- Revenue: Highest ever quarterly stand-alone revenue at INR1,959 crores.
- ECD Growth: 21% year-on-year.
- Fans Growth: 16% year-on-year.
- Pumps Growth: 13% year-on-year.
- Appliances Growth: 24% year-on-year.
- Air Coolers Volume Growth: 68% year-on-year.
- Large Domestic Appliances Revenue Growth: 25% year-on-year.
- Small Domestic Appliances Growth: 20% year-on-year.
- Large Kitchen Appliances Revenue: INR14 crores.
- Lighting Revenue Growth: 2% year-on-year.
- Material Margins: Improved to 31.3% from 29.4% a year ago.
- Stand-alone EBIT Margin: 14.9% excluding A&P spend, up 1.6% year-on-year and 30 basis points quarter-on-quarter.
- ECB EBIT Margin: 19.8%, an expansion of 2.3% year-on-year.
- Lighting EBIT Margin: 11.3%, an expansion of 20 basis points quarter-on-quarter.
- Alternate Channels Growth: 30% year-on-year.
- E-commerce Revenue: INR100 crore-plus for the fourth consecutive quarter, with 82% growth year-on-year.
- Rural Growth: 16% year-on-year.
- Modern Retail Growth: 22% year-on-year.
- Debt Repayment: Paid INR300 crores towards NCDs for Butterfly acquisition, remaining debt at INR300 crores.
- Net Cash Positive: Company is net cash positive.
- A&P Spend Increase: 30% year-on-year and 60% quarter-on-quarter.
- New Product Launches: 41 new products in Q1.
- Innovation Patents: Filed 2 innovation patents in cooling technology and kitchen appliances.
Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Crompton Greaves Consumer Electricals Ltd (BOM:539876, Financial) achieved its highest ever quarterly stand-alone revenue at INR1,959 crores, driven by strong ECD growth of 21% year-on-year.
- The company saw broad-based growth across its portfolio, with fans growing at 16%, pumps at 13%, and appliances at 24%.
- Significant volume growth in air coolers, with a 68% increase, leading to an overall revenue growth in the large domestic appliances segment of 25%.
- The company has been successful in premiumization, with premium saliency of large domestic appliances improving to 25.6%.
- Crompton Greaves Consumer Electricals Ltd (BOM:539876) remains a net cash positive company, having paid INR300 crores towards NCDs for the Butterfly acquisition and generating strong cash flows.
Negative Points
- The Lighting revenue was broadly flat, with only a 2% growth, and the B2C category within the Lighting segment experienced a degrowth.
- The large kitchen appliances business is currently making losses at the EBITDA level.
- There were supply glitches that affected the sales of air coolers and fans, which could have been higher.
- The company faces ongoing pressure from raw material price increases, particularly in copper, aluminum, and ABS.
- Despite improvements, the Butterfly Gandhimathi Appliances Limited segment is still a work in progress and has not fully turned around.
Q & A Highlights
Q: Can you highlight the volume and price increase in the fan segment and whether it offsets commodity cost inflation?
A: We took a 1.5% price increase in fans around mid-May. Our strategy includes cost optimization, premiumization, and price increases to sustain margins. The volume growth in fans has been strong, primarily driven by volume rather than mix or price.
Q: With the recent price hikes, do you foresee further margin expansion?
A: We don't provide forward guidance on margins. However, our strategy focuses on growth, investing in brand, people, and innovation. Marketing spends have increased, and we aim for double-digit portfolio growth and profit expansion.
Q: What is the outlook for the solar pump segment?
A: We executed INR21 crores in orders this quarter and have a healthy pipeline. However, we do not disclose the exact order book.
Q: Can you elaborate on the new product categories under Crompton 2.0 strategy?
A: New categories will have adjacencies with our current offerings, leveraging our brand, go-to-market strategies, and innovation capabilities. We aim to be significant players in these categories over time.
Q: What is driving growth in the small domestic appliances segment?
A: Growth is driven by increasing market share, product portfolio expansion, and channel mix, particularly e-commerce. We have introduced higher-wattage mixers and strengthened our steam iron portfolio.
Q: What has driven the earlier-than-expected turnaround in Butterfly Gandhimathi's performance?
A: Sequential revenue improvement and establishing the right fundamentals have contributed to a positive EBITDA. However, the transition is ongoing, and we aim to grow the business from H2 onwards.
Q: Why are you reporting pre-A&P spend margins separately?
A: Our EBIT margins are inclusive of A&P spend. We report pre-A&P margins for comparability with previous quarters. No A&P expenses are capitalized.
Q: What are your in-house capacities for fans and pumps, and how is pricing decided for outsourced products?
A: We are roughly equally split between in-house and outsourced manufacturing for fans. Pricing for outsourced products is based on a standard commodity index and specific design requirements.
Q: What are the top three priorities for Crompton in the next three years?
A: Our priorities are meaningful innovation, premiumization across product categories, and optimizing our go-to-market strategy. These are supported by a strong supply chain and investments in brand and people.
Q: What are your plans for cash usage and debt repayment?
A: We plan to repay the remaining INR300 crores of debt by July next year. Cash will be used for new product development, manufacturing, and supply chain capabilities. We are not currently looking at M&As.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
