Release Date: November 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Cosmo First Ltd (BOM:508814, Financial) reported a 14% increase in consolidated sales for the September 2024 quarter compared to the same period last year, driven by higher specialty sales.
- The company's specialty sales have grown by 12% year-over-year, now comprising 70% of total volume, indicating a strong focus on high-margin products.
- BOPP margins improved significantly, reaching ₹25 per kg in the September 2024 quarter, up from ₹18 per kg in the same quarter last year.
- The specialty chemical subsidiary is advancing well, with expectations of achieving over 30% return on capital employed in FY 2025.
- Cosmo First Ltd is expanding its product lines, including the launch of new innovative products and the development of the world's largest production capacity lines for CPP and BOPP, which will enhance production efficiency.
Negative Points
- The company faced inventory losses due to a drop in raw material prices during the quarter, impacting overall performance.
- Despite improvements, the rigid packaging vertical is expected to incur losses in FY 2025 before achieving profitability in FY 2026.
- The net debt of Cosmo First Ltd increased to ₹698 crore as of September 2024, with a net debt to equity ratio of 0.5 times, indicating a higher leverage.
- The company anticipates subdued BOPP spreads due to seasonal demand fluctuations around the Diwali period, which could impact short-term profitability.
- The Sun Control Films and Paint Protection Films segments are still in the trial phase and may take time to contribute significantly to revenue and profitability.
Q & A Highlights
Q: Can you provide details on the export markets for your specialty BOPP volumes and the share of specialty volumes in these markets?
A: We export to multiple regions, with a significant portion going to the US and Europe. Over 80% of our exports are specialty products. We have operations in the US, Japan, and Korea, where we also sell specialty products. (Respondent: Unidentified_2, Group CEO)
Q: How does Cosmo First Ltd differentiate its specialty products in the European and US markets compared to local competition?
A: We are among the top players globally in specialty products like thermal lamination and labels. We have the highest production capability and market share in thermal lamination worldwide. Our product differentiation and leadership in these categories give us a competitive edge. (Respondent: Unidentified_2, Group CEO)
Q: What is the current capacity utilization for your specialty chemicals, and what turnover do you expect at full capacity?
A: In Q2, we achieved a topline of approximately 48 crore INR in specialty chemicals. Our current capacity can generate around 300 crore INR at full utilization. We are operating at 70-75% capacity for master batches and 50-60% for adhesives and coating chemicals, with expectations to increase next year. (Respondent: Unidentified_2, Group CEO)
Q: How is the Sun Control Films segment progressing, and what are the revenue and market positioning expectations?
A: We are currently sampling and receiving positive feedback. We plan to launch 80-100 SKUs by year-end and aim to establish a strong distribution network in India and globally. Our strategy includes competing with Chinese products and focusing on exports, leveraging our presence in Europe, America, Canada, Japan, and Korea. (Respondent: Unidentified_4, Unidentified Title)
Q: What are the expectations for the specialty segment's contribution to overall volumes and revenue by FY26?
A: We aim for 80% of our volumes to come from specialty products by FY26, which should translate to over 90% in terms of revenue. We expect to reach 70% specialty volume by the end of FY25, with a target exit rate of 80% for FY26. (Respondent: Unidentified_2, Group CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
