Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AGI Greenpac Ltd (BOM:500187, Financial) reported a 1.7% increase in total income year-on-year, reaching INR577 crores in Q1 FY25.
- The company achieved a 4.7% year-on-year growth in EBITDA, amounting to INR147 crores with a stable margin of 25.4%.
- Net profit for the quarter was INR63 crores, with a margin of 11%.
- The specialty glass plant, which commenced production in FY23-24, is performing well and capitalizing on high-margin products in the cosmetics and perfumery sector.
- AGI Greenpac Ltd (BOM:500187) successfully commissioned a 2.8 megawatt solar rooftop project at its Hyderabad plant, increasing overall solar capacity to 19.56 megawatts, significantly reducing the carbon footprint and energy costs.
Negative Points
- The company experienced a scheduled furnace shutdown for relining and de-bottlenecking, which impacted production and sales.
- First-quarter sales were affected by election-related restrictions on the consumption of alcoholic beverages, a significant segment for the glass industry.
- Despite the positive financial performance, the company did not provide specific volume metrics, making it difficult to assess operational efficiency fully.
- There are concerns about potential overcapacity in the industry, given the dormant capacities and the possibility of new entrants.
- The company faces competition from the Firozabad cluster, which benefits from more favorable gas pricing, posing a challenge to AGI Greenpac Ltd (BOM:500187)'s market position.
Q & A Highlights
Q: Sir, my first question is with respect to your unit economics over the last three years, FY21 to FY24. What exactly has led to the increase in gross margin per tonne? And how should your EBITDA per tonne behave in the coming future?
A: The increase in gross margin per tonne is due to a combination of cost-side efficiencies and strategic price adjustments. We have implemented several de-bottlenecking projects and operational improvements. However, we do not disclose per tonne data publicly. The cost reductions achieved are expected to be permanent, contributing to sustained EBITDA margins.
Q: My next question is on the industry demand and supply scenario. How does the management plan for the next five years in such a scenario from a growth perspective?
A: We focus on cost efficiency and operational excellence to remain competitive. The industry is cyclical, but our strategic initiatives and technological advancements help us maintain resilience. We aim to sustain our growth by fortifying our cost structure and leveraging market opportunities.
Q: Congrats on the different set of numbers, despite a few hurdles on the production. How was the first quarter volume and the realization? And how do you see the volume growth and pricing trend?
A: The first quarter faced challenges due to elections, impacting sales in the liquor and beer segments. Realizations remained flat with minor adjustments. We expect stable pricing trends and aim to optimize our production capacity to meet demand.
Q: What is the progress on the acquisition of HNG?
A: The matter is currently with the Supreme Court and NCLT, with a hearing expected in mid-September. We anticipate a favorable resolution soon, allowing us to proceed with the acquisition. Details on CapEx for the acquisition are part of the resolution plan and cannot be disclosed at this time.
Q: Can you clarify the current capacity and any recent additions?
A: Our base capacity is around 1,600 tonnes per day, with additional capacity from de-bottlenecking and new lines bringing it close to 1,900 tonnes per day. We continue to optimize and exploit our furnaces to achieve higher output.
Q: What is the demand outlook from the alcohol industry, particularly spirits, given the shift to plastic bottles for lower-end brands?
A: The alcohol industry is growing at around 8-9%. While there is some shift to plastic, particularly high-end plastic, the overall demand for glass remains strong. We focus on innovation and quality to maintain our market position.
Q: How do you plan to compete with the Firozabad cluster, given their favorable pricing in terms of gas, etc.?
A: We leverage our technological superiority, product quality, and strategic location to remain competitive. Our focus on innovation, customer commitments, and operational excellence helps us maintain a strong market position.
Q: What is the long-term export opportunity for glass from India?
A: The China Plus One policy and demographic trends in other countries present significant growth potential for Indian glass exports. India's ability to sustain energy-intensive industries positions us well for future export opportunities.
Q: How long does it take to set up a brownfield project, and what is the cost per tonne compared to a greenfield project?
A: A brownfield project typically takes 2.5 to 3 years. The cost per tonne varies based on the type of machines and products. For a 100-tonne per day furnace, relining costs around INR 25 crores, with additional costs for technological upgrades.
Q: What was the impact of the plant shutdown in the first quarter on sales?
A: We lost 16,000 tonnes of production due to the planned shutdown. However, this was a planned event, and we have strategies in place to mitigate the impact on sales and revenue.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
