Release Date: November 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Indo Count Industries Ltd (BOM:521016, Financial) is experiencing a positive shift in the US retail market, with increased retail sales and rising imports of bed linen from India.
- The company is embarking on a transformative phase, 'Version 2.0', focusing on sustainable long-term growth through strategic investments in a diversified product portfolio and premium segments.
- Recent acquisitions in the US utility bedding market, including Fit Inc USA and Modern Home Textile, are expected to significantly expand the company's manufacturing footprint and revenue potential.
- Indo Count Industries Ltd (BOM:521016) has been recognized with several prestigious awards for excellence and sustainability, highlighting its commitment to corporate social responsibility.
- The company anticipates stable domestic cotton prices, which will support operations and help manage input costs effectively.
Negative Points
- Supply chain issues have led to increased inventory levels and deferred shipments, impacting sales volumes and revenue.
- The company's EBITDA margin has been affected by upfront costs and additional expenses related to brand promotion and infrastructure for the new utility bedding business.
- Net debt has increased due to funding for recent acquisitions and higher working capital requirements, with a net debt to equity ratio of 0.48x.
- There are challenges in maintaining margins due to rising costs in logistics, labor, and interest rates, as well as the withdrawal of interest subvention by the government.
- The company faces geopolitical uncertainties and volatility in the supply chain, which have extended transit times and impacted working capital.
Q & A Highlights
Q: Can you quantify the increase in inventory due to supply chain issues and any deferred shipments?
A: The inventory increased by approximately 2.5 million meters due to deferred shipments. This will be liquidated in the coming quarters. (Kailash Lalpuria, CEO)
Q: What is the expected margin from the new acquisitions, and what was the basis for their valuation?
A: The margins from the new acquisitions are expected to be around 16%, similar to current margins. The valuation was based on assets, business, and customer base. (Kailash Lalpuria, CEO)
Q: Why acquire manufacturing facilities in the US when production costs are lower in India?
A: The logistics cost of shipping lightweight, bulky items like pillows from India is high. Producing in the US reduces logistics costs and addresses geopolitical issues. (Kailash Lalpuria, CEO)
Q: How will the recent acquisitions impact revenue and capacity utilization?
A: The acquisitions are expected to generate $85 million at full capacity, with current utilization at 50% for one facility and 35% for another. We aim to ramp up to 75% by FY26. (Kailash Lalpuria, CEO)
Q: How are core business margins being affected by rising costs and how do you plan to maintain them?
A: We aim to improve margins through operational efficiencies, brand promotion, and targeting higher-value segments. Despite cost pressures, we maintain a margin of 16%. (Kailash Lalpuria, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
