Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Pidilite Industries Ltd (BOM:500331, Financial) reported a 7% increase in revenue for Q2 FY25 compared to the same period last year, with an underlying volume growth of 8%.
- The B2B segment showed strong performance with a UVG of 21%, driven by industrial and project verticals.
- Gross margins expanded by 280 basis points over the same period last year, aided by benign input prices.
- EBITDA margins for the standalone business improved to 24.6%, expanding by 143 basis points year-over-year.
- The company continues to invest in upgrading and building new facilities and expanding its distribution network, indicating a focus on long-term growth.
Negative Points
- Consumer and Bazaar product demand was impacted by rains at the beginning of the quarter, resulting in a lower UVG of 6%.
- Urban demand slowdown was noted, with concerns about the impact of food inflation and potential cooling off of real estate growth.
- The company's domestic subsidiaries, particularly Nina Percept, faced challenges and have not yet returned to profitability.
- Employee costs have surged, raising questions about the sustainability of such expenses in the long term.
- The competitive intensity in the waterproofing segment remains high, with no decrease in competition from paint companies.
Q & A Highlights
Q: Can you explain the impact of rains on your portfolio and whether double-digit volume growth in Consumer and Bazaar (C&B) could return in the coming quarters?
A: Sudhanshu Vats, Managing Director Designate, explained that while certain segments like waterproofing were impacted by rains, other areas showed robust growth. He emphasized that the overall volume growth remains healthy, driven by a diverse portfolio and strong execution. He remains optimistic about returning to double-digit growth, depending on market conditions.
Q: What is your view on the urban demand slowdown, and how does it affect your business?
A: Sudhanshu Vats noted that while urban demand is not buoyant, it is not as adverse as some suggest. He highlighted that Pidilite's business is more reliant on renovation than new construction, which buffers against urban slowdowns. He expects the situation to become clearer in the next three to six months.
Q: Could you provide an update on your partnership with Col Tech and its potential impact on your business?
A: Sudhanshu Vats stated that the partnership is progressing well, with an application center opened in Bangalore. While currently a distributor, Pidilite is open to manufacturing in India as the partnership evolves. The focus is on leveraging Col Tech's strong R&D and product portfolio.
Q: How is the B2B segment performing, and what factors are driving its growth?
A: Sudhanshu Vats reported strong double-digit growth in the B2B segment, driven by strategic initiatives and robust execution in industrial and project businesses. He noted that while some growth is due to improved export conditions, the segment's success is largely due to internal strategies.
Q: What are your plans for the paint venture, and how is it impacting your current growth figures?
A: Sudhanshu Vats mentioned that the paint venture is still in its early stages, focusing on rural and semi-urban markets in four states. He emphasized that while the venture is progressing well, it currently does not significantly impact overall growth figures. More detailed updates are expected after the festive season.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
