joint Managing Director
Q: How will the EUDR impact sourcing and costs of natural rubber?
A: We source natural rubber from various regions, including Southeast Asia and Africa. Compliance with EUDR will increase costs by approximately $200-$300 per metric ton. - Rajiv Poddar, Joint Managing Director
Q: What is the outlook for the Indian market?
A: The Indian market remains positive, and we aim to expand our range in this region. - Rajiv Poddar, Joint Managing Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
