- Net Sales: INR 384.99 crores, down from INR 419.09 crores year-on-year.
- MDF Sales: INR 346.62 crores, down by 4.1%, contributing 90% of the top line.
- MDF Domestic Volumes: Grew by 4%.
- MDF Export Volumes: Fell by 15%.
- MDF Domestic Realizations: Lower by 6.7% at INR 31,593 per cubic meter.
- MDF Export Realizations: Higher by 2.2% at INR 19,053 per cubic meter.
- MDF Blended Realizations: Lower by 4.2% at INR 29,300 per cubic meter.
- MDF Capacity Utilization: Uttarakhand at 82%, AP plant at 70%, blended at 74%.
- Plywood Sales: INR 38.37 crores, down by 33.3%.
- Plywood Sales Volumes: Lower by 22.6% at 1.54 million square meters.
- Plywood Sales Realizations: Lower by 13.8% at INR 249 per square meter.
- Gross Margin: Fell by 212 basis points year-on-year to 56.1%.
- EBITDA Margin: Lower by 577 basis points to 17.3%.
- EBITDA: INR 66.42 crores.
- Post-Tax Profits: INR 34.6 crores, down by 7.8% from INR 37.5 crores year-on-year.
- Net Working Capital: 25 days, an increase of 2 days year-on-year.
- Net Debt: Negative INR 176 crores as of 31st December 2023.
- Prepaid Borrowings: EUR 3.59 million (INR 32.7 crores) during the quarter.
- Internal Accruals for MDF Expansion: INR 24 crores during the quarter, totaling INR 115 crores to date.
- Borrowings for Expansion: INR 146 crores to date.
- 9 Months FY '24 Net Sales: INR 1,167.84 crores, down by 12.7%.
- 9 Months FY '24 MDF Sales: INR 1,041.30 crores, down by 9.3%.
- 9 Months FY '24 Plywood Sales: INR 126.54 crores, down by 33.2%.
- 9 Months FY '24 Gross Margin: Down by 295 basis points to 56.6%.
- 9 Months FY '24 EBITDA Margin: Lower by 817 basis points to 18.1%.
- 9 Months FY '24 EBITDA: INR 211.35 crores, down by 39.9%.
- 9 Months FY '24 Post-Tax Profits: INR 112.88 crores, down by 39.8%.
- 9 Months FY '24 MDF Sales Volumes: Down by 3% at 357,714 cubic meters.
- 9 Months FY '24 Plywood Dispatches: Lower by 27% at 4.76 million square meters.
- Gross Debt to Equity: 0.18 as of 31st December 2023, compared to 0.17 as of 31st December 2022.
Release Date: February 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MDF domestic sales volumes grew by 4%, indicating a positive trend in the domestic market.
- Export realizations for MDF increased by 2.2%, showing improved pricing power in international markets.
- Net debt stands at negative INR 176 crores, reflecting a strong balance sheet with significant debt reduction.
- The company has prepaid borrowings of EUR 3.59 million, demonstrating proactive debt management.
- Work on the MDF expansion project is progressing, with commercial production expected in Q3 FY '25, indicating future growth potential.
Negative Points
- Overall MDF volumes were flat, with export volumes falling by 15%, indicating challenges in international markets.
- MDF domestic realizations were lower by 6.7%, impacted by the introduction of new products for the OEM segment.
- Plywood volumes decreased by 22.6%, and operating margins were negative at 4.1%, reflecting significant challenges in this segment.
- Post-tax profits for the quarter were lower by 7.8% due to increased raw material costs and currency losses.
- Net working capital increased by 2 days year-on-year, indicating potential inefficiencies in managing receivables and inventory.
Q & A Highlights
Q: Sir, firstly, I want to understand, last time in the call, you have highlighted October domestic volume growth was 9% year-on-year, but as a quarter, the growth is 4%. So it means that sales have been slightly lower side on November and December. And lastly, how is the trend now like Jan is also over?
A: Yes. So November was possibly impacted by the festival season, although it was similar to last year. And as far as the future is concerned, I think we will see volumes improving from this quarter onwards quarter-by-quarter. And we expect to finish flat as far as domestic volumes are concerned on a yearly basis and possibly some degrowth on the export side. We have reduced exports to large buyers primarily because of the increase in costs on the raw material side. But we are continuing shipments to the smaller buyers that we are getting higher realizations and some positive contribution to the fixed costs. - Vishwanathan Venkatramani, CFO
Q: Understood. Earlier, once we are anticipating 10% to 12% growth on export NSR. So have that played out or yet to play out, how should we see that?
A: I didn't get your question.
Q: So I remember, maybe a quarter or 2 back, you said that export NSR will improve by 10% to 12% because whatever the shipment you have bought, but hardly we have seen that getting played out in number. So should we expect a better NSR for export in Q4?
A: Yes. Probably we could see a marginal increase in export realizations. I don't think there's any possibility of reduction there. But yes like I mentioned, we have stopped exports to the large format buyers, primarily because of a significant increase in raw material costs. So while realizations might improve a bit, I think volumes will be constrained. - Vishwanathan Venkatramani, CFO
Q: Just wanted to understand the domestic demand scenario. We understand you have purposely reduced the share of exports. But how is the domestic demand scenario? Because we're not seeing a great momentum in volumes either in domestic market.
A: Yes. Domestic volumes -- the domestic market has been growing during the current year. And we are quite satisfied as far as the demand conditions are satisfied. So the fact is that imports took away a larger share of the growth from domestic producers. So we are hopeful that once BIS is implemented, we will see a reduction every month happening on the import side and the benefits getting passed on to the domestic manufacturers. - Vishwanathan Venkatramani, CFO
Q: Secondly, the margin [standpoint] you have revised your guidance last quarter downward over 22% to 23-odd percent. This quarter, margins have come slightly below that number. Is there any one-off? Or do you still expect margins to hover around 19% level?
A: As far as the margins are concerned, so there were a couple of factors attributable to that. One was the higher brand spend in the quarter. Second was the increase in wood prices. And the third was a significant increase in the volumes for the new products, which we had introduced for the OEM segment. So that's had a significantly lower margin as compared to our regular product. So that had an impact on the margins. But going forward, I think once we see the volumes moving towards the optimum level, we'll also see a corresponding improvement in the margins. - Vishwanathan Venkatramani, CFO
Q: And is the timber prices already started declining, sir?
A: No, I don't think we are expecting any significant reduction in wood prices during quarter 4 or even the next financial year. I think they would possibly start reducing from FY '26 only. - Vishwanathan Venkatramani, CFO
Q: How confident are we in terms of implementation happening from Feb? Do you expect any delays at all? And can import come back to the COVID level, I would say, after implementation? What's your assessment on that?
A: Implementation is, for certain, to happen because it's already been passed. So -- but what I would say is that there would be 2 elements of benefit for the domestic producer with the BIS implementation. There would be, I would say, short-term relief in terms of import volumes being reduced. And then, of course, on account of compliance with BIS, it's a fairly tedious process for the foreign producers to get the registrations done and to comply and then also going forward to continue producing material which comply with the BIS norms, which would result in certain additional costs on account of their manufacturing even after they have gotten the registrations and compliance has gone with the BIS norm. So it would -- I won't say that it would come to pre-COVID levels where it was to that low levels. But it would definitely help us in curtailing the imports coming into the country. - Shobhan Mittal, CEO
Q: Sir, my first question is that given that we have a pretty strong balance sheet, are we planning to enter into any new product category, say, over the next 1 year period?
A: No. At the moment, we are not planning entry into any other products. - Vishwanathan Venkatramani, CFO
Q: Sir, just wanted to understand on this point only, so whether the landed cost of imported MDF remains the same or it has gone up post Red Sea conflict?
A: It remains the same. There has been no increase. - Vishwanathan Venkatramani, CFO
Q: So my first question is, like our realizations in import is a way too lesser than domestic. So what is the different product we are selling, how we are able to make positive EBITDA margins?
A: If you take the imports, more than 90% of the imports would be of the plain MDF category, primarily the -- what we call the industrial or the interior category. And possibly about 5% to 10% would be prelaminated MDF. Whereas if we look at our mix, so there are 4 categories, so plain MDF contributes about 82%, our prelaminated MDF contributes about 17% and the balance 1% comes from chlorine. So plain MDF is again broken up into 4 parts: industrial, commercial, exterior and club. Here, again, the mix is about 30% for industrial, about 32% for commercial, 17% for exterior and 21% of club. So if we compare and -- take the plain industrial MDF and what we call the value-added products, which are basically prelaminated
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
