Release Date: January 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sustained infrastructure spending led to growth in the B2B category.
- Lighting segment delivered strong volume growth, driven by both B2B and B2C segments.
- Small domestic appliances category benefited from festive demand.
- Formation of a subsidiary in the U.S. to distribute HVAC products, aiming to expand into developed markets.
- Improvement in segment contribution margins despite higher advertising and promotion (ANP) spends.
Negative Points
- Price deflation continues to impact value growth.
- Higher base in France led to muted growth in the PCB segment.
- Muted consumer demand affected overall performance.
- Higher advertising and promotion (ANP) spends impacted segment results.
- Decline in margins for the wires and cables segment due to product mix.
Q & A Highlights
Q: Can you throw some light on the overall demand in the Lloyd segment, especially in terms of volume and pricing pressure?
A: The third quarter is not representative as 65-70% of sales come from air conditioners, which are not in demand this quarter. We are satisfied with Lloyd's performance over the first nine months, showing over 30% CAGR growth. We expect better insights in the fourth quarter and the first quarter of the next financial year.
Q: Was the strong volume growth in the lighting segment driven by B2B or B2C lighting?
A: We saw strong volume growth in both B2B and B2C segments. However, there has been significant price erosion over the last year, which has now stabilized. Margins have improved due to a focus on innovation and recovering from last year's fire impact.
Q: What led to the margin decline in the wires and cables segment?
A: The decline was due to higher ad-spend across all businesses and a product mix shift. Despite this, we have seen improvement in contribution margins, and overall EBITDA margins should normalize in the coming time.
Q: How is the residential real estate demand impacting Havells' top line, especially in premium and luxury segments?
A: We are seeing good traction in the residential segment, particularly in urban areas. The deferred purchases due to inflationary impacts are expected to kick in soon, leading to decent growth in the residential and consumer business.
Q: Can you provide details on the new CapEx in cables, lighting, and HVAC segments?
A: We are increasing our capacity by about 25% in underground cables and domestic wires to cater to southern markets. The HVAC manufacturing plant is still under evaluation, and lighting production has mostly come in-house after the fire.
Q: Are we losing market share in the switchgear segment given the low growth?
A: We have not lost market share. Growth has been seen in both project and retail segments, though there was a decline in telecom OEM segments and flat exports. We do not have capacity constraints in switchgear.
Q: What is your reading on the B2C demand environment and expectations for future demand?
A: The B2C segment has shown mixed results with strong volume growth in lighting but value erosion in LEDs. We expect improvement in the B2C side with a low base for summer products in the coming quarter.
Q: How should we look at the pricing environment for seasonal categories like fans and air conditioners?
A: We have been able to pass on the price increase due to energy rating changes and do not anticipate further price increases. Margins have improved and will continue to do so due to economies of scale.
Q: What are the incremental investments required for distribution and product modifications for the developed markets?
A: Product modifications are mostly complete, and certifications are ongoing. Investments in building distribution are operational and not very large. We are focused on building distribution reach rather than just volumes.
Q: Do you think new brands entering the market are impacting the margins of larger players?
A: The electrical market has seen stronger brands becoming stronger. While new brands enter, some existing brands exit. We have not seen a meaningful impact on market shares of larger, established brands.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
