Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shankara Building Products Ltd (NSE:SHANKARA, Financial) achieved a steel volume growth of 20% year on year.
- Non-steel revenue grew by 35% year on year, driven by all subsegments including plumbing, fittings, sanitaryware, tiles, electricals, paint, hardware, and accessories.
- Overall revenues grew by 14% year on year, reaching INR1,291 crores for the quarter.
- The company's EBITDA margin for the non-steel segment improved to 6.5%, with gross margins standing at around 10% to 12%.
- Shankara Building Products Ltd (NSE:SHANKARA) continues to grow aggressively in the Western and Central regions, with Maharashtra and Madhya Pradesh witnessing a 52% year-on-year growth in revenues.
Negative Points
- Retail footfall was down this quarter due to slow construction activity amid elections and monsoons.
- Finance costs increased significantly due to higher acceptances, resulting in a profit after tax of INR16 crores.
- The company faced weak cash flow in the sector and rapid expansion into West and Central regions, leading to increased receivables.
- The steel segment's revenue growth was limited to 12% year on year due to softening steel prices.
- The manufacturing segment incurred a loss this quarter, primarily due to the softening of steel prices and bad cash flows in the market.
Q & A Highlights
Q: Sir, I'm trying to understand, our interest costs have shortened dramatically from INR9 crores to INR16 crores quarter on quarter and from INR7 crores to more than double to INR16 crores year on year, whereas the working capital days, according to your presentation, remains same, like, 30 days. So what does that -- I mean, how is this sustainable?
A: So when you're seeing the payables, there are -- some acceptance are there. There, we are bearing the interest cost. So that has led into higher bit of interest in this quarter comparing it with Q1 and Q4 of FY24.
Q: So then how come your receivable days are only 30? Sir, receivables at its journey, then your receivables are [in the thousands]?
A: No, the payable -- our payable, we conclude the acceptance also (inaudible).
Q: So basically, on your payables, you have ended up paying interest. Is that correct?
A: Yes. Yes.
Q: Okay. So now moving forward, if we -- now in the interest cost, will it remain at the same level, around INR16 crores? Or again, it is expected to go back to around INR7 crores, INR8 crores, INR9 crores levels?
A: For now, one more quarter, we may continue the same, too, and --
A: We are looking to normalize the situation and get back to how it was, but we are looking at -- as the monsoons are still intensified in the South and Western regions and the way the markets have been going on in the last 1.5 months, we think that this will continue for a few quarters and then we should normalize.
Q: I was trying to match up the numbers that you have mentioned in the presentation. You have non-retail and retail broken up separately, right? And you have EBITDA for both of them. If you add up the EBITDA, it basically adds up to around INR48 crores. But if you look at the reported EBITDA, it's around 40.7. I just want to know what's the difference between the two.
A: So that is unallocated expense that had not been captured in the segment EBITDA. When you're seeing the reported number, that number -- their expense also will be different and final EBITDA will come to INR41 crores.
Q: Sorry, I didn't get the last part. Say it again?
A: Unallocated expense has not been captured in the segment EBITDA for retail and non-retail. So reported number and their expense has been continued on a [concerning] level. Net EBITDA will be around INR41 crores.
Q: So you have given a breakup of steel and nonsteel also, right? Where you have given the EBITDA for the non-steel business at around, whatever, 6.5% on INR137 crores, which is 9% -- INR9 crores. So if I had to work back the steel EBITDA based on that, then I have to take the same INR48 crore number?
A: On retail, when you're seeing the steel EBITDA will be approximately around 4 percentage. And while you are thinking about steel, steel will be approximately around -- INR33 crores will be steel EBITDA.
Q: Steel EBITDA is INR33 crores. Okay. All right. Just one more thing, and this is on the payables that you mentioned that you are paying interest on. And you clearly said a couple of quarters, while actually in the initial three months you mentioned, that we are expecting it to normalize in the coming quarters. I'm just trying to understand the difference between the two. Will this be a one-off? Or will this continue for another few quarters?
A: So that will continue for another one or two quarters. Yes, it will continue.
Q: And is this change in policy that was taken recently? Or is this something which you have been doing in the past?
A: The change has been taken recently because the rise of the quarter is there so we started then in the interest cost. So that -- the change has been taken recently.
Q: Okay. Can I just ask one last question? I'm sorry about this. What would be your total debt at the end of the quarter?
A: Around INR620 crores including acceptance.
Q: Sorry, how much?
A: INR620 crores including acceptance.
Q: INR620 crores?
A: Yes.
Q: On top -- okay. So if you remove the acceptance, as I'm saying, remove the payables, what will be the actual debt on the books?
A: It's around INR100 crores.
Q: I just have one question. One question is already covered. So one question is about, like, in the one of the previous calls, we were comparing as [S V Mark], one of your competitors. And you just said that it is not exactly a competitor, but kind of a super distributor. And we are a retail distributor. So I just want to understand whether is that the case, because it means like we are buying from them or we are directly buying from the -- our manufacturer?
A: So majority of our products are steel [cube] and I think that come directly from the manufacturer. We do buy certain products from [S V Mark], where [there's] a stock gap where we do require certain materials immediately in certain territories, but it's more of a stock gap and more of a small purchase. And as we continue to say, they are super distributor super stockist. They do not go down to the B2C or even the small B2Bs.
Q: Okay. And do we also do kind of a super distributor business? Or we are only doing retail business?
A: We do, do distribution business, but we are more localized in the sense that we do statewide, citywide. And so we do have multiple hub-and-spoke models and multiple warehouses across the South, West and East. So you could say we do, definitely, distribution. Some products in the super, but somewhere in the medium, you could say. I mean, midsized.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
