- MDF Domestic Volumes: Increased by 10.2% year-on-year.
- MDF Export Volumes: Contracted by 21% due to logistics issues.
- MDF EBITDA Margins: 12.1%, impacted by a steep increase in wood prices (5.8% sequentially and 30.9% year-on-year).
- Plywood Operating Margins: Negative 2.2%, impacted by lower volumes.
- Post-Tax Profits: INR15.7 crores, lower by 58% compared to INR37.26 crores in Q1 FY24.
- Net Working Capital: 36 days, increased by eight days sequentially.
- Net Debt: INR103 crores as of June 30, 2024; negative INR111 crores excluding debt for expansion project.
- Net Sales: INR354.15 crores, compared to INR385.16 crores year-on-year.
- MDF Sales: INR331.78 crores, contributing 91% of revenue.
- MDF Domestic Revenues: INR288.33 crores.
- MDF Export Revenues: INR43.45 crores.
- Domestic Realizations: Lower by 10.01% at INR29,603 per cubic meter.
- Export Realizations: Higher by 11.7% at INR20,051 per cubic meter.
- Blended MDF Realizations: Lower by 5.1% at INR27,864 per cubic meter.
- Uttarakhand MDF Plant Utilization: 76%.
- AP MDF Plant Utilization: 74%.
- Blended Capacity Utilization: 75% for the quarter.
- Plywood Sales: De-growth of 28% at INR32.37 crores.
- Plywood Sales Volumes: Lower by 22.8% at 1.22 million square meters.
- Plywood Sales Realizations: Lower by 6.7% at INR266 per square meter.
- Gross Margins: 51%, fell by 710 basis points year-on-year.
- EBITDA Margins: Down by 780 basis points to 10.9%.
- Gross Debt-to-Equity Ratio: 0.21 as of June 30, 2024, compared to 0.13 as of June 30, 2023.
Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MDF domestic volumes increased by 10.2% year-on-year for the quarter.
- Net working capital at 36 days has shown a sequential increase of eight days due to increase in wood inventory in preparation for the monsoon season.
- Net debt stood at INR103 crores as on June 30, 2024, but stands at negative INR111 crores excluding debt for expansion project.
- Uttarakhand MDF plant operated at 76% and AP plant operated at 74% with blended capacity utilization at 75% for the quarter.
- The company is focusing on increasing the value-added product mix, which has higher margins and insulates from competition.
Negative Points
- Export volumes contracted by 21% due to logistics issues.
- MDF EBITDA margins at 12.1% were impacted by a steep increase in wood prices, 5.8% sequentially and 30.9% year-on-year.
- Plywood volumes were lower both sequentially and year-on-year, with operating margins at negative 2.2%.
- Post-tax profits for the quarter were lower by 58% at INR15.7 crores compared to INR37.26 crores in Q1 FY24.
- Gross margins at 51% fell by 710 basis points year-on-year due to reduction in selling prices and increase in wood prices.
Q & A Highlights
Q: MDF margins are now at 12%. When can we expect a price increase, and what is the outlook on timber prices?
A: Timber prices are expected to stabilize next year when new plantation material enters circulation. Currently, we are sourcing different species to control costs. We don't foresee major price reductions in the market as new capacities have already been established. Freight prices remain high, reducing imports, which is beneficial for domestic pricing.
Q: Given the current margins, can we expect to close the year with a 15% margin?
A: We had guided for MDF margins around 16.4% for the current year, which remains our target.
Q: Do you maintain your 15% MDF volume growth guidance for FY25?
A: Yes, we maintain our 15% MDF volume growth guidance for FY25.
Q: When do you see domestic competition easing, and can timber price reductions be passed on?
A: Domestic competition remains, especially with Century's new plant. However, imports are reduced due to high freight costs. We believe the industry has hit a bottom limit on price cuts and may pass on cost increases if timber prices rise.
Q: What is the current capacity and demand in the MDF industry?
A: Current capacity is around 3.5 million cubic meters, expected to increase to 4 million cubic meters this year. Current demand is approximately 2.5 to 2.6 million cubic meters.
Q: What are the North and South timber prices for the first quarter?
A: North plant timber price was INR6.75 per kg, South plant was INR5.50 per kg, and blended was approximately INR6 per kg.
Q: What is the OEM contribution in volume and value for the quarter?
A: OEM contribution was 25% of domestic volumes. The value figure is not immediately available.
Q: How do you plan to achieve a 16% margin for FY25 despite current challenges?
A: The margin improvement will come from projected volume growth of 15% in the MDF segment, leading to operational efficiency.
Q: What is the expected impact of new capacity additions on the industry?
A: The industry is expected to add 600,000 cubic meters of capacity this year, bringing the total to 4 million cubic meters. Current demand is around 2.5 to 2.6 million cubic meters.
Q: What are the expected timber price trends for FY26?
A: It's difficult to gauge future timber prices due to the fragmented nature of the market and varying supply and demand dynamics.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
