Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Prataap Snacks Ltd (NSE:DIAMONDYD, Financial) reported a 2% year-on-year increase in revenue, reaching INR 441 crores despite challenging macroeconomic conditions.
- The company achieved higher volumes in the INR 5 price point category, which constitutes over 80% of its total volume.
- Strong performance was noted in the pellet snacks category, with nationwide expansion under the Yellow Diamond brand.
- Prataap Snacks Ltd is focusing on premiumization with the introduction of the Seven Diamond brand, featuring premium snacks like protein puffs and peanut butter cups.
- The company has initiated exports and received positive responses from international trade fairs, aligning with its long-term growth objectives.
Negative Points
- EBITDA decreased significantly from INR 38 crores in Q2 last year to INR 19.2 crores, with margins dropping from 8.8% to 4.3% due to inflationary pressures.
- Key input costs, including potatoes, wheat, and gram, have seen steep inflation, impacting profitability.
- The company faces challenges with palm oil price increases, which are expected to further impact costs in Q3.
- Despite efforts to optimize costs, freight expenses remain higher compared to competitors, affecting overall cost efficiency.
- The transition to a direct distribution model has led to some market disruptions, particularly in regions with smaller distributors.
Q & A Highlights
Q: Can you provide more details about the "better for you" segment and its future growth prospects?
A: Amit Kumat, CEO, explained that the "better for you" segment focuses on healthier snacks like protein puffs and peanut butter varieties. The company is leveraging trends towards guilt-free snacking and expects this segment to significantly contribute to their premiumization strategy over the next 18 to 24 months.
Q: Is there a seasonal trend in your sales, particularly in Q2?
A: Amit Kumat, CEO, noted that Q2 typically sees higher sales due to reduced snack consumption in summer and increased availability of potatoes in Q3. This seasonal pattern has been consistent over the years.
Q: How are rising input costs, particularly potatoes, affecting your margins?
A: Sumit Sharma, CFO, stated that potato prices have increased by 60%-65% year-over-year, contributing to a 2% decline in gross margins. Potatoes account for 70%-75% of this impact, with other commodities also experiencing inflation.
Q: What are your plans for freight cost reduction and current CapEx?
A: Sumit Sharma, CFO, mentioned that decentralized manufacturing has helped reduce freight costs. They aim to further optimize by mapping production to target markets, potentially saving 0.5%-1%. Current CapEx focuses on maintenance and a solar plant, with no significant new investments planned.
Q: How is the company addressing margin pressures from commodity inflation and palm oil duties?
A: Amit Kumat, CEO, explained that they are mitigating these pressures through cost optimization, trade margin adjustments, and operational efficiencies. However, due to volatility, specific margin guidance for Q3 or FY'25 is challenging.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
