Emmbi Industries Ltd

NSE:EMMBI

Earnings Call Transcript 2023-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to the Emmbi Industries Limited Q2 FY '23 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Abhishek Mehra from TIL Advisors. Thank you, and over to you, sir.

[Abhishek Mehra]

Thank you, Alan. Welcome, everyone, and thank you for joining this Q2 FY '23 earnings conference call of Emmbi Industries Limited. The results and investor update have been emailed to you and are also available on the stock exchanges. In case anyone does not have a copy of the same, please do write to us, and we'll be happy to send it over to you. To take us through the results of this quarter and answer your questions, we have with us today Mr. Makrand Appalwar, Chairman and Managing Director; and Ms. Rinku Appalwar, Executive Director and CFO. We'll be starting the call with a brief overview of the financial performance, which will be followed by the Q&A session. I would like to remind you all that everything said on this call reflecting any outlook for the future, which can be construed as a forward-looking statement must be viewed in conjunction with the uncertainties and risks that the company faces. These uncertainties and risks are included, but not limited to what we mentioned in our annual report, which you'll find in our company's website.With that said, I'll now hand over the call to Mr. Appalwar. Over to you, sir.

[Makrand Appalwar, executive]

Thanks, Abhishek, for the introduction and starting with the call. So this call is on the background of a very successful previous year, that is financial year '21-'22, where company had a wonderful growth of around 60% in the top line and almost 1.5x in its EPS. So last year was wonderful and did a great job. But this year seems to be more of a -- year of consolidation and the growth what we had last year is getting a little bit subdued this year, mainly because of the reasons or the situations which are beyond the control of the company. So I am going to explain you what are the situations which you -- pulling us later down this year. And how are we trying to get -- counter those situations so that, we can be at the normal [ CSAP ]. So this year is basically a year, as I said, the year of consolidation. And you know that large part of our revenue that is almost 60%-plus used to come from exports. And the global situations like Europe war or a very high inflation in the United States is really causing the demand curve itself very low. And being a packaging-company and packaging is directly connected to GDP. So there is a natural slowdown in these areas or these continents like the typically European business is slowing down. And we are also seeing some pressure on the U.S. business also.Pricing interest rate in India is also a cause of concern for consumption within the country, as well as globally because all over the world, the interest rates have gone up. Anything from, I would say, 250 basis points to 500 basis points, depending on the segment or areas, which in terms at times reflects 100% growth in their local rates. So that has kind of pushed down their consumption pattern and being a GDP connected manufacturing it has slightly resulted into the reduction of our top line.So in the first half year, our value growth is reduced by 10%. So -- but the good part is the volume growth is actually reduced by 15%. So we could keep up our prices, rather increase our prices and that could only happen because of a very premium segment in the global market, we are operating, we could still protect our margins and keep all this running and doing very well.The capacity utilization is down from 89% in the previous financial year to 80% in this half yearly, I would say, results. So that is purely because the sale itself or the top line itself was hit because of the net lack of demand globally. So that is the reason why capacity utilization is down. But still, even at the reduced capacity utilization, we are at 80%, which is fairly good and above our operating or, I would say, breakdown breakeven point levels. So company is still do -- generating cash on a regular occurrence.In order to take care of the following what we have done is we have immediately focused on various parameters to take corrections. As Europe was doing really badly, we have started focusing more towards the U.S. as well as Oceania region and Africa region for the exports. We also started a larger, I would say, focus on the Indian domestic packaging because I think India is the one country which is hurt least, and we feel that Indian economy is still doing very well and we can stay, bounce back considering this fact. So the larger focus now remains within the country apart from the exports, which we were. And we are hopeful that within next quarter or 2, the situations would improve.This particular, I would say, first half of the year was also not very strong for Avana because purely because very extended monsoon in India. In the last 25 years, we have never seen so much of an extension of monsoon. So as you know that a lot of Avana work is connected to the water and the rain, which is happening during the period or -- within leaching back underground. So on the ground level, we could not really perform the Avana business very well in this last 3 to 4 months because of the excessive rains happening and there was a lack of this. But this is particularly, it's not a loss of business. It's just a shift of business, the business or the ponds or the reservoirs, which was supposed to come, they will still come, and that will only get shifted from, say, quarter 2 to quarter 3 and 4. So that business will get shifted. And at the, I think, end of the year, I'm sure we'll see a good traction in the Avana business also.The year is expected to be a little bit on the flattish side. It's not going to have any major increase in the sales, but we might see a small reduction of 10% to 15% in the top line. And a similar pattern of the bottom line might be seen as it was seen in the half yearly results. So management is very, very committed. We are working on the various options on the possibilities.And the good part is even with the global slowdown, there are no bad debts or anything like that. So -- and all the 100% of our exports are ECGC backed up. So the company is financially properly managed, and it's very strong. The rupee kind of depreciating is helping the profitability and margins. So that would remain, we are quite bullish about the dollar getting strengthened in the next 6 months to come. So I think by and large, that would have come very handy towards the company.So I think this was my initial commentary, and now I would like to open the call for the questions if there are any.

[Operator]

[Operator Instructions] Ladies and gentlemen, as there are no questions from the participants. I would now like to hand the conference back to Mr. Abhishek Mehra from TIL Advisors for closing comments. Thank you, and over to you, Abhishek.

[Abhishek Mehra]

Participants, thank you for joining on this call. If there are any queries, please do feel free to reach out to the Company Secretary or me. We will soon be hearing out all the contact details of the designated IR officials working on the company. Thank you.

[Operator]

Thank you very much. Ladies and gentlemen, on behalf of Emmbi Industries Limited and TIL Advisors, we conclude this conference. Thank you all for joining us, and you may now disconnect your lines.