Release Date: August 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hindware Home Innovation Ltd (BOM:542905, Financial) reported consolidated revenue of INR600 crore for Q1 FY25.
- The company achieved an EBITDA of INR55 crore with a margin of 9.2%.
- The Bathware division generated revenue of INR326 crore with an EBITDA of INR42 crore.
- The Consumer Appliances business delivered INR111 crore in revenue with an EBITDA of INR3 crore.
- The Plastic Pipes & Fittings segment reported a 5% year-on-year increase in sales, reaching INR163 crore.
Negative Points
- The company experienced a softer start to the fiscal year due to evolving macroeconomic conditions.
- There was a noticeable reduction in margins due to lower top-line revenue.
- The Consumer Appliances business had a low EBITDA margin of 2.7%, reflecting ongoing challenges.
- The Bathware business faced a decline in market sentiment and restructuring impacts, affecting growth.
- The company reported an increase in net debt by INR100 crore on a sequential basis, despite a decline in revenue.
Q & A Highlights
Q: What kind of growth should we expect for the sanitaryware and faucets business? Was the margin reduction solely due to the lower top line?
A: Yes, the margin reduction is primarily due to the lower revenue recorded in Q1. We executed a strategy to combine our sanitaryware and faucets teams, which required restructuring and retrenchment. This, along with the market's overall sentiment, resulted in lower growth in Q1. We anticipate market recovery in H2, with growth returning to pre-COVID levels of 8%-10%.
Q: What is the purpose of the INR200 crore rights issue? Are there any further plans for cleaning up the balance sheet?
A: The rights issue is primarily to improve liquidity and pay off debt. We are evaluating various options but cannot confirm any additional plans until approved by the Board.
Q: What kind of volume growth should we expect for the plastic pipes business? Are there any capacity constraints?
A: We expect volume growth of around 16%-18% for the year. Currently, we have sufficient capacity to cover this growth. However, raw material prices are fluctuating, which may impact margins.
Q: Why did the debt increase on a quarter-on-quarter basis, and what is the CapEx guidance for FY25 and FY26?
A: The debt increased due to slower market conditions and ongoing CapEx programs, including setting up a new plant in Roorkee. We plan to spend around INR170 crore to INR180 crore on CapEx in FY25.
Q: Are we done with the restructuring of the sales force in the Bathware and Consumer Appliances segments?
A: Yes, the restructuring in the Bathware business is complete. We have also achieved synergies between our Bathware and Consumer Appliances businesses in marketing, logistics, and warehousing. The benefits of these changes will start reflecting in the second half of the year.
Q: How should we read into the performance of the Consumer Appliances business, particularly in comparison to other companies?
A: Our air cooler business, which is a smaller part of our overall Consumer Appliances segment, grew similarly to other companies. However, our kitchen appliances business did not grow, impacting overall performance. We are evaluating product categories and may exit those that are not strategically beneficial.
Q: What was the premium, mid, and mass split in the sanitaryware and faucets business for this quarter versus Q1 '24?
A: For this quarter, the premium segment contributed 47%, and the economy segment contributed 53%. In Q1 '24, the premium segment was 53%, and the economy segment was 47%.
Q: What are the medium to long-term growth targets for the company?
A: We aim for a 15%-18% CAGR in sales and 20%+ CAGR in EBITDA over the medium to long term. We are focusing on in-sourcing materials and expanding our facilities to achieve these targets.
Q: What is the current level of outsourcing from China, and what are the plans for reducing it?
A: Currently, outsourcing from China is around 3%, down from 17%-18% two years ago. We plan to further reduce this by in-sourcing more materials.
Q: How has the market outlook been for July, and have we seen growth?
A: Secondary sales have been positive in July, indicating some positive momentum in the market.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
