Q1 FY 24 Conference Call Highlights
| Current Quarter | Prev Quarter | |
|---|---|---|
| Sales | 654 cr | 509 cr |
| EBIDTA Margin | 16.3% (EBITDA margins look optically dropped, but its the value growth due to cost plus model that has increased revenue and hence led to increase in denominator) | 22% |
| PAT Margin | 9% | 10% |
- Krishnapalem and Tirupati capacity and execution timeline - NCL Capacity at 55000 tons , fully operational. Tpty (spray dried) another 16000 tons by next yr march. With that capacity will be at 71000 tons. Next FY Q2, 6000 tons of freeze dried capacity at Vietnam. With that total capacity at 77000 tons (spray dried + freeze dried)
- Cost of capex: India - 400 cr, Vietnam USD 50 million
- On recent acquisition of Percol and Rocket Fuel in UK - CCL products, after 5 years has CCL launched continental coffee and started to build as a good brand. They want to further foray into B2C segment and hence looked to acquire in new markets. Going forward it can add 100cr portfolio. Currently working with, Sucafina, partner in UK to resurrect and launch the brand.
- Current revenue from the brand - 18 to 20 cr. We are looking to make it 100 cr in 5 yrs.
- Why no continental coffee brand in international market - Brand building in mature markets is difficult. Better to resurrect an existing brand than to introduce a new brand (CCL)
- Volume growth 18 to 20%. Company works on cost plus model => Coffee prices go up, selling price also is increased => optically sometimes EBITDA margins look low. Important to track volume growth.
- Vietnam capacity utilisation: Old capacity 14000 tons is at 90%, new capacity of 16000 tons at 50%. Blended utilisation growing forward wil be at 70%
- UK business will be taken care by Sucafina. Company fully focused on domestic as well as abroad business.
- On product innovations going forward - In the past developed freeze diet, instant cold brew, currently working on instant speciality coffee (setup a pilot plant).
- Cold brew (innovation complete - looking to push the product) seems to be a very good opportunity. Spcl coffee also is receiving good interest.
- CCL Prods also does product development for new startups and companies and help them create product profile.
- Interest cost about 88cr per qtr.
- No additional WC required for acquisitions as they are already running brands.
- Debt profile - 1000 cr WC debt (600 cr India, 400 cr subsidiary), capex debt 600 cr by end of FY 24.
- Inventory about 550 cr.
- What is the driver for high teens volume growth as coffee market is not growing at exponential pace - Coffee mkt. growing at low single digit whereas company is growing in double digits (meaning mkt share gains)? Economies of scale working in growth, ability to innovate and give better product profile to client with R&D profile.
- In 5 years, CCL has built a brand and became no 3 player in India.
- On further brands, being very careful not to overlap with B2B customer’s brands
- Planning to go to 1.5L outlets, focus on brand building in non-south markets.
- Expecting volume growth by 18 to 20 %. Coffee prices supporting, company should do well.
- Order book : Freeze dried booked out for 1-1.5 years, spray dried visibility is usually short term. Booked out for next few months.
- Currently 8% of B2B market share. Company has ability to gain market share due to low base and hence high growth is expected. Probably the growth will saturate at around 15 % market share.
- Currently interest rates are going up from 3 to 6-8% now. On debt: WC debt 1150cr. WIth other facilities coming up, the total debt (including WC debt) is expected to be 2000 cr by FY 25. This is likely to be the peak.
- Expected retail revenue % after all the capex is complete? - Can’t say the exact % but it all depends on coffee prices. In B2B if coffee prices increase, because it is cost plus model, revenues will shoot up, but in retail it is difficult to hike prices.
- Earlier debt guidance was 1200cr but now guidance is for 2000 cr. Why is the difference QoQ? - It is the changes in the working capital debt that has changed the debt outlook.
Discl: Invested
