Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated sales for the June '24 quarter increased by 5% compared to the previous year, reaching INR690 crores.
- EBITDA for the quarter improved significantly to INR84 crores from INR55 crores in the June '23 quarter.
- Specialty sales accounted for 69% of total volume in Q1 FY25, up from 64% in FY24, contributing to higher margins.
- The BOPET business, which started in September 2022, earned positive EBITDA for the first time in Q1 FY25.
- The company expects improved sales of specialty films and healthier domestic margins for FY25.
Negative Points
- Net debt stands at INR598 crores, which is close to 2 times EBITDA and 0.4 times equity.
- The company is planning a significant CapEx of INR300 crores to INR350 crores in the next 12 months, which may impact cash flow.
- Zigly, the petcare vertical, is still in the consolidation phase and is not yet profitable.
- The rigid packaging vertical is still ramping up and is expected to break even only by the end of FY25.
- BOPET margins, although improved, are still not at the desired level and the business has been underutilized.
Q & A Highlights
Q: Congratulations on the good set of results and your future plans. I have two questions mainly related to the BOPP margins, contribution margins, and the realization for this quarter, the previous quarter, and how it has been for July and August.
A: As I've already stated, it's probably working fine. Margins are running probably fine. Post June, it will be difficult to give you specific numbers, but the margins are a little upward direction.
Q: Do we have any update on the windows sun films capacity that we were planning?
A: Part of the capacity, we expect to start commercial production from the quarter four of FY25. Currently, we are in different stages of trials for the different product categories, which is working fairly well. At the same time, we are also developing a distribution network in India and overseas for the product to be launched.
Q: In this quarter, we have seen this specialty mix improving from 66% to 69%. And you are saying that INR12 in commodity has increased to INR19. Despite that, the gross profit has only increased by INR30 crores. Can you explain?
A: Commodity margin has increased by INR7 on average in quarter one compared to the previous quarter. INR19 versus the INR12 as indicated. Based on the company's current volume of commodity part of the business, INR30 crore increase in the gross margin is largely due to specialty increase and commodity margin increase is fully justified.
Q: I wanted to gauge more understanding about the Korea shifting that we are doing, which you said that will start by Q3 of the current financial year.
A: The thermal film line, which we are running in Korea, will be moved to India for better optimization. We expect various trials to be completed in quarter two, and commercial production to start from quarter three.
Q: In the last quarter, did we get the benefit of BOPP price increase in the entire quarter or for a month or so?
A: BOPP price was increasing during the previous quarter inflated each month. The average gross margin was INR19 compared to INR12 in the previous quarter.
Q: How much increase in profit is contributed by the increase in specialty film ratio and how much by BOPP price increase?
A: It's difficult to quantify on the call, but very broadly, a large part of this is because of the specialty increase. This could be a 60-40 ratio, but it's a ballpark number.
Q: What is the contribution of specialty films by the end of FY25 and FY26?
A: In quarter one, we already reached 69% in volume terms. We expect this to further increase in the coming quarters with a lot of new product categories being launched.
Q: When can we expect Zigly to become profitable in terms of EBITDA level breakeven?
A: Zigly is currently in a growth phase, making it difficult to quantify when it will become profitable. We are focusing on consolidation and cost optimization in the first two quarters of FY25, with the next level of growth planned for the second half of the financial year.
Q: Is the increase in realization in BOPP an India phenomenon or is it happening globally?
A: It's a global phenomenon. India may have a slightly higher increase compared to the global average, but increased demand is witnessed in exports as well.
Q: What will be the CapEx number for the coming two years?
A: Roughly INR300 crores for this year and close to INR150 crores for next year, including maintenance CapEx.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
