Thanks @asarda
What should be the reason for sudden resignation of Mr. Dhirup? I believe that was not planned hence do you think performance of ex MD can be the reason?
Also how you rate profile of new MD - CEO Mr Akshat Seth?
Thanks in advance.
Hello @Deven ,
I do not know the reason regarding the departure of Mr. Dhirup. The global scenario for the company is not very favourable. The availability and the cost of MDF/HDF was a big issue and the fibre cost was also very high. I think the best way to know about this is to wait for the Q3 con-call. The company is very candid about the operations to its investors. The disclosure is amazing.
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This is the latest con-call report - HIL Limited (HIL) Q4 FY23 Earnings Concall Transcript | AlphaStreet
The bottom-line is that the worst is behind them and they will perform better in FY24.
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Q1 FY 24
BUSINESS
HIL has reported a revenue of Rs. 1,016 crores, with a PBT of Rs. 74 crores.EBITDA for the quarter stood at Rs. 91 crores as compared to Rs. 137 crores
Roofing Solutions business grew by 4% year-on-year to Rs. 466 crores.Higher fiber cost relative to Q1 last year has negatively impacted margins in this segment.
Building Solutions business grew by 8% year-on-year during Q1 FY24, coming in at Rs. 134 crores.Revenue and profits were negatively impacted on account of the ongoing strike at Chennai. FastBuild’ business has been instrumental in augmenting our volumes.Building Solutions perspective, we had mentioned that the revenue is about Rs. 134 crores, of which Rs. 77 crores come from Blocks and the rest comes from Panels and Boards. Ebidta margins for blocks will be in the 10% range. For the rest, it’s more in the 20% range.
Polymer Solutions business, de-grew by 16% year-on-year on a revenue basis to Rs. 120 crores, 17% year-on-year growth in volumes of Pipes and Fittings, With the recent commissioning of the state-of-the-art multilayer Foam Core production line, we are amongst only a handful of players that offer underground drainage products.Big segment of Agri pipes, which is typically high volume, lower margin where we do not play.
The Flooring Solutions that is Parador business de-grew by 20% year-on-year and stood at Rs. 294 crores in quarter.
David Bradham, who we call Neel, as the CEO of Parador
Present at nearly 20,000 outlets across the country and cover more than 60% of Tehsils in the country.
We grew Mr. Ajay Kapadia has stepped into the role of Chief Financial Officer,
Capacity Utilisation- Blocks and Roofing, we are in the high 90%,Panels and Boards is at about 80%, rest of the segments are about 70%. We expect to double our size in each one of them in the next three-odd years.
The new product line is on Construction Chemicals, where we feel we have just about started, and the growth potential is tremendous.
Quarter 1 from a Roofing point of view is the most pronounced quarter.Q2 slightly softer.
Order book of nearly EUR 75 million, which is today about 25%, 30% of our total business Commercial.
Capex- 150 crores this year.
The Made-in-Germany tag that we carry the brand is known.
MANAGEMENT GUIDANCE
Parador a EUR 500 million-plus global brand over the next three years to four years.
First growth drivers are to open up key markets in North America, Middle East and Asia.
Second area of growth will come from a more solid coverage of the commercial segment.
Third area of growth is quality and innovation in products and design, and creating product lines, which can help command a price premium.
Planned capacity expansions in Golan, Jhajjar and Hyderabad come on stream in quarter 2.
Early teens, so 12% to 14% would be the first milestone for us to hit.
Q3 onwards is where we expect normal service to resume, we should start seeing the trend reversing in that period.
RISK
Mr. Saikat Mukhopadhyay anothe CFO has left the company in less than a year.
Higher fiber cost relative to Q1 last year has negatively impacted margins in this segment
Revenue and profits were negatively impacted in the Building solution segment due to the ongoing strike at Chennai.
Our expectation is it will take anywhere between six months to nine months for it to fully absorb the high fibre price increase of 22% to 24% which is going to stay as Russia is not supplying and everyone has flocked to Brazil.
We’ve seen a period of high inflation, now followed by a period of high interest rates. And that has led to subdued consumer sentiment, which is playing out also in the Construction segment and so on.
There are very few sources of fiber globally. And most of those sources are also in geopolitically volatile geographies of the world. And hence, continued uncertainty in that segment.
30% of the business or revenue is coming from Roofing, but our profitability is still highly dependent upon Roofing.
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Good note. Really liked the insights. I have two queries, if you can provide some inputs will be helpful:
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What %age of their roofing business is Asbestos based. Also in case asbestos gets banned, how do you feel it will impact HIL?
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HIL is into 4 different broad segments. For the company of their size, do they run the risk of spreading too thin. What are your views on the same?
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This was addressed in one of the post earnings interactions last year. Majority of the roofing business is asbestos based. They didn’t see this to be an immediate threat, as in rural sector - there are no other alternative products available which are as cost effective, with high durability and high longevity. However they are the only company which has a strong non-asbestos based roofing product (Fortune brand). WIth some more cost efficiencies, they intend to make it most cost competitive and would be positioning it as the replacement for asbestos based product. So should not impact as much.
Flooring, Polymer and Building solutions business were newer businesses and meant to have a higher growth rate as compared to the legacy business. Also its in line with their aim to becoming a 'One stop solution; provider.
However the downside in such cases is managing the supply chain for multiple businesses and ensuring raw material availability, etc. In case of a unforeseen geopolitical event causing raw material scarcity, can result in headwinds for the business. Something which impacted the flooring business last year.
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totally agree with karthi plus i see it as adding growth triggers as they are diversifying into building material products not into other area. 30% of income come from roofing out of which fortune which is non asbestos sheets are very low in single digit but growing fast.
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