Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sheela Foam Ltd (BOM:540203, Financial) reported a 26% year-on-year increase in consolidated revenue for Q1 FY25.
- The company has successfully integrated Perlos and Cordon Enterprises Limited, which were acquired in October 2023.
- The integration of ERP systems was completed in less than a week, ensuring cybersecurity and operational efficiency.
- International businesses in Australia and Spain have increased their capacities significantly, positioning them well for future growth.
- The company has achieved a run rate of about 100 crores in cost savings from the integration process, with potential for more.
Negative Points
- EBITDA for the quarter declined by 23% year-on-year, with EBITDA margins falling to 7.4%.
- Net profit for the quarter decreased by 25% year-on-year on a standalone basis.
- The integration process caused temporary disruptions, particularly affecting sales and revenue growth.
- Gross margins on a standalone basis declined by approximately 383 basis points year-on-year.
- The company faced challenges due to a negative economic environment, impacting consumer durable sales.
Q & A Highlights
Q: Why have revenues fallen when competitors' revenues are growing?
A: The integration process temporarily impacted revenues. Disruptions occurred due to changes in distribution and sales processes. However, the company expects to realize the anticipated revenue targets soon. (Rahul Gautam, Executive Chairman)
Q: What caused the decline in EBITDA margins from 12% to 7.4%?
A: The decline is due to fixed cost leverage and integration disruptions. However, the company has achieved significant cost savings and expects better EBITDA margins as revenues stabilize. (Amit Gupta, Group CFO)
Q: What is the outlook for gross margins and future growth?
A: Gross margins are expected to improve due to synergies from the integration. The company aims for a 15% year-on-year growth rate and expects double-digit growth in the upcoming quarters. (Amit Gupta, Group CFO)
Q: How are the international subsidiaries performing?
A: Both Australia and Spain have increased capacities and are stable. However, margins have been impacted by lower raw material prices. The company expects better performance in the coming quarters. (Rahul Gautam, Executive Chairman)
Q: Can you explain the ERP integration process?
A: The ERP integration was expedited by preparing in advance and training staff. The switch was completed quickly to minimize disruptions. (Rahul Gautam, Executive Chairman)
Q: What is the company's strategy for expanding distribution?
A: The company plans to expand its distribution network by 10% in urban markets and significantly in small-town India. This includes both exclusive and multi-brand outlets. (Rahul Gautam, Executive Chairman)
Q: How does the company plan to capture the low-income group market?
A: The company has launched affordable PU foam mattresses that can be folded, targeting low-income groups. The product has received a positive response. (Rahul Gautam, Executive Chairman)
Q: What is the company's dividend policy?
A: The company has debated the issue and recognizes the importance of dividends. While not currently paying dividends, the company is open to the possibility in the future. (Rahul Gautam, Executive Chairman)
Q: Are we losing market share?
A: The company is not losing market share and is expanding into new markets. The integration process has temporarily impacted revenues, but the company expects to regain momentum. (Rahul Gautam, Executive Chairman)
Q: What are the expected EBITDA margins for FY 2025?
A: The company expects consolidated EBITDA margins to be more than double digits, around 10-11%. (Amit Gupta, Group CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
