Release Date: May 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Heritage Foods Ltd (BOM:519552, Financial) reported a robust growth in earnings and profitability for Q4 and the full year FY24.
- Consolidated operating income for FY24 grew by 17% year-on-year to INR3,794 crore.
- EBITDA for FY24 stood at INR210 crore, representing a strong growth of 52%, with EBITDA margins improving to 5.52%.
- Net profits for FY24 saw a significant improvement of 84% year-on-year, reaching INR107 crore.
- Value-added products registered a robust revenue growth of around 22% year-on-year in Q4, contributing significantly to overall growth.
Negative Points
- Milk procurement prices dropped by INR3.5 per liter, which could indicate potential volatility in raw material costs.
- Bulk fat sales, which have low or zero gross margins, still contributed to revenue, indicating a reliance on lower-margin products.
- The company had to provide for butter provisions, with INR4.5 crore still carried forward, impacting profitability.
- Heritage Novandie Foods Private Limited, a joint venture, continued to incur losses, although reduced from INR17 crore to INR13 crore.
- The company faces challenges in maintaining stable milk procurement prices, which could affect future EBITDA margins.
Q & A Highlights
Q: On the milk procurement price reduction, is this a one-off or a trend? Do you expect some moderation in EBITDA margin?
A: (Srideep Kesavan, CEO) The drop in milk prices is typical for the end of a good flush season. We do not anticipate reducing consumer prices. While prices may climb slightly in Q1, we expect sales volumes and value-added product contributions to increase, maintaining stability.
Q: There is a large amount of fat sales this quarter. Is this due to branded fat sales or bulk fat sales?
A: (Srideep Kesavan, CEO) This quarter included bulk fat sales, but the quantity has significantly decreased. We do not anticipate further bulk fat sales. Consumer-side fat product sales have been steadily growing.
Q: Can you elaborate on the growth in milk sales volume and which markets contributed to this growth?
A: (Jangam Samba Murthy, COO) Milk sales volume has grown across all markets, not just a single market. Growth in Hyderabad is roughly the same as in other markets.
Q: What are the future trends for milk and other product sales in Q1?
A: (Srideep Kesavan, CEO) We prefer to defer discussions on current quarter trends to the next earnings call.
Q: Can you provide details on the butter provision and its impact on financials?
A: (A. Prabhakara Naidu, CFO) We still carry forward around INR4.5 crore in butter provisions.
Q: What are the plans for the JV related losses and future growth?
A: (M. Sambasiva Rao, President) The JV faced initial setbacks due to COVID but is now growing. We expect it to break even in the next two financial years, with plans to expand the product portfolio.
Q: Can you provide the curd sales figures for FY24 and FY23?
A: (Srideep Kesavan, CEO) Curd sales were close to INR820 crore, growing at a rate of 16%.
Q: What is the growth potential for the ice cream segment in the next three to four years?
A: (Srideep Kesavan, CEO) The ice cream industry is growing at 16%-18%. We aim to grow faster than the industry, currently growing at 38%.
Q: What is the sustainable percentage of value-added products in the revenue mix?
A: (Srideep Kesavan, CEO) We aim for 40% of our revenue to come from value-added products as we reach INR6,000 crore in revenue, improving our profit profile.
Q: What are the CapEx plans for this year and next?
A: (M. Sambasiva Rao, President) CapEx for FY24 was INR136 crore. For FY25, we plan around INR150 crore.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
