Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Associated Alcohols & Breweries Ltd (BOM:507526, Financial) reported a 50% increase in net revenue for Q2 FY 2025, reaching 255 crores compared to 170 crores in the same period last year.
- The company's premiumization strategy is yielding strong results, with flagship products like Hillfort whiskey and Nicobar gin receiving positive market responses.
- Nicobar gin earned a bronze medal at the San Francisco World Spirits Competition, enhancing its market standing.
- The company maintained a healthy gross margin of 40% despite rising input costs, thanks to operational efficiencies and cost management.
- Plans to enter new markets such as Maharashtra, Goa, and Karnataka are expected to drive further growth, particularly in the premium spirits segment.
Negative Points
- Rising input costs, particularly for grains like rice and maize, have put pressure on margins.
- The company's ethanol segment reported lower margins this quarter due to high raw material prices.
- There is a significant increase in other expenses, including freight and sales promotion costs, impacting profitability.
- The company faces challenges in entering new markets due to lengthy excise registration processes.
- Margins in the ethanol business remain low, with expectations of only 7-8% EBITDA in the long term.
Q & A Highlights
Q: What are the key factors driving the expected double-digit growth?
A: The primary factors include the launch of premium products and expansion into new states such as Maharashtra, Goa, and Karnataka. The introduction of ready-to-drink products and tequila in Q4 is also expected to contribute significantly to growth. - Tushar Bhandari, Director & CFO
Q: Could you provide the current utilization of the plant and the peak revenue potential at full utilization?
A: The current plant utilization is at 100%, and the peak revenue potential at full utilization is approximately 300 crores. - Tushar Bhandari, Director & CFO
Q: How is the premium segment performing compared to the popular and economy segments?
A: The premium segment is seeing month-on-month growth in volume, driven by positive market feedback. Building a brand in the premium category is a long-term process, but we expect it to grow at a faster pace in the coming years. - Tushar Bhandari, Director & CFO
Q: What is causing the pressure on margins this quarter?
A: The pressure on margins is primarily due to increased spending on brand building and entering new states, which has led to higher advertisement and sales promotion costs. Despite this, we have maintained similar gross margins due to cost efficiency measures. - Ankit Agrawal, Group CFO
Q: What are the plans for the UP plant expansion, and what is the expected capacity?
A: We have acquired land and are applying for government licenses. The initial capacity is expected to be around 100 to 120 KL. We will start with a bottling unit, followed by an ENA plant. - Tushar Bhandari, Director & CFO
Q: How do you see the tequila market in India, and when is the expected launch?
A: Tequila is seen as the next big thing in the industry. We plan to launch our own branded tequila in Q1 of FY 2026. - Tushar Bhandari, Director & CFO
Q: What is the strategy for entering new markets like Maharashtra, Goa, and Karnataka?
A: We have a manufacturing tie-up in Goa and will initially send packed products to Karnataka and Maharashtra. As volumes grow, we will establish local manufacturing. We are also evaluating entry into other states. - Tushar Bhandari, Director & CFO
Q: What is the expected growth rate for the proprietary IMFL and premium segments?
A: We expect a 15-20% growth rate for the proprietary IMFL segment this year. The premium and super-premium segments are expected to grow at a higher rate due to their smaller base. - Tushar Bhandari, Director & CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
