Himatsingka Seide Limited
6,545words
33turns
5analyst exchanges
5executives
Management on call
Prerna Jhunjhunwala
ELARA SECURITIES PRIVATE LIMITED
Shrikant Himatsingka
MANAGING DIRECTOR &
K. P. Rangaraj
PRESIDENT FINANCE & GROUP
Dilip Panjwani
EXECUTIVE VICE PRESIDENT &
K. P. Rangraj
President Finance & Group CFO and Mr. Dilip Panjwani – Executive Vice President &
Key numbers — 40 extracted
56%
manufacturing facilities during the quarter stood as follows: The Terry towel division recorded 56% capacity utilization versus 54% in the previous quarter. Sheeting division recorded 53% against 5
54%
the quarter stood as follows: The Terry towel division recorded 56% capacity utilization versus 54% in the previous quarter. Sheeting division recorded 53% against 55% in the previous quarter and t
53%
recorded 56% capacity utilization versus 54% in the previous quarter. Sheeting division recorded 53% against 55% in the previous quarter and the spinnig division recorded a capacity utilization of 7
55%
% capacity utilization versus 54% in the previous quarter. Sheeting division recorded 53% against 55% in the previous quarter and the spinnig division recorded a capacity utilization of 75% against 7
75%
% against 55% in the previous quarter and the spinnig division recorded a capacity utilization of 75% against 78% in the previous quarter of this fiscal year. During the quarter
78%
% in the previous quarter and the spinnig division recorded a capacity utilization of 75% against 78% in the previous quarter of this fiscal year. During the quarter, revenue st
Rs.402 Crore
this fiscal year. During the quarter, revenue streams from brands stood at Rs.402 Crores versus Rs.575 Crores during the previous year and Rs.439 Crores in the previous quarter. Our fir
Rs.575
Crore
During the quarter, revenue streams from brands stood at Rs.402 Crores versus Rs.575 Crores during the previous year and Rs.439 Crores in the previous quarter. Our first half financial ope
Rs.439 Crore
enue streams from brands stood at Rs.402 Crores versus Rs.575 Crores during the previous year and Rs.439 Crores in the previous quarter. Our first half financial operating performance is in line with our expe
Rs. 639.68 Crore
e on to comments on financial performance. The consolidated total income for the quarter stood at Rs. 639.68 Crores versus Rs. 816.21 Crores in the previous year. This represents a decline of 21.6% year-on-year.
Rs. 816.21 Crore
cial performance. The consolidated total income for the quarter stood at Rs. 639.68 Crores versus Rs. 816.21 Crores in the previous year. This represents a decline of 21.6% year-on-year. Consolidated EBITDA for t
21.6%
at Rs. 639.68 Crores versus Rs. 816.21 Crores in the previous year. This represents a decline of 21.6% year-on-year. Consolidated EBITDA for the quarter stood at Rs.52.68 Crores versus Rs.144.55 Crore
Guidance — 20 items
“As always I will start this with a short business update followed by some comments on the financials and the floor will be open to question-and- answers addressed by our Managing Director, Mr.”
“As shared with stakeholders earlier, we expect progressive recovery on the operating performance front going into H2 of the fiscal year.”
“We will be happy to take on your questions now.”
“We will be happy to discuss this offline.”
“So, our capex will be light, our major capex cycle is over and we are focused on saving our assets and making sure that they deliver as we had set out to deliver.”
“But more certainly our capex will be broadly contained in that vicinity.”
“Because as I said our major capex cycle is over we will be sticking to our organic capex only and the rest of these accruals will be channeled towards debt reduction.”
“The company continues to use imported cotton as well, depending on the variety of cotton the weighted average cost will be marginally reducing, but that has also started to cool off.”
“However, the government has not made clear its stands on what the duty structure and quantum will be going forward, one has to wait and see that what is the next.”
“Okay, second on your outlook on how the inventory level in USA are setting up going forward and how much time it will take to normalize, what are the industry expectations on that front and second thing is on opening up of the opportunities with FTA in Australia and how is the industry setback on possibility of SKU with UAE any development on that?”
Risks & concerns — 8 flagged
This represents a decline of 21.6% year-on-year.
— K P Rangraj
International raw material prices have also begun to soften over the last 45 days or so.
— Shrikant Himatsingka
So, it has eaten into our gross margins, it therefore eaten into our EBITDA and this recent inventory correction exercises has exacerbated the impact of these events.
— Krishna Kumar S
So, it might take a couple of quarters to get there, but I think, do not hold me to this it is difficult to predict in such volatile times as to how long will it exactly take.
— Krishna Kumar S
So, which is why I say there are brands that are creating a drag on our operating performance because of the inherent cost structure of the brand then we will certainly make sure that we rationalize that part of our portfolio even if it means that there is a light reduction in branded revenue streams in case of private label.
— Shrikant Himatsingka
At this point we are trying to figure out how to make sure that we get our strategy right on India and not start another exercise which creates a drag on operating performance.
— Shrikant Himatsingka
So, I think 2024 should be good for us in terms of time frames heading back to more solid operating performance FY2022 H1 we were positioning ourselves to achieve EBITDA over Rs.600 Crores with terry to ramp up and with some inflation pressure.
— Shrikant Himtsingka
Our assets are priced to deliver EBITDA I would say new EBITDA margins should be as we have shared with stakeholders earlier we used to say 20-22% but not more cautious more volitality I would admit more in the region of 19 to 20% somewhere there and there is more revenues to be clocked than what we did in FY2022.
— Shrikant Himtsingka
Q&A — 5 exchanges
Q
Thanks for the opportunity. In first half we saw a capex of around Rs.38 million, so what should we see for FY2023 and FY2024. What capex are you planning to deploy in FY2023 and FY2024?
Shrikant Himatsingka
I am not sure where you are getting this number of Rs.38 million from. We will be happy to discuss this offline. But Roshan our capex outlays and view on capex is extremely clear as far as we are concerned. At this point we are focused only on our organic capex cycle which is typically Rs.60 Crores to Rs.80 Crores a year and nothing more than that. We are only focused in making sure that we head back to normalcy after this short-term head winds that we have witnessed off late and we are not on capex at all. So, our capex will be light, our major capex cycle is over and we are focused on saving
Q
Good evening, sir. Basically, I just want the possibility or how is the situation of raw material import because we do import significant amount of raw material. So, how is our mix for cotton import compared to past and there was duty free import allowed, how is the current situation, is there any duty on that, I just wanted to get update on that.
Shrikant Himatsingka
I will divide the raw material update in two batches, domestic, imported. Now, on the domestic fronts one is the cotton prices cool off with the arrival of the new crop and of course it is not started on the 1st of October but on a weighted average it is coming down gradually which is a good sign and it will help the operating performance. International raw material prices have also begun to soften over the last 45 days or so. The company continues to use imported cotton as well, depending on the variety of cotton the weighted average cost will be marginally reducing, but that has also started
Q
Good evening, Mr. Shrikant. I know times have been very tough. Just to understand from a market perspective you had explained that things will get better from here but, particularly because of pricing if you could give some more color sir because right now our gross margins are down by 50% from probably much higher level which probably means that we will not be able to pass through the cost you explained this to previous participant that being a highly more planned oriented player could we expect in the near future that the price pass through will happen and the margins will get restored at a
Krishna Kumar S
Sir, would we have to pass through any benefit of raw material going forward like you mentioned we cannot pass through cost increase, so would we be able to keep the benefits of raw material cost reductions or would we have to share to the customers. Shrikant Himatsingka: Nothing in question, we need to keep some, you will have to give back some because clients will expect that there is no doubt in the matter. But they also understand where the suppliers stand and the inflation rate is. So, I think it is going to be a give and take. But net- net it should have positive impact and then the othe
Q
I can’t make generalization but in our experience they are very alive to them and they love them, basically value in brands and so on. But that doesn’t mean that every brand that one has in their portfolio is going to achieve their objective. So, which is why I say there are brands that are creating a drag on our operating performance because of the inherent cost structure of the brand then we will certainly make sure that we rationalize that part of our portfolio even if it means that there is a light reduction in branded revenue streams in case of private label. As I said we are an integrate
Prerna Jhunjhunwala
Is there is any write down that we will have taken because of the price correction that has happened in cotton or input cost. Shrikant Himatsingka: No, it is a very wide term the price correction in cotton will not surface in the form of write down. The price correction in cotton will surface in the form of lower gross margins in which many of us are facing already because the prices were high of cotton but if the market prices have fallen and as I said you have some old cotton which is at a higher price it will come in the form of a write down, it will come in the form of, we having lower gro
Q
I just wanted to understand amongst the competitors are looking at India as a growth opportunity. I just wanted to understand what are your domestic sales and any plan to kind of ramp that up as well that was question one, question two was what are your net debt levels currently and what are your cost of debt at the current juncture and you do mentioned that the second half should be much better, any target in terms of margins in the second half that you would be targeting and you expect FY2024 likely to be more like FY2022 or is it too early to take that call. Thank you.
Shrikant Himatsingka
I will address first question number three. I did not say that H2 will be much better, it could very well be but what I did say is we will progressively improve operating performance as we go into H2 for the reasons that raw material prices are easing out from H2 , supply chain conversion issues and challenges are easing out and the inventory correction initiative which we have undertaken by us to customers into these coming to close in some cases, the intensity is coming down in certain other case these are the factors that we felt will guide progressive recovery going forward. So, that is on
Opening remarks
K P Rangraj
Thank you, Prerna. Good afternoon, ladies and gentlemen. This is Rangaraj – President Finance & Group CFO, Himatsingka Seide Limited. Let me first of all welcome you all to this Q2 FY2023 earnings call. As always I will start this with a short business update followed by some comments on the financials and the floor will be open to question-and- answers addressed by our Managing Director, Mr. Shrikant Himatsingka. First, starting with the business update, Q2 FY2023 and the first half of the fiscal year operating performance have been severly impacted by raw material inflation, energy inflation and inventory correction initiatives that were undertaken by global clientele. Therefore, both operating margins and total income have been impacted during this period. As a result of the above, capacity utilization across all our plants was marginally impacted during the quarter. The capacity utilization for our manufacturing facilities during the quarter stood as follows: The Terry towel divisi