Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- S.P. Apparels Ltd (BOM:540048, Financial) is benefiting from the global shift towards the China plus one and Bangladesh plus one strategy, positioning India as a key sourcing destination.
- The company has achieved a 95% utilization rate in its spinning division, enhancing efficiency and performance.
- The acquisition of Young Brand Apparel has opened doors to the American market, expanding the company's customer base and growth potential.
- S.P. Apparels Ltd (BOM:540048) has a strong order book of INR 512 crores, indicating robust demand.
- The company is implementing strategic measures to maximize capacity utilization, aiming for a 90% utilization rate by March 2025.
Negative Points
- Higher employee expenses due to recruitment and training have impacted operational margins.
- Increased air freight costs due to expedited orders have affected profitability.
- The retail division reported a nominal loss, and the company is exploring fundraising opportunities to improve its financial position.
- The company's EBITA margin in the garment division has been impacted by increased costs and training expenses.
- There is pressure on margins due to the competitive nature of the industry and fluctuations in raw material prices.
Q & A Highlights
Q: How many customers does S.P. Apparels have in the US market, and what is the strategy to increase this number?
A: Currently, S.P. Apparels has about six customers in the US. The strategy involves increasing the customer base by leveraging the capacity of Young Brands, which is already attracting interest from American customers. The company plans to expand its customer base to 10-15 customers over the next two years. (Respondent: Unidentified_3)
Q: What is the current utilization rate of the spinning division, and how is its profitability?
A: The spinning division is operating at full capacity with a 95% utilization rate. The efficiency levels have improved, and the division is maintaining margins around 14-15%. (Respondent: Unidentified_4)
Q: Why did garment margins decline to 17% compared to historical levels of 18-20%?
A: The decline in margins is attributed to increased air freight costs, higher employee expenses due to training, and spillover sales from Q1 to Q2. The company expects sales to complete in Q3 and Q4, which should improve margins. (Respondent: Unidentified_4)
Q: What is the expected growth in the garment division for the second half of the year?
A: The company expects a 10-15% growth in the garment division for the second half of the year, with overall growth for FY25 projected at 10%. (Respondent: Unidentified_3)
Q: How is the retail division performing, and what are the plans for its future?
A: The retail division is nearing break-even at the EBITDA level. The company is exploring raising funds from existing shareholders to reduce debt and improve margins. The decision to continue or discontinue the retail business will depend on its performance in the next two quarters. (Respondent: Unidentified_11)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
