Release Date: October 25, 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 4.2% year-on-year increase in consolidated revenue for the quarter, reaching INR1,020 crore.
- EBITDA for the quarter grew by 77% year-on-year to INR83 crore, with EBITDA margins at 8.16%.
- Net profit surged by 117% year-on-year to INR48 crore, resulting in PAT margins of 4.77%.
- Milk sales volume increased by 5.11% year-on-year to 1.19 million liters per day.
- Value-added products saw a robust 16% increase in revenue, contributing 30% to total revenue compared to 27% in the previous year.
Negative Points
- Revenue growth in milk was slightly lower due to a 0.31% decline in average milk selling price compared to the previous year.
- Employee costs have increased, now accounting for 7.5% to 8% of revenue, compared to 6% previously.
- The company has not taken any price increases in the last five quarters, impacting potential revenue growth.
- Bulk fat sales, which are typically loss-making, contributed INR26 crore to revenue this quarter, down from INR72 crore in the previous year.
- The company faces challenges from adverse weather conditions affecting value-added product categories like curd, drinkables, and ice creams.
Q & A Highlights
Q: What is your expectation of normal margins going forward, especially as you approach the INR 6,000 crore revenue target?
A: Srideep Kesavan, CEO, clarified that the company aims to maintain EBITDA margins in the range of 7% to 8%. Although there is potential for margins to increase over time due to operating leverage and growth in value-added products, the company is not currently promising a shift to 9% to 9.5% margins.
Q: Why has there been stagnation in revenue over the last five quarters?
A: Srideep Kesavan, CEO, explained that the revenue growth is primarily driven by milk and value-added products, which have shown consistent growth. The stagnation is partly due to the absence of bulk fat sales, which were significant in the previous year. The company focuses on milk and value-added products, which are growing steadily.
Q: What is the outlook on milk procurement and pricing given the current market conditions?
A: Jangam Samba Murthy, COO, stated that milk procurement is stable, and there are no major changes expected in procurement prices. Srideep Kesavan added that the rural economy looks positive, and there is no immediate risk of inflation affecting procurement prices.
Q: How is the company planning to capitalize on the potential exit of a major competitor from the ice cream segment?
A: Srideep Kesavan, CEO, mentioned that the company sees significant growth potential in the ice cream industry due to low per capita consumption in India. Heritage Foods is investing in a new Greenfield facility to expand its ice cream production capacity, regardless of the competitor's actions.
Q: Can you provide insights into the growth potential and margin improvement for the feed business?
A: Upendra Pandey, CEO of Heritage Nutrivet Ltd, stated that the company aims to sustain growth momentum in the feed business, targeting 7% to 8% EBITDA margins. The focus will be on top-line growth, with strategic raw material purchases to improve profitability.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
