JHSNSE21 November 2022

JHS Svendgaard Laboratories Limited

5,113words

93turns

8analyst exchanges

0executives

Key numbers — 27 extracted

rs,

cent years the company partnered with various industrial giants like Gillette and Amway among others, to manufacturer Oral-B toothbrushes range of oral care products respectively. Subsequently, during

Rs 24.05 crore

al performance of the company for the second quarter ending 30th September 2022. We have reported Rs 24.05 crores in revenues during quarter two of financial year 2023 as against Rs. 24.64 crores in quarter two

Rs. 24.64 crore

We have reported Rs 24.05 crores in revenues during quarter two of financial year 2023 as against Rs. 24.64 crores in quarter two of the corresponding quarter in previous financial year. There has been a margin

quarter in previous financial year. There has been a margin year-on-year decline of approximately 2%. This decrease is on account of drop in revenues from our major revenue contributor which is to

Rs. 2.49 crore

cant tractions in the toothbrush business and retail business. We have reported an EBITDA loss of Rs. 2.49 crores. This can largely be Earnings Conference Call Q2 FY2023 • www.svendgaard.com contributed

Rs. 41 lakh

of the manufacturing business. The PAT for the quarter two financial year 2023 stood at a loss of Rs. 41 lakh. As of half yearly performance as on 30th September 2022 we reported Rs. 45.36 crores in revenues

Rs. 45.36 crore

ood at a loss of Rs. 41 lakh. As of half yearly performance as on 30th September 2022 we reported Rs. 45.36 crores in revenues during the first half of financial year 2023 as against Rs. 46.22 crores in the corr

Rs. 46.22 crore

we reported Rs. 45.36 crores in revenues during the first half of financial year 2023 as against Rs. 46.22 crores in the corresponding period previous year. This decrease in revenues is again mainly on account

Rs. 4.41 crore

t with the increase in revenue from retail business. Our EBITDA for the period stood at a loss of Rs. 4.41 crores largely due to the decline in the revenues, our PAT during the first half of the year stood at

Rs. 4.57 crore

due to the decline in the revenues, our PAT during the first half of the year stood at a loss of Rs. 4.57 crores as against a profit of Rs. 18 lakh in the first half of the previous financial year. The absence

Rs. 18 lakh

r PAT during the first half of the year stood at a loss of Rs. 4.57 crores as against a profit of Rs. 18 lakh in the first half of the previous financial year. The absence of exports and lower than optimum c

83%

the half year ended 30th September 22, from a segment wise perspective, we have done a revenue of 83% from the manufacturing business and approximately 4% is from our own proprietary brand business a

Guidance — 20 items

Paramveer Singh

opening

“As of now, exports have dipped quite a bit but we soon expect it to gain some traction.”

Ashish Goel

opening

“However with the addition of new customers for our toothpaste business we expect the volumes and value to increase going forward.”

Ashish Goel

“For toothbrush it will be in the range of 25-35%, whereas in the case of toothpaste it will Earnings Conference Call Q2 FY2023 • www.svendgaard.com range from 10-25% depending on the client volumes and business.”

Aniket Redkar

“As far as the export market is concerned, what is the export contribution for this quarter and a half year and how do we plan to grow in the export market?”

Ashish Goel

“However, the company is already in advanced stages of discussion with various leads from US and UK markets and is in the process of getting the necessary certifications in place and we expect that by Q4 of this financial year we should all have that in place and the export numbers will again increase thereafter and we are looking at it as an overall sale contribution of somewhere around in the range of 15-20% from export business from next financial year onwards.”

Ashish Goel

“So, as far as Aquawhite business is considered, we are going pretty cautiously there in terms of which segment we need to focus and target in order to increase our market share.”

Ashish Goel

“As you rightly mentioned and observed that we have been successful in localizing the supply solutions for the oral care category and not just for the toothbrushes, but even for toothpaste also we are probably the exclusive supplier of these products to Chicco and going forward we are looking at that apart from meeting their domestic demands we are also looking forward to be their global suppliers to other geographies as well.”

Jay Mittal

“So, any sort of guidance or expectations, what kind of revenues we can expect from this brand maybe this year or the next year?”

Jay Mittal

“Would that be one-off case or can we sort of not expect volumes from that particular customer going forward?”

Ashish Goel

“But, as soon as those transactions get materialized then it will be the right stage to call out for the requirement.”

Risks & concerns — 8 flagged

There has been a margin year-on-year decline of approximately 2%.

— Ashish Goel

This can largely be Earnings Conference Call Q2 FY2023 • www.svendgaard.com contributed to the decline in the revenue of the manufacturing business.

— Ashish Goel

This decrease in revenues is again mainly on account of decline in the third party business of toothpaste category which has largely been offset with the increase in revenue from retail business.

— Ashish Goel

4.41 crores largely due to the decline in the revenues, our PAT during the first half of the year stood at a loss of Rs.

— Ashish Goel

We'll continue to remain cautious in terms of which segment are we getting onto and will focus on the institutional business largely as far as our own proprietary brand is considered.

— Ashish Goel

Per se largely because of the decline in the revenues, I would say because as far as the operating expenses which have been reflecting in the consolidated numbers those are largely on account of the retail business but as such it is largely the lower capacity utilization which can be attributed for the purpose of decline in the EBITDA margin.

— Ashish Goel

As you rightly mentioned, there has been a significant decline in terms of the export markets but the company is now going post-COVID is going pretty cautious in terms of selecting the category and the clients as far as the export market is considered and now is focusing on the US and the UK markets for which currently we are in the process of getting relevant certifications which are required for the purpose of exporting of oral care categories.

— Ashish Goel

From a risk profile perspective, risk and return profile perspective that business is completely independent.

— Ashish Goel

Q&A — 8 exchanges

Can you give the revenue split product wise and the segment wise for this quarter and the half year?

Ashish Goel

As on the half year ended 30th September 22, from a segment wise perspective, we have done a revenue of 83% from the manufacturing business and approximately 4% is from our own proprietary brand business and another 12-13% is on the retail side. Of the manufacturing business, 30% is being contributed through the toothbrush segment and another 50% is being contributed to the toothpaste segment largely and remaining is contributed by mouthwash and the other allied oral care products. What are the margins we expecting from these new products like talcum powder, creams and all? As far as the semi-

Good afternoon sir, congratulations the tie-up with Artsana group, I believe Chicco is a well-known kid’s brand. If you could just shed some more light on the nature of your agreement, it mentions in your presentation that it's an exclusive tie up so would we be the only manufacturers for Chicco brand in India or how would that work sir?

Ashish Goel

Good evening, Mr. Jay. As you rightly mentioned and observed that we have been successful in localizing the supply solutions for the oral care category and not just for the toothbrushes, but even for toothpaste also we are probably the exclusive supplier of these products to Chicco and going forward we are looking at that apart from meeting their domestic demands we are also looking forward to be their global suppliers to other geographies as well. So, we would be the only manufacturers for Chicco? For now, yes. So, any sort of guidance or expectations, what kind of revenues we can expect from

My question is regarding finance costs. Our finance cost has decreased by 30% despite increasing long-term borrowing. Why is it so? Can you please explain?

Ashish Goel

Good evening Ms. Harshita, as far as the finance cost is considered since the company is largely debt-free so, that finance cost which has been reflecting has been reflected on account of certain vehicle loans of which few have been repaid in full during the relevant period. That has been the prime reason for the reduction in the financial expenditure. So, how do we see the next three years spanning out in the terms of top-line and bottom- line? We're really looking forward in terms of great numbers in terms of whether it be the addition of new clients, new product categories along with certai

I just wanted to know about the R&D budget. What is the R&D budget?

Ashish Goel

Mr. Aniket, as I mentioned that particularly in the case of third-party manufacturing which is largely the business portion of the company, the product designs and the product formulation specifications are being provided by the clients itself. What company at its own end is continuously striving in terms of R&D is to cater to the regional and the new age customers that are coming into this oral care category. So, from that perspective we have an in-house team which takes care of the entire R&D. From a budget perspective we are looking at somewhere between 0.5-1% of our overall business in ter

I have recently started to track your company and I was just going through your presentation. I see in terms of your geographical breakup, in terms of revenue, in FY21 we were exporting around 5% which in FY22 it has come down to nearly zero. Going ahead, if you can help us understand, what is the plan in terms of which geographies do you plan to focus?

Ashish Goel

Good evening, Mr. Nayan. As you rightly mentioned, there has been a significant decline in terms of the export markets but the company is now going post-COVID is going pretty cautious in terms of selecting the category and the clients as far as the export market is considered and now is focusing on the US and the UK markets for which currently we are in the process of getting relevant certifications which are required for the purpose of exporting of oral care categories. We expect that by Q4 all those certification shall be in place. Going forward from next financial year onwards, we are looki

I just wanted to; if you could shed some light in detail about this recent demerger and amalgamation notification about JHS Svendgaard Retail Ventures Limited and JHS Svendgaard Brands Limited, what is the intent is and what to expect? Earnings Conference Call Q2 FY2023 • www.svendgaard.com

Ashish Goel

Sure. So, as far as these three entities are concerned, for which also the segment reporting is being done. So, whereas JHS Svendgaard Brands Limited as an entity is particularly dealing with the proprietary brand of the company which is Aquawhite into the Oral Care category. Under the composite scheme which you just referred to, we are merging JHS Svendgaard Brands Limited in the parent business of JHS Svendgaard Laboratories Limited itself since we are any which way the segment in terms of the customers and are very focused on institutional business. But, in order to reduce the administrativ

I just wanted to understand in terms of the working capital requirements in our business and the working capital days in our business.

Ashish Goel

As far as working capital in terms of number of days that is required in case of the manufacturing business considering the overall mix of the categories as well as the client and their terms, is effectively anywhere between 45-50 days which is the requirement in terms of the working capital. Do we plan to even improve it from these levels or this is the best industry standards? No, this will further improve and this has anyways reduced over the past three years and this will further improve with the addition of new product categories as well as the new client base. We plan to focus on the exp

Pertaining to the closing remarks of Q&A, I thank the entire team of JHS Svendgaard Laboratories Limited for their untiring effort, hard work and dedication which drives the company forward in various market conditions. Also, I appreciate all of you for participating in our conference call. Please do get in touch with our Adfactors – Investor Relations Team for any further questions. Thank you very much.

Management

Speaking time

Ashish Goel

Aniket Redkar

Jay Mittal

Nayan Gala

Moderator

Harshita Patel

Paramveer Singh

Opening remarks

Paramveer Singh

Good evening everyone. I would like to wish you all a very warm welcome to JHS Svendgaard Laboratories Limited earning conference call for the second quarter and half year ended 30th September 2022. On call with me today, I have Mr. Ashish Goel – our group CFO along with Mr. Neeraj Kumar and Adfactors – our Investor Relations Team. I would like to share a brief overview of our company and the recent developments before we get into the business and financial performance. JHS Svendgaard Laboratories Limited was established in 1996 as a manufacturer of toothbrushes. During recent years the company partnered with various industrial giants like Gillette and Amway among others, to manufacturer Oral-B toothbrushes range of oral care products respectively. Subsequently, during the 2000s we extended our portfolio by adding three facilities to manufacture toothpastes, mouth washes and denture tablets. Over the years, we further expanded seven prestigious FMCG brands to our portfolio including P&

Ashish Goel

Thank you, Paramveer. Good evening everyone. Now I'd like to take you through the financial performance of the company for the second quarter ending 30th September 2022. We have reported Rs 24.05 crores in revenues during quarter two of financial year 2023 as against Rs. 24.64 crores in quarter two of the corresponding quarter in previous financial year. There has been a margin year-on-year decline of approximately 2%. This decrease is on account of drop in revenues from our major revenue contributor which is toothpaste segment. However with the addition of new customers for our toothpaste business we expect the volumes and value to increase going forward. This was however also offset by good growth and significant tractions in the toothbrush business and retail business. We have reported an EBITDA loss of Rs. 2.49 crores. This can largely be Earnings Conference Call Q2 FY2023 • www.svendgaard.com contributed to the decline in the revenue of the manufacturing business. The PAT for the

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