Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hindustan Foods Ltd (BOM:519126, Financial) achieved the highest quarterly turnover on a consolidated basis at INR670.9 crores, growing at 40.4%.
- The company posted its highest ever PBT numbers of INR36.2 crores and PAT of INR27.2 crores, growing at 16.5%.
- The integration of the Baddi healthcare and wellness plant is progressing well, with the highest production recorded in July 2024.
- The company has resumed exports to UAE, Australia, and Africa, with only the Russian FDA approval pending.
- Hindustan Foods Ltd (BOM:519126) is optimistic about its foray into the footwear business, with significant investments and integration efforts underway.
Negative Points
- Despite the highest turnover and profitability, some product categories experienced tepid volume growth and deflationary pressures.
- The integration of the Baddi and shoe businesses is a mammoth exercise, causing operational challenges and delays.
- The new ice cream factory project faced delays due to relocation from Kundli to Nashik, pushing the expected production start to March 2025.
- The effective tax rate increased to around 25% from 20% last year, impacting the PAT growth.
- The company is cautious about the macroeconomic environment, particularly the inflation scenario, which presents a complex puzzle.
Q & A Highlights
Highlights of Hindustan Foods Ltd (BOM:519126) Q1 FY25 Earnings Call
Q: What is the progress on private labels and the impact of BIS norms on the footwear business?
A: The private label business remains strategically important but small in volume and value. The number of customers has increased, including online and offline retailers. The BIS norms are a significant tailwind for the footwear business, but the country lacks the capacity to meet the entire demand, leading to continued imports. (Sameer Kothari, Managing Director)
Q: Can you provide more details on the OTC pharma business and its contribution to Q1 FY25?
A: The OTC pharma business has been integrated, with 60-65% capacity underwritten by the main customer. The factory achieved its highest production in July 2024. The Russian FDA approval is pending, affecting exports to Russia. The business contributed to the top line in Q1 FY25. (Sameer Kothari, Managing Director)
Q: How is the sports shoe business progressing, and when will it contribute to sales?
A: Both the Baddi and sports shoe facilities have been acquired as going concerns. The integration is ongoing, with the North Shoe factory expected to ramp up by Q3. The South Shoe factory will ramp up between Q3 and Q4. (Sameer Kothari, Managing Director)
Q: What is the impact of the shift of the ice cream plant from Haryana to Nashik on revenue targets?
A: The shift was due to statutory reasons and will delay the project by a couple of months. Production is expected to start by March 2025. The delay will not significantly impact the annual revenue target, which is more affected by inflation and deflation in various commodities. (Sameer Kothari, Managing Director)
Q: How has the core FMCG segment performed in the quarter?
A: Performance varies by category. Some categories have shown growth, while others have not. The impact of rural demand and other factors is still uncertain. (Sameer Kothari, Managing Director)
Q: What is the reason for the increase in employee expenses and other expenses?
A: The increase is primarily due to the integration of the shoe business, which added around 4,500 employees. (Ganesh Argekar, Executive Director)
Q: How is the new customer acquisition progressing for the Baddi facility?
A: The anchor tenant has ramped up to committed capacity, except for exports to Russia. New customer acquisition is ongoing but has a longer gestation period due to regulatory requirements. No new customers are expected in this financial year. (Sameer Kothari, Managing Director)
Q: What is the impact of deflation on the revenue growth and volume growth?
A: The 40% value growth includes contributions from new businesses like the shoe and Baddi facilities. Volume growth is higher than value growth due to deflation in some commodities. (Sameer Kothari, Managing Director)
Q: What is the status of the warrant issuance and its impact on financial leverage?
A: The warrant issuance was done to spread out the capital requirement over 12-18 months. The secondary transaction has no impact on the primary transaction. (Sameer Kothari, Managing Director)
Q: Why is there a significant focus on the impact of inflation and deflation on sales numbers?
A: The top line is governed by inflation and deflation, while the bottom line remains constant. This differentiation is crucial for understanding the company's financial performance. (Sameer Kothari, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
