Release Date: May 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Total sales volumes increased by 16% year-on-year in Q4 FY '24.
- Building Products segment saw a significant 75% growth in volume compared to Q4 FY '23.
- Overall growth for FY '24 was 28% in volume and 18% in value.
- Agriculture segment grew by 16%, Industrial Solutions by 59%, and Building Products by 75% year-on-year.
- The company is optimistic about robust demand in the Agriculture segment for the upcoming quarters.
Negative Points
- EBITDA margin dipped by 124 basis points year-on-year to 7% in Q4 FY '24.
- Net profit margin stood at a modest 1.85% for Q4 FY '24.
- Other expenses have increased significantly, impacting overall profitability.
- Operating leverage has not improved despite higher revenues, with expenses remaining high.
- The company faces challenges in expanding market share due to high transportation costs and competition.
Q & A Highlights
Q: Sir, on the overall demand scenario, since we are going into the next year and the quarter one happens to be our best quarter with regards to more towards the agri part. So how are we looking at the overall situation on the ground in terms of demand? We have already crossed about one month and some more days. So until now, have been the demand from the agri side and also the other segments, that is my first question.
A: The demand scenario looks to be fairly good because prices are affordable and we are seeing good traction on the top line.
Q: So are we in for a record quarter in terms of revenues?
A: Yes, it looks to be a good quarter. Agriculture demand is quite robust.
Q: Sir, in terms of the margins part. Even prior to, say, COVID also, when we were recording around INR 400 crores, INR 450 crores of sales or INR 500 crores of sales, our EBITDA margins have been in the range of around 7.5% -- 7% to 7.5%. Leaving aside 1 or 2 years where probably we gained on inventory or we lost on inventory. Today, our revenues are almost about INR 860 crores. The operating leverage doesn't seem to be kicking in.
A: I told you earlier developing building material is taking a lot of efforts in terms of footwork as well as detailed retail efforts and dealer development initiatives. So as we are trying to expand in building materials, initially, our expenses will continue to be a little higher. And as the volume ramps up, we will be able to distribute these expenses on a larger sales base. So then -- it is only then you may see that our expenses per unit of sales will be within range and then our margins should look up.
Q: Sir, last question, sir, on the CapEx side. Our gross (inaudible) is up and plus we have a CWIP also in the balance sheet. So with regards to the CapEx, if you could share more details and also the building products, I understand a lot of this is going towards building products, the expansions of the SKUs. So till date, whatever capacity we have built in the building product division, at this peak capacity utilization, what kind of revenue can be generated from the Building Products segment?
A: Building Product, as you would know, this year, we have shown a total sales, which has grown by almost like in terms of tonnage about 79%, 80% to about -- how much is 75% -- 75% growth. So obviously, this all addition of range and product quantities, the initial investments have to be high. So this is where most of our expenses are in developing range, developing capacities, appropriate requirements of market for CPVC, for UPVC, for fitting, for pipes. So we are now almost ready up to a level where we will be able to expand our market because we have a larger range to take that.
Q: Sir, just to clarify. This existing capacity, which we have already built to date, that can add peak utilization, can you give us what kind of revenues in this segment? Capacity past year...
A: INR 170 crores as a revenue. We are at about 100-odd -- INR 103 crores, INR 104 crores today last year. But the capacity here is -- we can -- if all the sizes are properly utilized, we can easily expand our sales from 1.5 to 1.6x of current sales.
Q: Sir, on the Building Product side, the kind of efforts we are making, last year and despite having a low base of less than 5,000 metric tonnes of sales in FY '23. Sir, our Building Product sales in volume terms has grown by 62% last year. And if we look at the quarterly performance over the past 2, 3 -- past 3 quarters -- past 3, 4 quarters, our Building Product sales has been around (inaudible) tonnes per quarter. And it has remained in that range for almost 3 quarters now. So how do you -- what has been the reason for the sales to be stuck in that range for past 3 quarters? And how do you see the growth in the Building Product segment for FY '25?
A: Our growth in terms of tonnage in Q4 to Q4 is about 75%. And if you compare our sales in Q3 to Q4 in Building Materials, it is about 23% growth quarter-on-quarter.
Q: Just wanted to clarify, the numbers given in the presentation of our Building Products is around INR 1,674 metric tonnes compared to 1,237 metric tonnes last year.
A: Our sales in Q4 is about 1,149 metric tonnes against last quarter was [1,753] metric tonnes. So it's about 23% growth.
Q: Okay, maybe some error in the -- Okay, sir. So how do you see the growth for next year and how do you see scale up...
A: Right. We are hopeful to sustain this.
Q: Okay. So even on a base of, let's say, INR 100 crores being sold...
A: Rather going forward, we're able to do better as our range is now available. Our marketing abilities have improved. So we are quite confident that we should be able to maintain the growth rate.
Q: Sure, sir. On the margin front, like in this quarter, has there been any inventory loss that we have incurred because our realization have come down?
A: No, no -- any inventory loss. But yes, our expenses have grown because of our efforts on the marketing side. And as our range has come down, the largest portfolio of higher diameters, we have to put in a lot of effort in terms of putting products on the shelf everywhere.
Q: Sir, let's say, let's assuming on the prices for (inaudible) stay at the current levels and with the significant expansion in the Building Products that we are envisaging for FY '25. How do you see the margin for the company panning out for FY '25? Last year, we reported close to 7% -- 6.8%, 7% EBITDA margins. For next year, how do you see the margin shaping out?
A: The margins will certainly improve because Building Products is a major area where we are putting in investments and where we are, I mean, seeing the traction quarter-on-quarter
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
