Greenlam Industries Limited
7,820words
142turns
15analyst exchanges
3executives
Management on call
Saurabh Mittal
MANAGING DIRECTOR AND CHIEF
Ashok Sharma
CHIEF FINANCIAL OFFICER - GREENLAM INDUSTRIES LIMITED
Samarth Agarwal
FINANCE - GREENLAM INDUSTRIES LIMITED
Key numbers — 40 extracted
14%
u through the financial performance. For the Q2 FY23 on a consol basis, our net revenue grew by 14% on a year-on-year basis and grew by 10.1% on sequential basis and stood at Rs.518 Crores in this
10.1%
or the Q2 FY23 on a consol basis, our net revenue grew by 14% on a year-on-year basis and grew by 10.1% on sequential basis and stood at Rs.518 Crores in this quarter as compared to Rs.454 Crores last
Rs.518 Crore
et revenue grew by 14% on a year-on-year basis and grew by 10.1% on sequential basis and stood at Rs.518 Crores in this quarter as compared to Rs.454 Crores last year same quarter. Gross margin grew by 110
Rs.454 Crore
s and grew by 10.1% on sequential basis and stood at Rs.518 Crores in this quarter as compared to Rs.454 Crores last year same quarter. Gross margin grew by 110 basis points to 44.6% in Q2 FY23 from 43.5% in
110 basis point
ores in this quarter as compared to Rs.454 Crores last year same quarter. Gross margin grew by 110 basis points to 44.6% in Q2 FY23 from 43.5% in Q2 FY22. On a sequential basis gross margin was down by 40 bas
44.6%
as compared to Rs.454 Crores last year same quarter. Gross margin grew by 110 basis points to 44.6% in Q2 FY23 from 43.5% in Q2 FY22. On a sequential basis gross margin was down by 40 basis points.
43.5%
54 Crores last year same quarter. Gross margin grew by 110 basis points to 44.6% in Q2 FY23 from 43.5% in Q2 FY22. On a sequential basis gross margin was down by 40 basis points. Gross margin in abs
40 basis point
points to 44.6% in Q2 FY23 from 43.5% in Q2 FY22. On a sequential basis gross margin was down by 40 basis points. Gross margin in absolute term grew by 16.8% to 231 Crores in this quarter as compared to Rs.198
16.8%
sequential basis gross margin was down by 40 basis points. Gross margin in absolute term grew by 16.8% to 231 Crores in this quarter as compared to Rs.198 Crores in Q2 last year. EBITDA margin was
231 Crore
al basis gross margin was down by 40 basis points. Gross margin in absolute term grew by 16.8% to 231 Crores in this quarter as compared to Rs.198 Crores in Q2 last year. EBITDA margin was up by 30 basi
Rs.198 Crore
points. Gross margin in absolute term grew by 16.8% to 231 Crores in this quarter as compared to Rs.198 Crores in Q2 last year. EBITDA margin was up by 30 basis points and stood at 10.4% in Q2 FY23 as com
30 basis point
1 Crores in this quarter as compared to Rs.198 Crores in Q2 last year. EBITDA margin was up by 30 basis points and stood at 10.4% in Q2 FY23 as compared to 10.1% in Q2 FY22On a sequential basis EBITDA margin
Guidance — 20 items
“We concluded our equity raise in this quarter, we concluded all the debt closures for the projects at Andhra Pradesh and Tamil Nadu and noteworthy is that IFC has agreed to part fund the debt for our Andhra Pradesh project.”
“The startup of the plywood and laminate expanded capacity at Tamil Nadu and Andhra Pradesh respectively will be in Q4 of FY23.”
“The startup of the particle board line will be in Q4 of FY24.”
“Most of the important equipments etc., have all been placed and the project is moving as per plan with some challenges due to rains etc., in Tamil Nadu and Andhra, but by and large it is moving on schedule.”
“I will have Ashok take you through the financial performance, post which we will be happy to address your questions and queries.”
“How is the situation right now shaping up in your key geographies and going forward do you believe that the export market would grow faster than the domestic market meaning whether the ratio of exports to domestic would be 50/50 and what would be the value added mix currently in the laminate segment.”
“So, I really think both will grow at a similar percent and the mix between the two will also be 50% each nearly plus minus depending on a quarter here or there by and large that we expect on the export market.”
“We said this in the past also already it depends when you say exports because we operate in several geographies and some markets we are steading in export markets some we are already settled so it will depend market-to-market, geography-to-geography but very hard to give an answer on this, but we believe more or less on an average basis it will be very similar.”
“There could be some export markets which are more profitable there could be some export markets which are less profitable but considering the mix of productions sizes and dimensions we have to be across geographies so it will be very similar.”
“And what will be the value-added mix for this quarter the laminates.”
Risks & concerns — 7 flagged
In the domestic market too there was a little bit of a challenge in terms of demand, but overall we could grow each segment in value terms sequentially and year-on-year on the domestic front.
— Saurabh Mittal
As we talk right now we believe chemical cost will soften further and paper costs have not really gone down it also depends on the currencies probably going up a bit.
— Saurabh Mittal
Sir I wanted to understand on how you are seeing things on the export side, particularly with the major consumer facing kind of inflationary pressure and because of that the housing new construction and innovation demand getting impacted so any thoughts on how market could evolve going forward.
— Pranav
The veneer segment alone we had cost pressures in Q2 we have taken some price increases in veneer and the flooring segment and as we talk I think probably the trajectory of volume value will grow upon the next period or so, but competitive pressure still remain especially in the veneer segment that still remain.
— Saurabh Mittal
Just in terms of export market perspective are we seeing any slowdown in terms of demand because I think earlier in the opening comments you have mentioned like there is some currency headwinds in terms of emerging market industries facing are you facing any demand slowdown.
— Manish Mahawar
So we said that several emerging markets have had a challenge in the Q2 period of currency availability, dollar availability from the Central Bank and opening up of LCs and paying the advances etc.
— Saurabh Mittal
As far as the demand is concerned the emerging markets which have a challenge rather there is demand for our brand and our products there but due to the currency challenges and there has been a working capital which will keep we are not able to shift them.
— Saurabh Mittal
Q&A — 15 exchanges
Q
Thanks for the opportunity. Sir my question is on the export market. How is the situation right now shaping up in your key geographies and going forward do you believe that the export market would grow faster than the domestic market meaning whether the ratio of exports to domestic would be 50/50 and what would be the value added mix currently in the laminate segment.
Saurabh Mittal
The export market will continue to grow, and the challenges being faced by our competition which is Russian cost in Europe and some other markets we see that as an opportunity. So, we think export market will continue to grow. Over a longer period of time we believe in laminates the mix between domestic and exports to be very similar considering the Gujarat factory and considering the Andhra Pradesh plant also. So, I really think both will grow at a similar percent and the mix between the two will also be 50% each nearly plus minus depending on a quarter here or there by and large that we expe
Q
Firstly, thanks for the opportunity. Just a couple of questions from my end. What I wanted to understand was this recent diversification that the management is going through in particle board or plywood. Any thoughts that you have that you will be reevaluating your investments in doors and flooring business. What I want to understand is although the losses at this point of time are small, but they do must be consuming some amount of management bandwidth here.
Saurabh Mittal
So, flooring and doors if you see the business has grown in this quarter by about consolidated all the veneer categories by about 17%-18% and we reduced our working capital days in this category and the business does not need any more fixed capital and does not need any further working capital also and I think they are in a certain trajectory and it just takes more time to sort of the business. So, we are looking at continuing with these businesses. Secondly what I wanted to understand is this time if I look at your exports business that has taken a hit one of the factor that you mentioned is
Q
Thank you for the opportunity. Sir I wanted to get a trend like what is happening on the particle board is the import picking up.
Saurabh Mittal
On the imports what I know is that not much imports are happening, although some street production is there so I do not have a major update on what is right now the math of how much imports have picked up, if any. But not that I know of I still believe it was a shortage of good quality boards in the market, boards are available but the right quality boards which are laminatable boards with the right physical properties and decorate properties I should believe there is a shortage of that material component. For the Gujarat plant should we expect any stabilization loss to continue in Q3 also. I
Q
Thanks for the opportunity. Just I have one question so how does the unorganized competition in the domestic market affect the demand for organized players like Greenlam etc. So because I would assume these are different products with different type of customer profile.
Saurabh Mittal
Unorganized market reflect the demand in the sense they will have cheaper products noncompliant products in terms of product quality, poor quality and so I think that will impact the demand mostly on the price. The price to channel partners, dealers, carpenters will be lower than organized players. All the best thanks.
Q
Thank you for taking my question. Sir I wanted to understand on how you are seeing things on the export side, particularly with the major consumer facing kind of inflationary pressure and because of that the housing new construction and innovation demand getting impacted so any thoughts on how market could evolve going forward.
Saurabh Mittal
On the export front we sea freights reducing so the customers cost of our products is coming down because we were charging them for the additional freights. So freights have got corrected and that cost reduction is being passed on to the customers because we were charging them in the previous times and so non-emerging markets we think it is an opportunity for us to take market share from the international players. The emerging markets have their own problems where demand is there, but there are currency challenges. But overall give or take some markets there could be some challenges some marke
Q
One question on the demand side like how have you seen the demand post quarter two especially when there was a festive season in October and post October how has been the demand has there been difference in demand uptake especially in domestic markets.
Saurabh Mittal
Domestic market October clearly was slow because of all these holidays and festive and both the festivals happening on the same month as it bring down demand. So to that extent these markets have shortfall good depending on the geography but prior to 7 to 8 days. I must talk right now in the coming time or are nearly back to normalcy. And have you as a company outlined a strategy over the next three to five years timeline where that the company want to reach in terms of top line or margins profitability anything of that sort over a longer period. Sure I think with the investments we are doing
Q
Firstly congratulations on the good set of numbers and thank you for the opportunity. I would like to ask how is the doors and floors business performance this quarter al so how do we expect the performance in upcoming quarters.
Saurabh Mittal
In terms of doors and floors if you see the numbers in this quarter has improved in comparison to previous quarter and it was impacted in last two years due to pandemic and now we hope to rebuild this business and which is very much visible on our quarterly performance and we hope that going forward this will further improve. On the numbers flooring business debt was Rs.11.7 Crores which was about 50% value growth versus Q2 of previous year and about 3% growth in Q1 and on the realization front growth of about 28% versus Q2 of last year and about 7.5%, 8% versus Q1 of FY2023. The door business
Q
Thanks for taking my question and good afternoon Saurabh ji and Ashok ji. I had a couple of questions first what we have seen is the realizations on a sequential basis has moved up well it is up by almost 5.5% for laminates but despite this the gross margins are lower by 40 bps so what raw material had this kind of hitting the profitability.
Ashok Sharma l
In terms of this our realization is going on this mix of both the price hike in comparison to what we have taken in the previous years but in quarter-on-quarter it will not have much impact because we have taken in the begin gin of the quarter one. So the raw material price hike as we have mentioned earlier in the call the chemical prices are softening but still there was a price hike in the cost of raw material in terms of paper both in decorative and the craft paper. Further since we have maintained stock level so the high price raw material was there at the beginning of the quarter two whic
Q
Thanks for the opportunity. I just have one question you mentioned about the situation in Europe regarding the exports market and some disruption over there emerges as an opportunity for players like us to get some benefits out of it so can you explain the situation in further detail and how we can benefit from this.
Saurabh Mittal
There is not much detail to explain here but typically the local manufacturing costs have gone up there in Europe in terms of electricity and energy and which kind of increases their cost of production and because we are present there with our resources in terms of warehousing people distribution and not so much still in the specification market and they have challenges of servicing, certain manufacturing plants have challenges. So we believe with our inventory and distribution in place this would help us take some market share over a medium-term period. So there is nothing immediate perse as
Q
Thanks for the opportunity. In the particle board segment, I wanted to know in the next two years what is the revenue growth rate and the EBITDA margins we can see.
Saurabh Mittal
The particle board as of now we do not have this business or this prelam particle board is a very small component of the overall business so particle board project which we are as of now under implementation that will come the commercial production is expected to start by Q4 of next year which is FY24. So it will take some time in terms of that for that businesses to build in and what we have told in the previous presentation at a full utilization which can take around three to four years this can have an EBITDA in the range of around 25% as and when it reaches the full utilization. And just t
Q
So the question was on particle boards. So I just wanted to have a flavor on, so what sort of customer base would we be targeting. I mean you did mentioned like the OEM so would we be targeting the branded furniture players as sort of the customer base and if that so how does the working capital work out apart from our regular business I mean given it is B2B then would it be stretched and another second question was so you did mentioned most of the current particle board players, unorganized players are poor quality, low quality and we and one more player will be going for a high quality. So w
Saurabh Mittal
I will take the question of customer base. The customer base will be OEMs people who are doing office furniture, kitchen furniture, wardrobes, paneling and sales will move through the channel for all those smaller OEMs and maybe directly from the company to the large OEMs. So this will be the sales pattern. As far as the working capital matter is concerned as we talk right now particle board MDF have a shorter working capital cycle than the existing business one because most of the RM not all but most of the RM is locally sourced and the debtor days in the market are as far as domestic market
Q
Just in terms of export market perspective are we seeing any slowdown in terms of demand because I think earlier in the opening comments you have mentioned like there is some currency headwinds in terms of emerging market industries facing are you facing any demand slowdown.
Saurabh Mittal
So we said that several emerging markets have had a challenge in the Q2 period of currency availability, dollar availability from the Central Bank and opening up of LCs and paying the advances etc. So those challenges have been there one or two markets have got reasonably streamlined in this quarter and we believe this could streamline over the over the next maybe three to six months. As far as the demand is concerned the emerging markets which have a challenge rather there is demand for our brand and our products there but due to the currency challenges and there has been a working capital wh
Q
Congratulations on a very good set of number and thank you for providing me the opportunity. Sir you have mentioned I guess that when particle board capacity be fully utilized it can generate 25% of EBITDA margins and it will take around two to three years for it to get fully utilized.
Ashok Sharma
Three to four years. And what kind of revenue potential are we targeting in FY24 because we have our plywood plant coming which will be operational I think by Q4 of this year and the Laminate enhanced capacity in the Bloom Dekor which we have acquired. It will also be contributing so what kind of revenue potential we are targeting in FY24 and if you can throw some light on maybe the margins on the plywood category as well. In terms of revenue potential or revenue target for that the entire capacity will be available it depends upon how much we can able to sell in the next year in the first yea
Q
Thank you for the opportunity. Sir I just wanted to know in laminates on an annual basis we have seen an expansion in the margins so anything specific here that had led to this expansion.
Ashok Sharma
The expansion of margin in the current scenarios is as we are going through the project phase, so we believe that expansion I the margin will come first it will come in the existing business on a gradual basis and it will be visible once we are able to complete this project and reach up to a certain level of utilization. No, what I was trying to ask is in Q2 compared to Q2 last year we have seen an expansion in the margin for laminates. So anything specific here which had led to the expansion. Cost has come down versus last year and we have taken price hike so nothing specific. Alright thank y
Q
Thank you everyone for joining the call today. If you have any other queries you may get in touch with us or SGA our Investor Relations Advisor. Thank you.
Saurabh Mittal
Thank you everyone.
Opening remarks
Saurabh Mittal
Thanks. Good afternoon friends, very warm welcome to all of you in this call. I am joined by Ashok our CFO; Samarth from the finance team and SGA our Investor Relations Advisor. The results and presentation are being available on the stock exchanges and the company website. I hope you have had a chance to look at it. I will give you a few key highlights for the quarter gone by and updates on the new projects. The Gujarat factory at Prantij started commercial production in August and we started the plant in a record time. The refurbishment work for the expanded capacity is going on and is going on as per schedule and this should come in to production by Q4 of this financial year. We concluded our equity raise in this quarter, we concluded all the debt closures for the projects at Andhra Pradesh and Tamil Nadu and noteworthy is that IFC has agreed to part fund the debt for our Andhra Pradesh project. The startup of the plywood and laminate expanded capacity at Tamil Nadu and Andhra Prade
Ashok Sharma
Thank you sir. Good afternoon friends. I will take you through the financial performance. For the Q2 FY23 on a consol basis, our net revenue grew by 14% on a year-on-year basis and grew by 10.1% on sequential basis and stood at Rs.518 Crores in this quarter as compared to Rs.454 Crores last year same quarter. Gross margin grew by 110 basis points to 44.6% in Q2 FY23 from 43.5% in Q2 FY22. On a sequential basis gross margin was down by 40 basis points. Gross margin in absolute term grew by 16.8% to 231 Crores in this quarter as compared to Rs.198 Crores in Q2 last year. EBITDA margin was up by 30 basis points and stood at 10.4% in Q2 FY23 as compared to 10.1% in Q2 FY22On a sequential basis EBITDA margin was down by 30 basis points. EBITDA in absolute terms grew by 17% to Rs.53.7 Crores as compared to Rs.45.9 Crores in Q2 FY22. Net profit for the quarter stood at 29.2% as against 20.7% in the Q2 last year. Moving on to half yearly performance, consolidated net revenue for the half year