Release Date: February 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Huhtamaki India Ltd (BOM:509820, Financial) reported a slight improvement in volumes and net sales compared to the same quarter last year.
- The company has a strong focus on sustainability and innovation, with its blueloop products contributing 27.5% to sales, up from 25% the previous year.
- The finance cost has decreased year-over-year due to the retirement of debt, improving the company's financial position.
- The company maintains a strong liquidity position with minimal utilization of credit lines and improved working capital management.
- Huhtamaki India Ltd (BOM:509820) is committed to strong corporate governance and sustainable packaging solutions, aiming for long-term competitive growth.
Negative Points
- Quarter-on-quarter volumes and net sales were lower, indicating a challenging market environment.
- Overall margins have been significantly impacted by raw material inflation and an adverse sales and product mix, leading to lower EBIT year-over-year.
- The company's EBITDA and EBIT for the full year decreased by 28% and 36%, respectively, compared to 2023.
- High freight costs and global geopolitical issues have impacted export sales, contributing to margin pressure.
- The adaptation of high-margin blueloop products is still in its nascent stage, delaying expected improvements in gross margins.
Q & A Highlights
Q: What is the contribution from blueloop products, and when can we expect high margins from them to reflect in financials?
A: Dhananjay Salunkhe, Managing Director, explained that blueloop's contribution increased from 25% to 27.5% last year. However, the adoption of sustainable structures is still in its early stages. While some low-end blueloop structures are being adopted, the high-margin products are still in progress. The company is working with customers to increase adoption, but the rate is currently low.
Q: What is the status of backward integration plans, and can it improve margins?
A: Dhananjay Salunkhe noted that the equipment for backward integration is being used for alternate purposes. While it offsets cash outflow, it hasn't yet improved margins. The real impact will be seen when high-end blueloop structures are more widely adopted.
Q: How does the company plan to address the high costs of centralized services paid to the parent company?
A: Jagdish Agarwal, CFO, stated that the charges for centralized services are justified and at arm's length. The company ensures these costs provide tangible benefits and are necessary for the services received. However, the management acknowledges the concern and will continue to review these costs.
Q: What are the barriers for customers in adopting high-end blueloop products?
A: Dhananjay Salunkhe explained that barriers include rigorous testing protocols, the need for regulatory push, and customers' investment plans. Some customers are waiting for regulatory changes to justify the cost, while others are aligning their investment plans with the adoption of new products.
Q: What is the outlook for export sales, and can it reach 45% of total sales?
A: Dhananjay Salunkhe mentioned that export sales remained stable in 2024 despite challenges. The company sees opportunities to increase export share due to external positive environments, forex benefits, and internal efforts. While a 45% contribution is not guaranteed, there is a trajectory for improvement.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
