Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Borosil Ltd (BOM:543212, Financial) reported a strong year-on-year revenue growth of 23.2% for Q1 FY25, reaching INR216.8 crores.
- The company's operating EBITDA before investment income increased to INR34.6 crores, up from INR23.9 crores in the same period last year.
- Profit before tax for Q1 FY25 was INR12.9 crores, compared to INR7.2 crores in Q1 FY24.
- The Larah Opalware segment saw a 15% increase in sales, reaching INR76.1 crores in Q1 FY25.
- The non-glassware segment recorded a 20.3% revenue growth, achieving a turnover of INR85.1 crores in Q1 FY25.
Negative Points
- Depreciation and finance costs increased by about INR9.9 crores due to the new Borosilicate glass furnace commissioned during Q4 FY24.
- The company had a net debt of INR57.8 crores as of June 30, 2024.
- The consumer demand across the board has been challenging, impacting the overall market environment.
- The company had to build up substantial inventory to mitigate risks associated with BIS implementation for appliances.
- There are concerns about the cost structure and technical know-how of developing an Indian vendor ecosystem for appliances, which may lead to higher prices.
Q & A Highlights
Q: The BIS implementation for appliances is happening from 1st of September, and we import a lot of our appliances. How are we positioning ourselves for this change?
A: (Shreevar Kheruka, CEO) We have added substantial inventory of almost nine months to a year of sales in advance to mitigate short-term disruptions. We are also developing new suppliers domestically. This strategy has been successful in the past, and we believe it will help us navigate the BIS implementation smoothly.
Q: After the successful QIP, how will the finance cost be for the next two to three quarters?
A: (Anand Sultania, CFO) The finance cost for the first quarter was about INR4.4 crores. For the full year, we expect it to be close to INR10 crores. The net debt will be zero, and there will be some surplus by the end of the financial year.
Q: In terms of production volume as a percentage of installed capacity, how much utilization did the glass furnace reach in Q1?
A: (Shreevar Kheruka, CEO) The furnace operated at about 70% to 75% of its capacity, and we sold 75% of that production. We have built up about 25% of inventory for Diwali. We aim to achieve full capacity utilization by the end of the year.
Q: How do you see the margins for the consumer glassware segment compared to last year?
A: (Shreevar Kheruka, CEO) Margins are better than anticipated, although there was some overlap with imported products. We expect a healthy ROI from our investments, but it's too early to provide specific figures until we achieve full capacity utilization.
Q: What is your outlook for FY25 in terms of revenue and margins for the three segments?
A: (Shreevar Kheruka, CEO) We aim to maintain a 15% to 20% growth trajectory. Margins should trend upwards from last year's 14%-15% EBITDA margins, potentially reaching low-20s in the next three to four years, depending on market demand.
Q: What is the current operational efficiency of the pressware facility, and what kind of revenue are you targeting from it?
A: (Shreevar Kheruka, CEO) The furnace is operating at about 75% capacity, and we aim to reach 100% by the end of the year. For FY24, glassware sales were INR200 crores, with pressware contributing INR100 crores. We expect pressware sales to reach between INR250 crores and INR270 crores.
Q: How do you plan to cater to the festive demand for Opalware with the current capacity utilization?
A: (Shreevar Kheruka, CEO) We have adequate capacity to meet current demand and have already built inventory for the festive season. We are confident in our ability to cater to the festive demand.
Q: What is the current debt figure, and is there an outstanding payable to Borosil Scientific?
A: (Anand Sultania, CFO) As of June 30, the net debt is INR57.8 crores. There is an outstanding payable of INR90 crores to Borosil Scientific, which remains unchanged. We are in the process of making long-term loan repayments.
Q: What is the upside to EBITDA, considering the current cost structure and operating leverage?
A: (Shreevar Kheruka, CEO) Gross margin expansion will play a bigger role in EBITDA growth, with about 5% coming from gross margin improvements and 2% from operating leverage. The improvements are linked to increased domestic production versus imports.
Q: Where is the growth in the non-glassware business coming from?
A: (Shreevar Kheruka, CEO) Growth is primarily from increased sales distribution in the South and West regions and strong performance in e-commerce. We are expanding our sales network and seeing good traction in underpenetrated areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
