Q2 conference call details
From Jan 20, Since Lagan shastri+ Advent taking the driving seat, there are hardly any return from Investor point of view - seems the case for most FMCG barring select few( Marico/ Dabur/ Tata consumer etc which had own triggers).
In fairness to new management, Covid impact and settling down and so on…while good salaries and ESARs continues- investors are sitting duck( unless fully timed entry in Q1 21). Communication has been minimal at best. Weak on charts as well ( 320 to 330 being key support zone)
Finally made Ashish Kacholia to take complete exit in one go, in Q2 Shareholding 2.84% to zero.
Some Q&A snippets from AGM in mid August
-
While you may notice and observe that people who were in snack food but were in snack food know
you pack sizes or habit flare they go into home, our product category largely over the years has been impulse category, given impulse is driven largely by people on the street. It was suddenly impacted so the question came, were we impacted and do we continue be impacted, yes we were impacted by the business, by the situation because our 98% to 100% of our business is impulse unlike other many other snack food players and we are cognizant of thatand we are working on probably improving or correcting that as we move forward but within the space that we were we increased 140 basis points and delivered a 3.2% revenue growth for FY21 -
The goods news though is as I said while we continued to gain share 140 basis points in the
previous year and we are continue to gain share even in the lock down quarter i.e april, may, and June of Q1. This has been largely on account of as I said because of our continued sales and marketing efforts and investments. One of the question that came was why did you continue doing marketing investment in march, we continue do it because that we believe
that it is the right thing to do for the brands and we continue to believe that and that’s paying off dividends -
we are doing business is basically through significant scale up of infrastructure where we see a little less through put there is no doubt about the fact that we ran eighteen months ago to what we ran today we at best may be on at flat levels because of
the fact through put theoretically and practically as told down because consumers not walking to the street but however we are able to do that. To cover for that, we have been able to expand around our distribution net distribution up and also our ability to increase our infrastructure in terms of sales channels, so we have covered and gone direct in terms of retail to more places than we were before last year so that is kind of doubling up our benefit on our revenue position as the marketing investments kick in they started helping us non rings brands. Non rings brands is continuing to do okay but also we have also got stronger and stronger on some other brands as we start investing. -
So there was a question on competitive advantages and what we really believe you know over 10-15 months that really will take this company forward and what’s the things that we believe that our things we need to work on, both ways right. So, clearly it’s very easy to answer what is the competitive advantages are clearly the brand is the number one thing that we believe we have the talent we are developing now plus the earlier talent which is getting
post and trained and getting better with their own experiences and the new people that we are
going to recruit is the second. Distribution reach specifically in the North, we lead every
other competitor players including lays and haldiram, we are more distributed in the North India than any other snack food player and that by far is also a you know a very verysignificant competitive advantages that we have. -
On the specific question, how management is rewarded. Management is basically rewarded
over the years across levels of the Company employees basically around desired outcomes of
the Company which is largely profitability, revenue and it will evolve to investor capital or other things as the Company evolves but I can assure that revenue and profit are one our primary driver of the management compensation specially the variable pay across all of the organisation. That’s the piece on people. -
The third one was as I said is profitability, on profitability you know, like any other year we have continued to focus on it in fact this year because of Covid, we actually initiated significant investment on cost initiatives and we were able to manage our gross margin at 40%. This question came as to how was inflation and let me just tell you as an example, on crude palm oil (CPO), MCX spot prices on Crude Palm Oil have increased by 72% from the year before and that’s the significant raw material into our product and in spite of that we were able to hold our gross margin at 40%. To address the same, we had put in place a comprehensive cost management programme, which has helped us derive efficiencies in material costs and lower our overall overheads. We were able to improve our EBITDA margins as reported from 8.2% to 10.6% during the two years FY 20 and FY21 in spite of the
significant increase in the inflation on crude palm oil obviously there was lot of pressure on carton prices and even in corn meals but all of that we have been able to absorb significantly last year. -
We believe and continue to focus on maintaining a healthy working capital. There was a question on negative working capital and what are thoughts around that. Our thoughts as I said are always on the table and we will do whatever is right for the business, we obviously want to put every investment into the business to grow ahead and can make profitable. So, if we believe we will review this and we believe at any time any working capital is required
appropriate solution will be formed and found to make sure that our growth agenda and
profit agenda is not subservient to any other factor but currently we continue 100% negative working capital position and we are happy with that as of now. -
The last one is basically scaling up and creating scalable systems and continuing stronger and
stronger governance standards. So our endeavour has to leverage technology and we are happy to say that you know a large part of North has been automated in the retail space. Our ability to see granular data has gone up substantially over the last seven to eight months. Our data is getting more stable and couple of more months, I guess will more stable on data points and you know automation efforts are bearing fruit with a number of distribution points already automated in North. We have started evaluating our need and our current situation on
automating east, west and south, the numbers are too small. -
As of now it is not applicable HFFS because HFSS has not been defined by the Government but we are working with the Government to help them in this journey. Our Regulatory head is in close conservation with few other industry leader and also with the Government
Full transcript here
Invested with small allocation with learnings of opportunity cost, however do believe that it should do well from here on for med term - near term risk being RM costs, some margin pain likely.
Key monitorable - top line growth, channel mix( eCom share), Product mix performance outside Crax, Asset light mfg, Geo penetration outside North, competetitive scenario, slightly longer term commentary.
Additional data points- multiple job openings in last 1 months, including South and West Geo.