CCL Products India Ltd
NSE:CCL
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CCL Products India Ltd
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Good day, ladies and gentlemen. And a very warm welcome to the CCL Products (India) Limited 4Q FY '22 Results Conference Call hosted by Nirmal Bang Equities Private Limited. [Operator Instructions]
Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Navalgund from Nirmal Bang Equities. Thank you, and over to you, Abhishek.
Thanks, Ali. Good morning, everyone. On behalf of Nirmal Bang Institutional Equities, I welcome you all to 4Q and financial year FY -- financial year 2022 earnings call of CCL Products (India) Limited. From the management side, we have with us Mr. Challa Srishant, Managing Director; Mr. B. Mohan Krishna, Executive Director; Mr. Praveen Jaipuriar, CEO of the company; and Mr. V. Lakshmi Narayana,, CFO; and Ms. Sridevi Dasari, Company Secretary on this call.
Without further ado, I request Srishant to start with his opening comments, post which we can open the floor for Q&A. Thank you, and over to you, sir.
Thank you for the introduction, Abhishek. I think opening comments will be given by Praveen this time. Praveen, you can start.
Yes. Good morning, everyone. Thanks, Abhishek, for arranging the call.
The group has achieved a turnover of INR 379.47 crores for the fourth quarter of '21, '22 as compared to INR 334.55 crores for the corresponding quarter of the previous year. And the net profit is INR 52.70 crores as against INR 49.20 crores for the corresponding quarter of the previous year. The EBITDA is INR 87.53 crores and profit before taxes, INR 68.14 crores.
For the financial year 2021 '22, the group has achieved a turnover of INR 1,466.12 crores as compared to INR 1,245.87 crores for the corresponding period of the previous year. And the net profit is INR 204.35 crores as against INR 182.26 crores for the corresponding period of the previous year. The EBITDA is INR 335.16 crores and the profit before tax is INR 261.33 crores.
That is it from my side. Please, we are open for questions from your side.
[Operator Instructions] The first question is from the line of Lokesh Maru from Nippon India Asset Management.
Congratulations on the amazing set of results given our exposure to Russia. One would have expected some kind of degrowth, but we have only grown and that shows a lot of resilience as well.
Another -- my first question, quite obvious one, is that in our gross margins within the subsidiaries and another is on the increase in staff costs, which is quite stuck, so any insights on the gross margin and staff cost front? Within the subsidiary business, yes.
Okay. So gross margin, there are a couple of reasons why gross margins got impacted. And some of these are very obvious and being witnessed across the board.
One of the brass tacks reason that we witnessed was because of the Russia, Ukraine war, some of our FD supplies got delayed. So that -- and FD, of course, gives us better margins. So that led to a little shrinkage there. And then you have seen that last few months, there has been quite a bit of increase in the other input costs as well, net energy costs and other costs. So that also puts some pressure.
And the third reason was that some of the logistics cost also was under pressure because of very high inflationary pressure. So if you combine all of these 3 that led to a little shrinkage in margin. But thankfully, because of our model, I think we have been able to kind of perform pretty well in spite of all these pressures.
The transport costs and everything that you have mentioned would be below that line of -- should be other expenses, right? So anything that we have witnessed on the raw material front, any spike or anything? My point being our spreads of processing, are they the same? Or have weakened a bit within the subsidiary part as it is, stand-alone remains resilient, but the subsidiary front, which would be Vietnam and the branded sales, anything different on that front this time?
Not really. These factors have led -- because coffee prices, we generally are better covered because of our [ cost plus model ]. But processing costs and all that is a part of COGS, they have got impacted everywhere across the board. So that has only led to certain shrinkage in the markets.
Sure. And on the staff cost front, the spike that we're seeing there, both within India operations and subsidiaries.
I don't think so there is beyond the top line growth increment there. That's also almost in line with our growth percentages. So that hasn't been...
That was -- has gone up by maybe 70% within subsidiary from [ 7.5 CR to 13.5 CR ], something like that? So I'm guessing, is there any addition of manpower for the branded sales or something like that?
Just a second. I'll just check up -- because at the consolidated level, it's very in fact, much lower than the top line growth. I just said for the subsidiary that why it has increased and just asking Lakshmi Narayan to assist -- check once.
Sure, sir. Sure, sir.
Do you have anything else, you can please go ahead. Yes.
Yes. Another question is on the 15% to 17% growth guided. So that is on volume front or real EBITDA front?
It is on volume. And obviously, because of our model, it will be on EBITDA front as well.
Right. Okay, understood.
The value will grow even higher than that. But yes, volume and the EBITDA growth will remain in that range.
[Operator Instructions] The next question is from the line of Jignesh Kamani from GMO.
Just want to know about how is the volume growth for the full year? And any color on how much volume we lost because of the, you can say, logistic issue for Russia, Ukraine issue in the fourth quarter?
Sorry, can you just come again? I just missed your first part.
For the full year, what is the volume growth in the total and some color on India and Vietnam utilization level. And second thing on the fourth quarter because of this logistic issue and the Russia, Ukraine issue, how much volume we got lost or deferred to, you can say, the following quarter.
So first is volume growth, approximately 15% volume growth we got, yes. And as far as the fourth quarter thing is that, see, in terms of percentages of costs that got impacted was close to around 2%. And if I were to talk about volumes, approximately 500 to 700 tonnes of FD got deferred. So if that gives you an idea of the impact that we got in the fourth quarter.
Understood. Second thing, our small pack capacity was supposed to commence in the fourth quarter of 12,000 tonnes. Any update on that? Is that commissioned or when it is expected to commissioned?
Yes, it's already commissioned. So now all the small pack is being done at our new unit.
So then next year, what kind of utilization we can expect from this 12,000 tonne small pack.
So because of all these new things that have kind of impacted everything, a lot of our small packs used to go to the emerging markets. And that has got impacted because of the coffee price increases and all that.
So right now, we are, ourselves, gauging that what would be our capacity utilization. But a large part of that capacity utilization is coming from the domestic market, which is our own branded sales.
So approximately, we know that out of that 12,000 tonnes, almost 50% will get utilized by the domestic market itself. So that is we are very sure of. And if you add some -- if you get more small pack orders from outside, we could be looking at a 60% to 70% kind of utilization.
Sure. So, I want to understand right now, as because of the dynamics, small pack demand emerging market might be weak, but 2 quarters down line, demand might settle and then our profitability will improve because of the higher contribution from the small pack, right?
Absolutely. Absolutely.
The next question is from the line of Vivek Ganguly from Nine Rivers Capital.
I had one question on volumes. So what would have been the volume that we have done in FD and SD?
So we will not diverge with exact volume figures, but our FD contribution this year would be approximately 25%.
Yes, it could have been a little -- Yes. It would have been a little more, had this 600, 700 tonnes not got deferred. But yes, barring that, approximately 25%.
Just a couple of other questions. One, can you give us how your -- the Continental Coffee, the domestic coffee business is doing? What is the revenue that you have done? And is on your new initiative in the plant-based protein?
Okay. So the domestic market last year, we had -- on a total level, which is like domestic consists of various segments, which is both branded and bulk and private label, we had achieved INR 150 crores last year. And this year, we touched the figure of INR 200 crores. Out of which almost 65% will be -- 65%, in fact, 70% will be brand -- pure brand, brand sales, yes.
So that is the turnover that we achieved. And the brand sales and the top line, the total sales grew by 35% approximately, and the branded sales grew by 40%.
And the protein-based snacks. We just, in fact, a couple of days ago, we've just started to launch in the market. We have only chosen 3 cities, which is Chandigarh, Pune and Hyderabad to seed our product. So it will be a very launch, which is not like a big bang, but more of a seeding launch because it's a new product category, and it's a new initiative for us as well. So it's just a couple of days since the product has gone to the market. And we'll keep you updated as we go along.
The next question is from the line of Ritu Modi from IIFL Asset Management.
Yes. My first question is basically in terms of volume growth, which you indicated of 15%. I'm assuming that is for the year, right? Could you just help us understand the volume growth for the quarter because for 9 months, I think you have indicated it was around 18.5%. So for the quarter, how much sort of volume growth did we do?
So for the quarter, it will be not very high. It would be in the range of 5% to 7%. That is primarily, as I was mentioning earlier, is because of the deferment of one big consignment to Russia and Ukraine that got a little delayed. So that happened in the month of April. So the fourth quarter numbers, therefore look a little muted.
Understood. And in the [indiscernible] spread that we will be making because -- if I just look at a pickup or [ KG ], what would that number be purchased for FY '22, and how are we looking at it going over the next 2, 3 years?
So because we are not indicating the exact volumes, it's a little sensitive to share this data in terms of what will be our EBITDA per kg. But if you were to -- because -- and otherwise also segment-wise, we get different EBITDA between spray-dried, [indiscernible], FD and things like that. But one thing which I would like to mention is that there would be very marginal differences in the EBITDA per kg that we'll witness quarter-on-quarter or year-on-year because of our cost plus model.
Of course, there has been a shrinkage in margins because of things which were beyond our control, like processing costs and trade costs and all that. So there has been a little bit of a shrinkage in the EBITDA per kg, but that's very marginal, and we will look forward to regain that in the coming months.
Okay. So basically, I was just trying to understand because we will have those spray dried -- we'll have the small pack capacity also operational now plus FD also being a high margin, higher spread.
So I mean, we had indicated earlier as well from that INR 100, approximately INR 120, is it fair to assume that we will be seeing gradual increase because of all these factors, which are high margin and high spread businesses, like the small package [indiscernible]?
Of course, we will be looking at a margin improvement. But considering the situation which has become so volatile and dynamic, it's very hard for us to give a very definitive kind of an answer on that. The reason being since the coffee prices have gone up so significantly, there is also a downgrade [ patient ] in consumers -- at consumer level from FD to SD. So we are seeing a pent-up demand in the FD.
So that's one dynamic that is playing. The other dynamic, as you rightly said, that we will increase our small pack volumes, that should help us improve. There could be softening of prices on the other fronts, could be.
So there will be multiple dynamics that will come in play going forward. So while we will expect to improve, definitive answer may not be yet at this moment.
Sure. Understood. Secondly, in terms of your capacity addition in Vietnam, we already have plans for around 16,500 coming up in Vietnam. So that is likely to be commissioned by the second half. Are you on track for that?
Yes, we are on track for that.
Okay. And the utilization levels, which would be fair to assume for Vietnam as well as India, if you could give us a sense on that?
So currently, in India itself -- so currently at a group level, we are approximately at 85% utilization today, which is almost a max kind of a utilization.
We are hoping that we get the new plant capacity added for at least the last 3 months of the year. So that will add up to the capacity. But next year, if you look at the total capacity, we still could be doing around 80% of the full capacity. So that will be our utilization. So we are looking at very quickly filling up even the new capacity as well in Vietnam.
Sure. Understood. And the guidance of 15% to 17% volume growth, which we have given -- that we are maintaining that for FY '23 as well?
Yes.
[Operator Instructions] The next question is from the line of Kashyap Javeri from Emkay Managers.
Congratulations for good numbers in difficult time. 3 questions from my side. One, when you highlight that the volume growth would be about 15% for FY '23, 2 things to probably clarify over here: one, Russia and Ukraine, which are one of the sort of large markets in CIS category for us probably might not grow -- but on the other side, you have been talking about one large U.S. retailer, I guess, besides [indiscernible], which is already in line to come into our fold. So if, let's say, Russia, Ukraine, the pressures subside, then we could do more than 15% growth also including this new U.S. client?
It could be. But right now to say that we will grow more than that could be a bit of a speculation. So we will not kind of commit on that.
But as you rightly said, things ease up and there is more demand because we believe that because of this war, there is also a drying up of the pipelines and things like that. So there could be more demand this year. And that may help us to grow more than 15%, 17%. But as I told you, we're already maxed out on our capacities and it's only in the later part of the year that we'll get additional capacities from Vietnam. So keeping all that in view, we havegiven you a figure of 15% to 17% volume growth.
But your 15% volume guidance take both this into accounts, right?
I think there's a lot of disturbance, I cannot hear you.
Kashyap, there's background disturbance from your line. If you can just...
Sorry, what I'm asking is that your 15% volume growth guidance take both the things into account.
Again, I'm not able to this thing. Can you just repeat my 15%...
I'm saying your 15% volume growth guidance is taking into account the things that pressures would continue from Russia, but there is a new client, which is lined up in U.S.
So if the client comes on board, then of course, things could change. But one client coming on board, there could be some other clients dropping off the board. So net-net, yes, 15% is taking everything into account.
Okay. Second question is on balance sheet. If I look at our inventory days now has reached most to about 130 days. Just about 4 years ago, that number would have been half of what it is today. And that's putting lot of pressure on the credit cash conversion as well as consequently, if I look at our debt despite strong EBITDA growth and cash conversion, we have not been able to reduce our debt also.
So what should one take in terms of inventory days as we go forward? And is this like a quarter-end phenomenon or on an average [ 4Q ] quarter, it would have been like this?
We have taken account to store more green coffee, keeping the largest issues in view, number one. And keeping in view of the price movements that we are witnessing from quarter-on-quarter. These 2 issues led us to take a call to have more inventories on our boat.
So if you look at it on annual comparison basis, normally, we used to go around [ 2 months past ]. But due to that reason, it has gone up to 4 months past. This will, I think, hopefully, by end of this current financial year, we'll end up somewhere around a 2- to 3-month [ past ] level.
But let's say, by the year end of FY '23, would we expect that to come back to less than, let's say, 3 months? Is that possible?
Yes, if all these issues are getting normalized, maybe in terms of the [ TC ] prices movement and the logistics issues and all, obviously, we make [indiscernible].
And last question from my side. In terms of geography, U.S., Europe and CIS, for the full year, can you give some highlight as to what's the volume growth in geography-wise?
Volume growth? Come again?
U.S., Europe and CIS, what would be the growth in volumes? Separately, geography-wise.
So when our volume grows at 15%, this one was sub-10%, the Russian markets because of the turmoil and all the...
So our U.S. market grew pretty handsomely more than 20%. And the Europe market was more or less Europe minus CIS was more or less around 15%. So that kind of -- so our growth in U.S. markets kind of helped us to do good numbers despite Russia-Ukraine issues.
Just one last book-keeping question. In your cash flow statement, I can see there is this exchange rate difference, which has existed in the adjustment, it's about INR 19 crores. Could you help us understand as to would have it impacted our margins also meaningfully? And why is this kind of INR 18 crores, INR 19 crores kind of exchange rate loss?
No, there is no exchange loss. In fact, the conversion that we have accounted based on the shipping deal and RBA rate. And at the end of the year, we take that based on the forward position. And overall, we have the currency gain.
Hello?
Yes.
What I'm saying is that you -- in the cash flow statement, it's added to the PBT, which means that it's a noncash expenditure, which is there as a part of your P&L?
Yes. There is -- in the part of the P&L, there is a currency gain of almost around [ INR 8.95 crores ] due to -- due to the currency variation. The value that we have accounted for and on 31st March, the rate that is prevailing the, [ 8.9 ] for growth is there, which has been part of the P&L.
Let me take this offline because in the cash flow statement, it's slightly different numbers. So let me come back to this offline.
The next question is from the line of Rohan Gupta from Edelweiss.
So just wanted to have some more clarity about this Russian market in terms of our revenue contribution from this market. And despite challenges there, you mentioned that Russian market still grew this year. And even volume growth for the current quarter was positive of almost 5% to 7%. So I just wanted to understand that are we able to meet the supplies there, the demand environment is not impacted? And how do you see that the current scenario will pan out going forward, primarily from the Russian markets?
So to answer your question, the first leg of reward, which almost lasted for approximately 30 days. That was the time when everything was impacted, everything stopped. So that led to some stress in the system. But however, as the days have gone by and as you would also be reading in the newspapers, things have started to, let's say, not normalize on the [ work front ] but normalize in the logistics front, et cetera, because ultimately, the consumption has to take place.
So therefore, what happened is that slowly, the liner started taking the containers and things started to normalize, although it's not 100% normalized. But yes, things have come back to, let's say, 75% or 80% of normalization.
So that is the situation currently. Going forward, we really do not know if the war is going to end soon or how much time will it take. But what we know is that there is quite a bit of normalization and therefore, our supplies are now okay. It's not as bad as when the window was started. So that is the situation. And there is no drop in the demand for coffee at least that we have witnessed in these markets.
And in terms of the revenue contribution from Russian market, can you just quantify that?
So approximately 20% is our revenue contribution from Russian markets.
Okay, sir. And sir, second is on this Brazilian market and that is also a pretty large supplier globally in terms of coffee procurement. You're seeing that the currency appreciation and some impact on fertilizers that what we are hearing that the yield may be impacted. Do you also see that the Brazilian coffee market, green coffee, can be impacted? And how -- what impact you see on the global market on the appreciation of the Brazilian currency? And how you see that this scenario is going to impact you?
So as far as Brazil is concerned, Brazil is actually the market leader and the largest volume of green coffee is grown in Brazil. So naturally, if there is any impact in the production in Brazil, it impacts the world terminal market prices as well.
Last year, we've seen a little bit of cost impact. There are multiple things that have gone wrong in Brazil, which is why this price increase also has come about in the market in the last 1 year.
Going forward, as of now, the predictions that are coming out in the market is that things are really not going to ease up for next year, maybe after another 1.5 years or so, things might ease up. But the upcoming crop and next year's crop also might get impacted is what we're saying.
Okay. Just last one. How do you see that around CapEx plans? What is the CapEx plan for the current year? And also, if you can just mention that in our retail business, what kind of infusion we are planning to do for the current year?
So CapEx for the current financial year at the Indian operations, we are expecting a normal level of around INR 30 crores to INR 40 crores this year. And for maybe based on the second half year, based on the new plan that we may come out at with the additional requirement.
And getting into the NPL operations side, Vietnam operations. So we have taken account expansion with 30 million the total CapEx for enhancing the capacity from 13,500 to 30,000 tonnes.
So $13 million, you're seeing in Vietnam. 1, 3, right?
3, 0. $30 million.
$30 million for Vietnam operation that will be all spent this year?
Yes.
Okay. And 30, 40 India. So roughly INR 250 crores around...
Yes, out of $30 million, $10 million we are going to [indiscernible] and $20 million.
Sorry, I didn't get to $20 million going to?
We are going to borrow.
Okay. Yes. So total spend will be INR 250 crores for the current year.
That's right. That's a good level.
$30 million, Vietnam will give us addition, 10,000 tonnes of capacity?
16,500 tonnes additional capacity.
15,500?
16,500, 16,500 which we will enhance to 30,000.
Okay. Got it. And sir, in terms of capacities will be available by end of this year and commercialization we can expect from FY '24?
In third quarter, we are expecting the price to be [indiscernible] and the fourth quarter onwards, the commercialization will come in too.
Okay. Sir, in terms of your growth guidance, you mentioned roughly 15% that I understand is primarily driven by volume. That means that in the [ world ], and we have been pretty handsomely growing with a similar rate in last 2 years. Definitely, we are continuously gaining market share because it's quite evident that world markets are not growing at that rate. Sir, can you give some more sense that earlier, you have mentioned that some of the Brazilian smaller players probably have lost market and that had given you edge in terms of gaining market share globally and also giving more access to the U.S. market. Is this trend is still going on and that's what you're -- giving you confidence -- of confidence of growing 15% in terms of volume growth? Or you have got some a couple of customers who are giving you confidence that you will be able to achieve this kind of growth?
So for us, if we look at it on a more holistic perspective, we have a factories present in India and in Vietnam. So both locations, we have green coffee available, we can also import raw materials and then we export. So we have multiple advantages, which are there in our favor.
If you're in Brazil, for instance, you are dependent only on the local crop. So it becomes very difficult for anyone to actually try to import it and the local duties, taxes and everything. The system is also quite complicated. And in a competitive market, every cent matters end of the day. Our biggest strength is we have that economies of scale advantage. The volumes that we procure is also quite high so we usually get that first reference from suppliers as well. And we also -- our customers also know that if they need whatever volumes with a shorter lead time, we can actually cater to their requirements. So all these factors is giving us that confidence that we can keep growing further.
Earlier, the expansion plans, what we've mentioned is only up to Vietnam as of now. But I've already mentioned earlier also, we are making plans to add another 16,000 tonnes of production capacity. The location is something that we are still -- we still haven't finalized yet, whether it's going to be in India or outside India. And that's a call that we will take in the next couple of months' time once we complete our feasibility studies.
Okay. So sir, you are saying that apart from this Vietnam in our CapEx, you still are contemplating 16,000 tonnes of additional capacity for that location you have to be finalized?
Yes.
And are you looking for cross-border? I mean, new territories apart from India and Vietnam or it will be any [indiscernible]?
We are looking at new territories beyond. I mean we're looking at India as an option and also outside India. Because there is -- I mean, there are certain continents that we can actually capture more aggressively if we are physically present there.
But things are a little complicated with any country that we go to, we have to look at local situation, political, geopolitical situation, multiple things we have to look at, stability, currencies. So keeping all these things and raw material, most importantly. So once we evaluate all these aspects, that's when we'll make the call on where to proceed with the expansion.
And since it will be completely greenfield, what kind of total investment outlay it can have, sir?
It's too early for us to comment on that right now. But yes, it will be totally greenfield.
Got it, sir. And sir, this Vietnam -- going from increasing by 16,500 up to become 30,000, what will be the breakup there, FD and traditional?
Where? Vietnam is about 100% spray-dried.
All is spray-dried. Okay. So in 16,500, there is no FD?
No FD at all.
Okay. Sir, we had earlier that realizations were getting in favor of spray-dried and FD was seeing some capacities -- additional capacity was coming and we're seeing the pressure in the realization. That was a scenario almost a year back. How do you see that now? I mean, is this -- have this started reversing that you are seeing further better margins in FD and lower in the spray-dried? That has always been the case? Or is spray-dried still giving you higher margin than FD?
So right now, there's not much of a change because normally when the green coffee prices go up, then all the product costs for SD as well as FD do increase. So most customers, if they want to look for alternatives, they'll start looking at transitioning from FD to SD. So considering the huge price increase that we've seen in coffee for the last 1 year, we could clearly anticipate that SD is where the volumes are increasing.
And as I mentioned earlier, also going forward, at least for the next year or so, we are definitely -- even if there's a price correction that if market consensus is clear that it will not be more than, say, $100 down. There's still a potential upside of $100 versus $200-plus also.
So we're not looking at a steep correction or anything anytime in the near future, which means that the SD demand will continuously keep growing until this gets reversed.
Okay. So you are not expecting that green coffee prices will fall beyond $100 something, and that is keep on -- and that will keep the spray-dried demand intact?
Yes.
Okay. Sir, just last, I have still a few more. What will be the margin difference right now between freeze-dried and spray-dried in terms of average dollar per kg?
So about we'll have at least around 10% to 15% variation between the 2. Actually more than 15% there.
So 15% is still higher in freeze-dried?
Yes.
Would it possible to share in a dollar -- I mean, like we earlier used to have, I think, a $1 average in spray-dried. $1.5 in...
$0.80 or something like that, between $0.80 to $1. It depends on the customer that we are selling to.
Okay. So SD is still will be $0.80 to $1 and freeze-dried will be 15% to 20% higher than that?
No, no, no. I'm talking about FD being $0.80 to $1 more than SD.
Okay. And this small packaging size that we are continuously focusing on that. I believe that our Australian capacities, I mean, that are completely used? And are you planning to put more small packaging capacities and going to invest some more there? How this -- or what kind of our total turnover you see is coming from the small packages -- small pouches and small packaging units?
So small pack, we've already made an investment of about INR 140 crores to set up this packing facility in India. And the infrastructure has been built to expand up to 20,000 to 25,000 tonnes.
So that is the ability -- when we add equipment, we can go after that extent. Right now, the equipment that we have is in the range of about 10,000 tonnes or so, 10,000, 12,000 tonnes. And tomorrow, will -- I mean, based on the response we see from the market, if we have customers who have specific requirements, we have the ability to keep expanding that capacity within the same premises.
So currently, we have 10,000 tons of kind of capacities and what is the utilization level of the small pack?
About 60% or so 60%.
60% and to go from 10,000 to 20,000 to 25,000, not much investment in plants and all will be required.
It's only the equipment cost that we'll have to look at it. If you have a specific customer saying they want automated packing, then the investment will be different.
So we don't want to make an investment, unless we're sure that there is a customer who wants a particular specific product.
And still here...
Sorry to interrupt you, may we request you to come back in queue for follow-up questions?
The next question is from the line of Jignesh Kamani from GMO.
On the FD capacity of 11,000 tonnes, we are running optimally this year, last year?
No. We still had about a 20% number, 10% to 20%. Yes.
So 5% to 7% kind of volume growth you mentioned for the next year. So FD volume also will be in then [indiscernible] or probably because of the capacity constraint, FD maybe single-digit growth.
If you actually look at sales of dispatches, the large portion of what was supposed to be dispatched in March was -- yes. So that also is factored in, no? It will be as an FD should be a little more than last year.
Understood. Second thing on the -- now since FDs probably will be running it optimally by end of FY '23. Any plan to expand our FD capacity because as of now, Vietnam don't have FD. In India, we will be utilizing fully.
So not at this point in time, as I was mentioning earlier, looking at how the coffee prices are, we are only not forcing that sudden sharp increase in FD demand anytime in the near future. And there are other companies who have already started investing in FD 2 years ago, which will start coming online and become operational by next year. So we don't think it's the right time for us to go for FD expansion at this point in time.
If the situation evolves or changes over a period of time, then we may take a call to go on further expansion. But as of now, at least for the next 6 months to a year or so, we're not looking at FD expansion.
So in FY '24 and probably initial of FY '25, our FD volume growth will be flattish because of the capacity constraint, right?
Yes, yes, FD will be constrained because of the capacity, yes.
Sure. And second thing on the Vietnam, the -- i'm reiterating over $30 million CapEx. Will that also entail the zero income tax? Or do we able to pay income tax on the new CapEx.
Zero tax.
Understood. And how did the current U.S. demand and some color on how working capital is setting up in U.S. because earlier it used to be high credit market.
So U.S. is still the same. The terms and conditions are the same. So volumes are growing, the credit terms are always the same for any U.S. customer. Value is increased automatically that credit days also will remain the same.
Understood. And it is a small pack, high-margin business for us, right?
Small packs, we are increasing now in the U.S. We have slowly started introducing in the last 2, 3 years, and that is also growing. Our bulk is also growing in the U.S. So both categories are growing actually.
Understood. And my last question to Praveen. On the branded, last year, how much profit or loss we made in the branded business of close around INR 200 crores. And some color on the retail touch point where we are right now and some color on the next year revenue and the touch point guidance.
So as I have always maintained, what we are doing is we are investing back into the business. So for the last couple of years, we have been breaking even. Last year also we broke even. So we invested back and therefore, I think -- and I'll just answer one more question which was asked very initially that how -- the manpower cost for subsidiaries have gone up. So these are manpower costs, which have gone up for the subsidiaries and largely for the domestic market. And these are the investments we are doing largely to make sure that we keep the growth momentum going. So that's the answer on the profit front.
And second, as far as the growth and the -- our standing in the market is concerned, as I told you, the brand grew by 40%. So that's a good rate of growth that we witnessed last year also. And this year also, we are looking to grow in the same range. So we're looking to grow the business at 40%.
One of the -- one of the difference that we'll see this year is our distribution expansion. So the last 2 years because of COVID and all our distribution was pretty -- we were not able to scale up our distribution. But this year, we are looking to scale up, go a little more -- do a little more penetration in the South and expand it to other North markets, which we have not been able to do in the last 2 years.
Understood. And from the profitability point of view, when we expect a significant profit generation from this recent venture?
So that's a very tough one to answer. Significant is a key word that you have used. So we're not looking to kind of significantly drive profits on the branded business because the whole idea is to keep expanding. And as I had mentioned in the last call as well, it's not only now India that we are looking to expand, we're also looking to expand in the other parts of the globe as well.
So we are looking to keep investing in brand building as keep going along. So I don't think so in the midterm future, we'll be looking to start expecting a lot of profit from this business.
And add to that, end of the day, core business is profitable and is still growing at a healthy pace. So there's no real need of pressure to ask the domestic team to start focusing on profit rather than top line. My view on this is just focus on top line growth as much as possible in a self-sustaining manner. We don't want to bleed, but at the same time, we want to grow with the maximum extent possible. Sustainable.
Understood. And last year, when 40% plus on the branded revenue growth rate. So repeat purchase will be double-digit growth rate, excluding the penetration?
Yes, yes. Repeat purchase will be high impact. For the last year and -- or let's say, the year before also because of the COVID, the expansion growth was not much. In fact, a lot of our growth is coming from repeat purchaser itself.
And we now, even if we do -- because if we do a soft feedback from the market, what we get to hear is that people who have tried our brand have kind of stuck on to our brand. So there's a lot of repeat purchase. And our large pack sell more than the small packs. So that itself is a testimony to the fact that we have got a very loyal set of consumers.
The next question is from the line of Manish Mahawar from Antique Stockbroking.
I hope my voice is audible.
Yes, yes.
Yes. So just in terms of Russia, I need some qualitative in terms of comment on like how the demand we are seeing from Russia, particularly for India as a geography or a CCL as a company because what we understand globally, a lot of geographies are restricting shipment to Russia, right? How the India or Vietnam as a country are benefiting and we as a company, that is one.
And secondly, in terms of receivables, right, as we've already seen maybe 300 to 500 [indiscernible] kind of a shipment postponement. So how do you see the receivables and collections from Russia?
So as far as Russia is concerned, whatever contracts that we have in place from before, we are executing those contracts without any problem. We are not defaulting like some other manufacturers have actually started defaulting from other countries. So there's an additional demand that has gotten created over there in Russia.
As far as payments are concerned, also, we're not seeing any problems. In some instances, we are actually receiving advanced payments also from customers and then they're asking us to ship the product.
Okay. The situation is better for India or Vietnam or as a company for us, right?
Both India and Vietnam because they've taken a more neutral stance I think that business is continuing with Russia. So we're not forcing any -- too much of a change in that. In fact, even in [ Puget ], India and Vietnam, even a lot of European countries are doing a lot more business with Russia now.
Okay. Understood. And in terms of a small pack and bulk pack, what is the contribution in terms of volume or if you can share, Srishant, in FY '22?
See, right now, small pack is quite small for us because our overall volumes have been increasing a lot in the bulk space. So earlier at one point in time, we were almost at around 25% for small packs, which has now come down to around 18% to 20%.
Okay. And going forward, how do you see because we have done a CapEx in this part? So how is the contribution going forward?
So contribution -- our endeavor is to go to the 25% again going forward. 25% to 30%.
Okay. Understood. And in terms of the...
The percentages may remain small, but the small pack itself will grow because what is happening is the large packs are doing really well. So that is why the percentages may look to be same. But the small packs will also grow. And thanks to the domestic growth, which is -- which will be at around 30% to 40%. The small pack growth will be there. So right now, our capacity utilization is around 60%. It will go up by 20% -- sorry, 30% to 40% definitely.
Okay. Understood. And in terms of EBITDA per [ KGs ], we are not giving numbers in terms of EBITDA per kg. But going forward, are you talking about '23, '24, the EBITDA per kg really should improve, right, for us, because the small package is going up and [ TCE ] should contribute much better.
Yes, it should improve, as I was telling earlier also because this year probably we're looking at better FD volumes also because of this thing. So it should improve, but very difficult to now comment at this stage.
At the end of the day, there is still a lot of pressure. One should keep in mind that there are a lot of input cost increases, packing materials have increased. Fuel has increased. There is not a single industry that I can think of that has not been impacted by this war, by COVID. Some impact of the other is there.
And in a situation like that, really focusing on improving margins is not the real key. The idea is that during this difficult time, we need to support customers to increase the volumes, keeping our cost to the minimum. And once things stabilize, that is when we can focus on increasing margins.
Okay. And no, because, Srishant, in the B2B business, right, either it's SDC or FDC, right? Say, it is more of costs are passed through in terms of a contract and more pressure in the margin should come on a branded business, right? So is there any dynamics such change or that we are sharing with the customer on our cost whatever increase is happening?
Dynamics have not really changed. It's -- our -- right from the beginning, the idea of creating this domestic entity also was to focus on converting [ PCL ] on a B2B player to B2C player. And for that to happen, we knew it's going to take some time.
Fortunately, things are going as per our plan right now. The only variation that we've seen now in the last couple of -- in the last year or so is the parent company also is now expanding at a much more aggressive rate. So it will take a little longer for the domestic entity to catch up.
So if you look at it purely on a percentage basis.
Okay. Understood. And you booking...
I'm sorry to interrupt, but may we request you to come back in queue for follow-up questions?
The next question is from the line of Dhiral Shah from PhillipCapital.
So my question is what was the contribution of branded product in the INR 200 crores revenue pipe?
Sorry, there's some [indiscernible]?
Dhiral, there's a lot of background disturbance from your end.
So what is the contribution of the Continental branded products in the overall INR 200 crores pipe?
Almost 65% to 70%, I must say, yes.
Okay. And sir, lastly, when you are looking to expand further by 15,000 tonnes, what may give you the confidence because instant coffee market itself is growing just 2% to 4%, right?
Yes.
So what gives you confidence?
Actually, if you -- if you would have heard Srishant in one of the questions that he answered a few minutes ago, he said that because of our economies of scale, both in terms of processing and in terms of buying is giving us the edge in terms of our ability to capture more and more market share.
And because we have been able to capitalize on this kind of economies of scale, it has also helped our clients, some of our clients who are our loyal clients to expand their business internally. So most of our clients are able to expand their market share and which has led to this kind of growth.
And because of our economies of scale and because we are growing bigger and bigger, it is helping us gain these kind of market shares. And therefore, that confidence comes that we'll be able to grow at such a rapid pace.
And there are a lot of markets that we feel are still nascent when it comes to our presence, and we are very confident that we'll be able to build our presence in those markets like we did it in U.S. market and gain market share.
The next question is from the line of Anuj Jain from ValueQuest Capital.
Just for clarification, can you provide the current capacity breakup between India and Vietnam and further in SD and FD?
So India, we have 25,000 tonnes and Vietnam, we have 30,000 tonnes by the end of this year.
Okay. And what is the split between SD and FD?
11,000 tons of SD, rest is all FD.
The next question is from the line of [ Hiten Boricha ] from [ Sequent Investments ].
Sir, most of my questions have been answered. I have only 2 questions left. So the first question is how much does Russia contribute to our overall revenue?
20%.
Sorry?
20%.
20%. Okay, okay. And sir, my second question is I just wanted to understand on the prices, how are the prices of coffee shaping us like what was it last year? And how was the prices currently going on? You can give some directional view on that.
So coffee prices, last year in January were in the range of about $1,300 per tonne. Today, that's about $2,100 per tonne.
$2,100...
90% of what we use is robusta. Robusta I'm referring. For Arabicas, the prices from $1,300 have gone to around $3,000.
Okay. $1,300 to $3,000?
$3,300 in that range, actually.
Arabica. Okay. Okay. So the arabica coffee, this coffee was much impacted by the Brazil drop, right, sir?
Yes, exactly.
Okay. So the Brazil cost won't be impacted much on our business.
Yes.
The next question is from the line of [ Rishabh Sisodia ] from [ Concept Invest Wealth ].
Hi, [indiscernible].
Sir, I'm sorry, you're not audible.
Hello. Now is this better?
Yes, it's better.
Most of the questions have been answered. One question [indiscernible] 2 years back, where we talked about getting into pod segment and the [ capstone ] segment. So if you could give me any color on that, like how are we looking at those segments going ahead?
So this is a sector that we have -- unless we have a specific customer who is interested in that particular product, we usually don't supply that product. Now pod is something which is roasted ground coffee, the shelf life of roasted ground coffee is significantly lesser than that of instant. And now considering the -- if your shelf life is 6 months to 9 months and due to the logistics issues if that delays by 2, 3 months, then the shelf life of the product comes down drastically, which is why most of the people they buy pods and all in the consuming country itself from local roasters at a higher price point.
Right, sir. [indiscernible] But at that time, the management was positive about getting into entering these segments because it also has a very high customer base and high margins, so are we going into that segment again in some demand [indiscernible].
No. We've not been in this segment of pods before. We have explored it. We have -- I mean, the equipment, all that is also there, but it's not something that we aggressively push for because it's -- there's no entry barrier for you to get into this segment at all. Anybody can do it, so you'll have more competition.
And now after the first patent ran out, there's another new patent, which is currently being used. So it depends on what category that you're looking for.
So -- and also, there's a lot of negativity that is there towards pods because of the landfills. People are looking for more sustainable packaging. Especially in Europe, they don't like the fact that there's so much waste that is getting created because of pods.
Okay, right, just one next question.
[indiscernible].
I'm not able to hear you at all.
Rishabh, I'm sorry, we are unable to hear you.
We'll move to the next question then from the line of Manish Mahawar from Antique Stockbroking.
Yes. Thanks for follow-up. Just can it possible to share revenue at the time back for Vietnam as a subsidiary for FY '22?
We are recording a revenue of INR 450 crores and it [indiscernible] INR 104 crores.
Could you repeat the number?
INR 450 crores is the revenue that we have recorded at Vietnam operation. And before interest and depreciation, it was INR 130 crores and profit before tax and after tax, it was INR 104 crores [indiscernible].
Okay. And in terms of Continent like the brand, what is the EBITDA and PAT we have made in FY 22? And if possible, can you share the [ added fund ] also for the subsidiary.
So but -- I will not share the detailed numbers on that. But what we can share is the top line, as I was telling you, for the domestic business was INR 200 crores, out of which 70% was branded sales. And we broke even on this business last year.
Broke even in terms of EBITDA or PAT?
In terms of PAT.
Right. Okay. And last one, in terms of export incentive, how much of the export incentive we have booked in the FY '22? And how much of the remain is still pending with the [indiscernible]?
We have accounted for INR 16.5 crores we have [ sold ] during the '22 financial year and around INR 7 crores is the balance eligible to repeat.
Okay. INR 16.5 crores you said, right? FY '22?
Yes.
In the interest of time, participants are requested to limit your questions to 2 per participant. The next question is from the line of Dhiral Shah from PhilipCapital.
What was the utilization of Vietnam plant in FY '22?
By the year-end, by the current calendar year end, it will be implemented.
No, no, sir, utilization of Vietnam plant in FY '22.
It was 83.
And for the incremental capacity of 3,500 tonnes?
So which includes incremental capacity, total capacity is 13,500, and we are at the operation of [ 86% ].
Okay. And sir, if you can share the [indiscernible] revenue impact?
Revenue, INR 450 crores is the revenue that we have achieved at -- from operations.
Brazilian, Brazilian operations, sir?
Brazilian operations, it was -- yes. It is also INR 230 crores is the revenue that we have recorded at the operations.
And sir, PAT?
And profit, it was INR 7.05 crores.
How much -- INR 7.5 crores?
Yes.
The next question is from the line of Ankush Agarwal from Surge Capital.
So firstly, on this plant-based protein business, so this would be a domestic B2C business model, right?
Right.
Yes. So sir, in the larger scheme of things, what I wanted to understand is that for the full transition from a B2B business model to B2C. Because our B2B business, is an extremely good business wherein we have extremely high sustainability in terms of getting fixed margins and our margins itself are quite high, like 25% EBITDA and 15% PAT.
So I would wanted to understand with this transition to B2C, do you think we'll be able to achieve those kind of -- that kind of sustainable business and profitability in the [ B2B ] business, given that this business has required a lot of incubation in terms of marketing spend to create a brand. And then at most, maybe we'll be able to get around 10%, 15% kind of PAT margins.
So I think just to answer your question, transition is probably not the right term because that sets very wrong expectation. It's not that we are transitioning...
Additional business...
Additional business. Yes. So now, of course, additional B2C business is not an easy one. It wouldn't give you returns in a jiffy. It takes time to build brands. But if you're looking at a very long-term perspective that we are, we're not looking here only for a 3-year, 5-year or 10-year perspective, but we're looking at a 20-year, 30-year and a 40-year perspective.
In that perspective, if you see, obviously, the brand business will give you better returns than our B2B business. And it's always more -- value gets added more if you build brands, isn't it? So that's the whole thought behind adding B2C segment as well to CCL.
So -- but isn't there some kind of consideration looking at the B2B model in accessing space, like in case of plant-based protein, right, even in that case, we probably -- we might would have looked to expand on the B2B model to start with before getting into B2C.
Because what is happening is nowadays in all this segment, be it coffee and snacks a lot of B2C brand right? So rather than competing with them on the front end, being the back end partner manufacturing for all these guys, wouldn't that be a great business to be in?
The only difference here is that unlike a segment like coffee or other snacks, where there is already a huge consumer segment available where B2B players could play. Here, the category itself is very nascent. So it was very -- it wouldn't have made sense to become a B2B player in this category. And considering that we are looking to expand our B2C segment, we were looking at certain categories where we could start playing.
And as you rightly said, there are certain categories that are very cluttered. So this category, although it comes in the snacking category is actually different and very nascent and evolving category. And our thinking process here was completely opposite that we will seed the market with our own brand, let's see how things evolve. And probably in the future, we could backward integrate. And that's the time we would actually become a supplier to our own brand as well as to somebody else as well.
So here, our thinking process has been a little different on this.
So to start with, we won't be manufacturing this products over?
No, we are not manufacturing. We are sourcing it from a third party.
Domestically?
Yes, domestic. Right now, we are launching in the domestic market. That too in very limited areas in 3 cities. And we'll see how this category shapes up and how we do in this category.
Again, even in the B2C segment, as you would have noticed, we don't really go the big bang way, whether it was coffee, whether it is this. So that the margins don't get depleted. So all we want to do is that we get self-sustainable in 3 to 5 years' time. So that the brand gets to feed itself and does not kind of have a stress on the parent company.
So sir, in the very long term, would it be a right understanding that CCL as a company would be more focused on venturing into additional B2C areas rather than figuring out any other B2B market wherein it could expand? In terms of category?
In the B2B space right now, coffee, we have that spend. We have that economies of scale advantage.
Coffee was obviously a natural expansion.
Yes. So that's why our international expansion also. That is the area that we are going to keep focusing on. Now if any of the other categories that we are venturing into, if our volumes increase, and at that point in time, based on the situation, we might take a call to get into manufacturing of those products, and we might consider B2B in that segment as well.
But this is on a lot of speculation. As of now, our focus is actually quite clear. Our focus is that on the B2B space, there is still a lot that we can do and there is a lot of new areas, new territories that we can explore which is what we are focusing on now.
While doing that, in order to have more sustainable growth in the future, we're also focusing on our own branded presence in India and maybe a little bit outside India as well.
These are the primary areas of growth. Things like these plant-based foods and all these other things, these are all very, very small categories. By virtue of being a public company, we have to announce it, which is why we announced it.
But right now, to be very frank, we're just seeding the market to see how the response is going to be. We are just experimenting. So future also, we will keep experimenting with products. But our primary focus is still going to be on these 2 areas: one, brand, our own Continental brand for coffee and the B2B for coffee.
Thank you. Due to time constraints, that was the last question. I now hand the conference over to Mr. Abhishek Navalgund for closing comments.
Thanks, Ali. So I would like to thank CCL management for giving us the opportunity to host this earnings call. Also thanks to all the participants for joining in.
Over to you, Srishant, sir, for your closing comments. [indiscernible].
Thank you, Abhishek. I just wanted to thank you and the entire Nirmal Bang team for organizing this. Looking forward to talking to all of you again next quarter.
Thank you very much. Ladies and gentlemen, on behalf of Nirmal Bang Equities Private Limited, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.