Release Date: February 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales to the EU market posted a growth of 50% year-on-year in both Q3 FY24 and the nine months of FY24.
- The share of EU in the overall sales mix increased to 36% in Q3 FY24 from 17% last year, indicating a more diversified sales mix.
- The company is setting up a wholly-owned subsidiary in the US to support logistics and market development, expected to benefit from FY25 onwards.
- Debt continues to decline, with a debt-to-equity ratio of 0.17 times as of September 30, 2023.
- The company remains positive about the growth prospects in the EU market, especially once regulatory approvals for ready-to-eat products are obtained.
Negative Points
- Net revenue for Q3 FY24 decreased to INR148 crores from INR230 crores in Q3 of the last fiscal year, mainly due to lower volumes sold to the USA and a fall in global shrimp prices.
- Total volumes sold by the company dropped to 2,117 metric tons in Q3 FY24 from 2,869 metric tons in Q3 of the last fiscal year.
- Global shrimp prices have been tapering down, impacting overall realization in Q3 FY24.
- Lower operating leverage and higher freight costs negatively impacted the EBITDA margin in Q3 FY24.
- The company is still awaiting regulatory approvals for the sale of high-value ready-to-eat products in the EU market, limiting potential growth.
Q & A Highlights
Q: What are your expectations regarding the Antidumping Duty on Ecuador and its impact on operations?
A: Indian shrimp has been subject to Antidumping Duties in the US for 20 years. The current investigation by the US Department of Commerce includes potential duties on Ecuador and Indonesia, which would level the playing field. Preliminary duties are expected to be announced by the end of March, with final duties by the end of May. We are cautiously optimistic about the impact on our operations.
Q: When can we expect regulatory approval for RTE products in the EU?
A: The delay is due to regulatory processes between the Indian and EU authorities, not specific to our facility. We have been waiting since 2019 and are hopeful for approval soon, which will allow us to expand our business in the EU market.
Q: What is the current and expected capacity utilization for FY25?
A: Current capacity utilization is below 50% due to demand drops in the US market. We expect better utilization in FY25, supported by stable global shrimp prices and increased production. We aim to achieve 15,000 to 18,000 metric tons of sales volume.
Q: How is the demand and pricing outlook for shrimp in the US market?
A: Prices have been stabilizing, and we expect a gradual increase. The impact of countervailing and Antidumping Duties on Ecuador and Indonesia will also influence market dynamics. We anticipate a better pricing environment in the coming quarters.
Q: What is the scenario for black tiger shrimp farming in India?
A: Farmers switching to black tiger shrimp is not an issue for us. We continue to process and sell black tiger shrimp, especially in the EU and US markets. The shift to black tiger shrimp is beneficial as it allows for larger sizes and better market opportunities.
Q: How are freight costs impacting your operations?
A: Freight costs have increased marginally due to the Red Sea conflict, adding $1,500 to $3,000 per shipment. Sailing times have also increased by 10 days. However, costs are still lower than during the pandemic.
Q: What is the impact of the interim budget's allocation to the blue economy on your business?
A: The increased allocation is a positive sign, potentially leading to higher production at the farm level. We await further details on the measures to be implemented, which could stabilize costs and improve raw material supply.
Q: How is the primary producer scenario in Ecuador affecting the global shrimp market?
A: The all-time low pricing was not viable for any primary producer globally. Ecuador's production costs are higher, especially for value-added processing. The market is stabilizing, and we expect better conditions for primary producers worldwide.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
