Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Huhtamaki India Ltd (BOM:509820, Financial) reported a 2% increase in net sales quarter-on-quarter, indicating some growth despite challenging market conditions.
- The company is focusing on long-term competitiveness and profitable growth through innovative product portfolios and operational excellence.
- Huhtamaki India Ltd (BOM:509820) is investing in sustainable packaging solutions, aligning with customer sustainability pledges.
- The company's liquidity position is strong, with a debt liquidity ratio of 0.1, and most external debts have been repaid.
- The blueloop product line, which contributes 27-28% of sales, is expected to offer higher gross margins due to its innovative and sustainable nature.
Negative Points
- Margins were significantly impacted due to adverse customer and product mix, as well as inflation in raw materials.
- Revenue for the quarter decreased by 1.5% year-on-year, reflecting challenges in maintaining top-line growth.
- EBITDA for the quarter decreased by approximately 36% compared to Q3 2023, indicating pressure on profitability.
- The company faces challenges from global supply chain disruptions and geopolitical issues, affecting both exports and raw material imports.
- There is a subdued end consumer demand, particularly in the FMCG sector, impacting the company's performance.
Q & A Highlights
Q: Can you provide more details on the backward integration process of the blueloop product and its expected impact on gross margins?
A: Dhananjay Salunkhe, Managing Director, explained that blueloop is not just about the film but about offering sustainable solutions. The process involves various manufacturing stages, including metalization and coatings. The shift from multi-layer to mono or bilayer materials is expected to improve gross margins, although the unique raw materials used are more expensive.
Q: What is the current contribution of blueloop to sales, and why hasn't there been a visible improvement in gross margins?
A: Dhananjay Salunkhe noted that blueloop's contribution remains around 27-28%. However, challenges in end consumer demand and adverse product mix have impacted overall margins, despite the blueloop's stable contribution.
Q: Can you elaborate on the strategy for achieving long-term growth and sustainable profits?
A: Dhananjay Salunkhe highlighted a multi-pronged strategy focusing on market share growth, operational excellence, and innovative products like blueloop. The strategy includes increasing the share of wallet with existing customers and focusing on operational competitiveness.
Q: How are raw material price changes impacting margins, and what steps are being taken to mitigate this?
A: Jagdish Agarwal, CFO, mentioned significant inflation in key raw materials like BOPP and polymers, with prices increasing by 10-15%. The company is managing these costs through operational excellence and market-aligned pricing strategies.
Q: What is the status of the blueloop product's market adoption and competitive positioning?
A: Dhananjay Salunkhe stated that blueloop is gaining traction, especially in developed markets, and Huhtamaki has invested significantly in capacity. The products are differentiated and first in the market, with no single competitor matching Huhtamaki's scale of investment.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
