Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated revenue for Q1 FY25 increased by 17% to INR2,888 crore compared to INR1,789 crore last year.
- Gross profit grew by 16%, with EBITDA for the quarter rising by 15% year-on-year to INR258 crore.
- Return on capital employed improved to 20.8% from 19.4% in Q1 FY24, and the debt to equity ratio declined from 0.4 times to 0.2 times.
- International business grew by 17%, with positive demand trends expected to continue.
- The company has appointed a distributor in Saudi Arabia, aiming to strengthen its presence in the Middle East market.
Negative Points
- Gross profit margin decreased by 30 basis points from 33.8% to 33.5% due to increased input costs.
- Logistic costs as a percentage of revenue increased by 1.5% compared to Q1 of last year.
- The impact of higher freight charges is expected to continue for at least one more quarter.
- The ready-to-eat segment in India has not picked up as well as expected, particularly the Kappa product.
- The company faces challenges in the Saudi market due to strong local competition and the need to establish a stronger distribution network.
Q & A Highlights
Q: Are you seeing any movement in market share in India given the acquisition by the number three player in the basmati segment?
A: Our market share report is yet to come, but the last report indicated we have a 30% market share in India.
Q: How do you see growth in your international business for the rest of FY25?
A: We have grown by 15% this quarter, with international business growing by 17%. We see a positive trend in consumption and demand, and expect this to continue.
Q: How are shipping and container prices impacting your costs, and is the worst behind us?
A: The worst is not yet behind. We have seen some impact on margins, but we are optimistic that this is a temporary issue and expect improvement in margins by 2025-2026 as commodity prices decrease.
Q: How will the lifting of the export ban on rice by the government impact your business?
A: Lowering the Minimum Export Price (MEP) will benefit us. LT Foods exports at a higher value, so the impact will be minimal, but the market opening up with lower MEP will be beneficial.
Q: What is your strategy for the domestic market, especially for value-added products?
A: We have a strong strategy for our core basmati business and value-added products. We have launched biryani kits and other ready-to-cook products, and are optimistic about their potential. Our food business in America is also doing well, and we are doubling our capacity there.
Q: How much has the increase in freight charges impacted your costs this quarter?
A: Logistic costs as a percentage of revenue have increased by 1.5% compared to Q1 last year, rising from 5.1% to 6.6%.
Q: What is the status of the insurance money you were supposed to receive?
A: The High Court has ruled in our favor, and the Supreme Court has rejected the insurance company's appeal. We expect to receive the money within four weeks.
Q: What are your plans for the Saudi market, given that a competitor is struggling there?
A: We have appointed a distributor in Saudi Arabia and are focusing on strengthening our presence there. The Middle East is a key focus area for us, and we are optimistic about growth in that market.
Q: Can you provide details on your UK facility and its impact on revenue?
A: The UK facility is a processing and packaging unit expected to generate around INR40 million in revenue this year. We have invested around INR65 million in this facility, which will add to our Europe revenue.
Q: How are you managing to maintain stable EBITDA margins compared to your competitors?
A: Our business model is brand-led with a strong global footprint, particularly in the USA, Europe, and India. This geographical diversity and brand strength contribute to stable and improving margins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
