Release Date: May 16, 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) reported a 14% growth in its ECD business, showcasing strong performance across various segments.
- The company's EBITDA margin improved from roughly 10% in the last three quarters to 12.5%, indicating better profitability.
- Fans segment reported the highest quarterly sales with a 13% year-over-year growth, while pumps grew by 9% and appliances by 27%.
- The company has seen significant improvements in premium saliency across ceiling fans, lighting, and domestic appliances.
- Strong double-digit growth in fans has been consistent for the last three quarters, marking a recovery since the pandemic.
Negative Points
- Despite the overall growth, the lighting segment showed flat growth, with B2C lighting still experiencing degrowth due to price erosion in lamp segments.
- Butterfly Gandhimathi Appliances reported a revenue of INR166 crores but an EBITDA loss of INR20 crores, indicating ongoing challenges in this segment.
- The company incurred a significant expense of INR14 crores this quarter alone for EPR, impacting profitability.
- There are still some one-off costs from the reorganization of Butterfly Gandhimathi Appliances, affecting overall financial performance.
- The company continues to face challenges in aligning revenue recognition policies between Crompton and Butterfly, leading to deferred sales.
Q & A Highlights
Q: Are we considering agri pumps as a big opportunity? And within that, is custom scheme something that's exciting us?
A: We are absolutely considering agri pumps as an exciting opportunity. We have garnered about 7% to 8% market share in the agri pumps business. Whether we participate in custom schemes depends on the profitability metrics of the bids. We see momentum in our agri business and are building on the strength of our residential business to improve our market position in agri. (Promeet Ghosh, MD, CEO, & Executive Director; Kaleeswaran Arunachalam, CFO)
Q: Do you think that now we have hit a sustainable run rate for R&D and A&P expenses, and from here on, these expenses could possibly be increasing at the same rate as revenues?
A: Yes, it's fair to say that the step-up has happened, and we will probably see these levels being maintained, especially as a percentage of revenue. (Promeet Ghosh, MD, CEO, & Executive Director)
Q: How should we see Butterfly's performance going forward? Are all the one-offs taken into account?
A: By and large, the revenue corrections are done. We now need to focus on getting the revenue back. Investments towards revenue growth, whether in people or A&P spends, have been incurred and will continue. We expect the business to start picking up momentum from Q2 onwards. (Kaleeswaran Arunachalam, CFO)
Q: Can you indicate what market share gains we have observed across segments, especially in premium products?
A: Our market share has gone up in ceiling fans and premium fans within ceiling fans. We have become the #1 player in e-commerce for geysers. In categories like lighting, where we have just started investing behind the brand, we are seeing early signs of positive results. (Kaleeswaran Arunachalam, CFO)
Q: Can you talk about the margins for pump orders and the execution cycle, including cash collection timelines?
A: The profit profile in solar pumps is very good, as is the cash flow cycle. For a large part of the orders executed last year, the money is already in the bank. (Promeet Ghosh, MD, CEO, & Executive Director; Kaleeswaran Arunachalam, CFO)
Q: Can you share some insights on what exactly we're doing in Butterfly to turn the business around and drive growth and volumes?
A: We are focusing on meaningful innovation, balancing channels, building productivity and efficiencies, enhancing customer and consumer engagement, and building people capability. We aim to build a high-performing team that embodies our values. (Swetha Sagar, Chief Business Officer)
Q: Given where you are in the cycle today, do you feel comfortable with where margins are in the ECD business alone?
A: We remain positive about the way margins will evolve going forward. We are focused on executing well, investing in people, consumer and customer engagements, innovation, and A&P, while also focusing on cost-saving initiatives. (Promeet Ghosh, MD, CEO, & Executive Director)
Q: How do you see the demand outlook for the summer?
A: The demand outlook has been reasonably good, helped by the summer. There have been some rains in the last few days, but overall, the demand outlook remains robust. (Promeet Ghosh, MD, CEO, & Executive Director)
Q: How should we handicap growth in the lighting business given its volatility?
A: Lighting is two businesses: B2B and B2C. B2B is driven by investments in infrastructure, while B2C faces steady price erosion, particularly in lamps. The price erosion cannot continue forever, and once it stops, volume growth in lighting will translate into revenue growth. (Promeet Ghosh, MD, CEO, & Executive Director)
Q: What is the growth potential for the fans category, both short-term and long-term?
A: In the short term, demand is robust, driven by the summer and consumer demand uptick. In the long term, as the world gets warmer, the need for cooling devices will increase, benefiting our fans business. We are optimistic about the future growth potential. (Promeet Ghosh, MD, CEO, & Executive Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
