Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Strategic focus on high-value products has improved margins.
- Positive customer response in new markets like Canada, France, Mexico, and Russia.
- Technological advancements like Kreos and CHROMIA are on track for commercialization.
- Capacity utilization is close to optimum, indicating efficient operations.
- Commitment to developing innovative products to mitigate pricing pressures.
Negative Points
- Challenging market conditions in the US due to rising interest rates, inflation, and a weak housing market.
- Escalated ocean freight costs impacting procurement expenses.
- Delays in raw material arrivals affecting delivery timelines and operational efficiency.
- Pricing pressure driven by lower demand and constrained consumer spending.
- Granite business continues to face significant challenges with a cautious outlook.
Q & A Highlights
Q: Sir, congratulations on a greater set of numbers. Sir, my first question is, I think previously, you were guiding for Q2 FY25 for Kreos to be commercialized. So any -- and I think you mentioned Q3 right now. So why the delay of one quarter?
A: See, Kreos we are currently forcing that should be close to September end in terms of commercialization, but it could also spill to another one or two weeks, which is probably on 15th of October. So on the mention I'm saying Q3, but practically, we are saying it's going to be September end. But then depending upon -- see, this is all done by Italians, the time, the technicians come and then there are some hot and cold start-ups. So there could be a spillage of one or two weeks, that's the reason we are giving the Q3 guidance now instead of Q2.
Q: Sir, my second question is, if you could just give us some sense -- I was reading on Breton's website that this CHROMIA technology includes 40% less silica. So I'm just trying to understand when we start manufacturing this product, is it my understanding correct that our gross margin should typically be higher because we lowered the silica content better for us? How should I look at that?
A: See, basically, Breton -- CHROMIA is basically a printing. So it depends upon what substrate you have for printing. So it is possible that you produce a low crystalline silica product and you print on it. So it is not necessarily that every product would have a low crystalline silica because of CHROMIA. So CHROMIA is just like a print at the base, which is a page or a slab in this case. We'll determine whether it will have a low crystalline silica or not.
Q: And sir, my second question to this is, so how has been the newer markets for us, how has been Canada, Mexico, Russia, India? And some sense on the capacity utilization that we are operating at currently?
A: Basically, the new markets like Canada is progressing definitely, well, France is progressing good. Russia, we continue to face shipping challenges while the market is improving for our product there, because we have done a good amount of marketing there with our distributor. But the challenging situation is with regard to the shipping today, because it's not easy to ship material from India to Russia. It takes a longer time and the vessels are not all the time available. So unless I think the shipping situation improves for shipping the product to Russia, we'll continue to have -- while the product is well accepted, we'll continue to have a limited demand coming from there. India, we've recruited a sizable team today now, and we are focusing on going to the channel in a different business model now. So it's just started. It's going to take some time.
Q: So sir, can we expect some CapEx in FY26? And the last question is what are our debt levels at the end of Q1?
A: The CapEx currently at the Board level, we do not have any plans considering for the CapEx. But as a company we keep always evaluating the different options which we get. So currently, we do not have any active CapEx beyond Kreos and CHROMIA committed but then we'll keep evaluating the options and as it comes in the future.
Q: Congrats on a good set of numbers. So we wanted more flavor on how is India developing as a market for us for the quartz segment? Like, what are current sales currently from India and -- and what are the plans for the...
A: India for us is definitely a very small market at this time. And the steps what we are taking are for the long term. So we do not see that immediately in the near future, we'll have a substantial revenues coming out of India. So currently, our revenues, while they are in double-digit growth, but we believe that there is a room to improve that. So I think it's going to take at least a year or two to see that the strategy is ratified.
Q: I just wanted to know what was the volume growth and value growth in the current quarter? And secondly, how much the new geographies has been contributed to the overall revenue?
A: So the -- if you look at sequential quarter, it was a double-digit growth. As I said earlier also, we do not give any statistical numbers for obvious reasons. But what I can tell you is that on a sequential basis, it was a double-digit growth what we had in sales volume. And the newer geographies are contributing better than the previous quarter, but still the meaningful contribution is not there in that.
Q: Firstly, when you say that you are running an optimal capacity utilization, I just wanted to clarify, in the past, we had quarters where we had significantly higher avenues, even when we are not using our full capacity. So when you say that you're running at optimal capacity utilization, this obviously does not take into account any product mix changes? Or what you can achieve based on the product mix in terms of capability. Or are you saying that your peak revenue per quarter will be on INR187 crores?
A: When we say optimum capacity utilization, we are typically driven more by the product mix here because if we are producing a product which requires 3x time, which typically a medium or a lower-end product would require, you typically come closer to an optimum capacity utilization. So while there is some headroom to improve, but in terms of -- the bottom line is where we think mostly, we are positioned, if not on the top line.
Q: And due to a planned shutdown -- did you have any planned shutdown this quarter because of which you lost revenue or shipping delays, because of which you lost revenues?
A: No, we have not had any planned shutdowns in this quarter because -- and there's also one more reason why there's little revenue lag would be also because of the shipping situation, there is some revenue portion, which we are not able to account for, while the material is still at the ICD. Because we typically -- based on the sales we do, we recognize the revenue when they actually arrive at the shipping port. Say if the material is lying in Hyderabad ICD while we ship from our factory, we still do not recognize this revenue till it reaches in our shore. And also there has been -- as I mentioned in my opening comments, there has been a little delay in shipping out the materials as well because current shipping environment, there are a lot of blank sailings happening, which vessels are limited. And the rates also have escalated, so customers are also sometimes pushing out to see if their next month situation improves. So there could be a little lag on the revenue side because
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
