Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Astral Ltd (BOM:532830, Financial) maintained its EBITDA margin in the range of 16% to 18% despite challenges, showcasing strong financial management.
- The company successfully launched new products, including OPVC and a new range of PTMT products, indicating a focus on innovation and expansion.
- Astral's Bathware division experienced significant growth, with a 63% increase in Q2, demonstrating strong performance in this segment.
- The Hyderabad plant has commenced production, and further capacity expansions are planned, which will support future growth.
- The Adhesive India business maintained a stable EBITDA margin of 15% and showed growth in both Q2 and the first half of the fiscal year.
Negative Points
- The company faced challenges due to volatility in polymer prices, particularly PVC, which affected inventory levels and market stability.
- Extended monsoon and slow government infrastructure demand negatively impacted construction and agriculture sectors, affecting overall business growth.
- The UK business experienced flat growth with a slight decline in margins, indicating challenges in international operations.
- Employee costs rose significantly, attributed to new initiatives and expansions, which could pressure margins if not managed effectively.
- The paint business faced margin pressure due to expansion into new states, indicating initial costs associated with geographic expansion.
Q & A Highlights
Q: Can you provide clarity on the BIS implementation and its impact on the market?
A: The BIS implementation will affect both the resin quality and the products sold in the market. It will shift demand from unorganized to organized sectors, benefiting companies like Astral. The government is finalizing protocols, and once implemented, it will raise industry costs but improve product quality. (Unidentified Company Representative)
Q: How is the CPVC segment performing, and what are the expectations for pricing and growth?
A: CPVC is growing well with stable prices. We expect continued double-digit growth in volumes. The anti-dumping duty is in place, and as old stocks deplete, new products will have higher prices, supporting revenue growth. (Unidentified Company Representative)
Q: What is the impact of the recent price increases in PVC, and how did October perform?
A: PVC prices have increased by INR3 due to anti-dumping duties. October was flat due to the festive season and extended monsoon, but November is showing signs of improvement. We expect demand to pick up as the market stabilizes. (Unidentified Company Representative)
Q: Can you explain the rise in employee costs and the challenges in the UK Adhesive operations?
A: Employee costs increased due to new initiatives like New Bharath and expansion in the US and Bathware divisions. In the UK, sales mix changes and destocking by major customers affected margins. We are addressing these issues and expect improvements by fiscal year-end. (Sandeep Engineer, Chairman and Managing Director)
Q: How do you balance quality, profitability, and volume growth, especially in a competitive market?
A: We prioritize profitability and quality over volume growth. Lowering prices to boost sales can harm long-term brand value. We focus on maintaining standards and introducing innovative products, which helps us gain market share without compromising margins. (Sandeep Engineer, Chairman and Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
