Demerger is good in part, though they have not demerged packaging division but have kept it as their core business along with building product division. Only retail and consumer product division (both loss making at EBITDA level) will be demerged. Also, looks like one of the companies will remain unlisted.
They are demerging 2 companies.
- Somnay Home Innovation (Resulting 1). This will be listed. This contains consumer business along with retail business.
- Brilloca (Resulting 2). This will be subsidiary of Resulting 1. This contains building product business. Currently this is subsidiary of HSIL itself.
Remaining HSIL in itself will contain the business of packaging division, manufacturing of building products and consumer products(water heaters) and wind power generation.
The other listed company (resulting 1) will be asset light company doing branding, marketing, sales, distribution etc.
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Appreciate if anybody has any news on the status of demergerā¦Sebi website is not showing anything
Hindustan Sanitaryware And Industries Ltd
Highlights of Q1 FY19 Results
Financials
- Revenue reported last year same quarter was inclusive of excise duty and this year it is net of GST
- Revenue grew by 13.4 % to 542 Cr
- EBITDA stood at 46 Cr compare to 54 Cr last year
- USD move from 65.04 to 68.58 in the first quarter representing exclude rupee depreciation of 5.43 %.
- Company had issued ECB and incur foreign exchange loss of Rs 11.60 Cr has been remitted to P&L and previous year excess gain was Rs 1 Cr. M2M during the quarter was Rs 4.72 Cr compare to loss of Rs 1.19 Cr in corresponding quarter. This M2M loss has been adjusted in finance cost as per applicable accounting standard hence after adjusting EBITDA for the quarter stood at Rs 57.22 Cr compare to 52.88 Cr corresponding quarter representing growth of 8.02 %.
- Finance cost for the quarter was 15.93Cr compare to 9.26 Cr last year.
- PBT is around Rs 3 Cr compare to Rs 17 Cr last year.
- PAT stood at Rs 2 Cr compare to Rs 12 Cr last year.
- Total debt of the company stood around 1250 Cr with long term debt of Rs 632 Cr and short term debt of Rs 428 Cr with overall debt funding cost at 7.04 %.
Segment Highlights - Building Product Division
o Revenue grew by 10 % to 240 Cr which is after the GST and excise effect YOY.
o Pipe and fitting plant was under trial production and rated net sale of around 34 Cr. It has not been considered in P&L account as plant was under trial run. Company has declare commercial production form 9th Sep 2018 .
o EBIT include foreign exchange loss of Rs 4.87 Cr as compare to previous year gain of Rs 0.39 Cr. It the exchange loss is initiated and also the non-capital expenses then the EBIT for the business will be Rs 38 Cr compare to 31 Cr last year recording growth of 22 %. - Packaging product division
o Revenue grew by 16 % to 228 Cr after adjusting for GST and excise impact.
o Started one Glass furnace at its plant which resulted in some optimal production during the quarter. Another Furnace plant is getting schedule to rebuild and is expected to affect production and volumes in the forthcoming quarters.
o EBIT for the quarter was about (-2 Cr) as compare 16 Cr last year same quarter .
o During the quarter there was foreign exchange loss of Rs 5.54 Cr compare to gain of 0.94 Cr last year same quarter. If the foreign exchange loss is removed then EBIT for the quarter will be Rs 3.55 Cr compare to 15.38 Cr last year same quarter mainly due to higher cost of raw material and fuel.
o Company is negotiating price hike with the customers to absorb the higher input prices. - Consumer Product division
o Revenue grew by 40 % to 55 Cr compare to last year.
o It reduce EBIT loss to (-6 Cr) compare to last year loss of (-9 Cr).
o Company is continuously investing in marketing and spreading brand awareness and distribution channels.
o Consumer segment have 8500 plus retail customers and market leader in Hawk and Chimneys. - Retail Division
o Revenue 22 Cr compare to 24 Cr last year.
o EBIT (-1 Cr) compare to (-3Cr) last year.
o Net PBT impacted by the following factor
ļ§ Sudden Rupee Depreciation
ļ§ Non-Capitalized file expenses for new brand promotion that is for building product division
ļ§ High input price of fuel and raw material in Packaging product division and some furnaces division.
Q&A - Is the forex impact on EBITDA is 11.6 Cr ? How is this going to play out in the next following quarter and give detail on regime policy also ?
o Yes
o USD/INR was at the level of 65.04 on 31st march and went to around 68.58 that is 5.6 % depreciation so company use the mix of foreign currency loan as a rupee loan Company foreign loan is 11 plus 130-140 basis point and foreign currency loan amount 20 million dollar , company had hedge also so this loan is paid at level of 60.750 and in may 2017 company hedge it will call spread of 70-90 so there is a M2M gain on derivative which is adjusted in the interest cost and the plain fluctuation on the currency is debited to the EBITDA. So company have 11.64 Cr of foreign currency debited to EBITDA and have 4.78 Cr of M2M gain which has reduce the interest value .
o From last 8-10 years the rupee depreciation varies around 3-4 % but this is a spurt so company will hedge the long term exposure with a call spread so it will give a advantage that If there is a rupee appreciation company will gain on the principal and company exposure are pretty long so lot the foreign currency exposure is a notional loss.
o One loan of ECB which company had taken the overall tenure of the loan is 8 years out of which 2 years has been completed and the payment will start from another 1.5 year from current level. So that loan is also hedge with a call spread of 70-90.
o Company keep monitoring the short term exposure and hedge the long term exposure and try to cover them in a near one because 100 % coverage some time doesnāt get feasible because the premium cost itself is very high. - In Glass furnace how much did Caps and Closure segment contribute ? Will the run rate will go down or it will maintain upward going forward in Glass Furnace segment ?
o On first Furnace only part of it is rebuild and during this period the production was lower but it definitely increase the life of the furnace that is almost over and now company is rebuilding another furnace which is already scheduled and it was build in 2009 so after 9 year it is getting refurbish. So Glass sale and profitability may suffer for the Q2 but company is very optimistic in Q3 and Q4 because of strong volume demand in the market. All furnaces of market will keep up running in the market flow.
o In Caps and closure company is operating the first phase so company had did turnover of 5 Cr in Caps and Closure and this is a first year . - In building product what was the growth for the Faucet and sanitary ware for the quarter ?
o Faucet has grown around 25-26 % and Sanitary ware has grown around 6-7 % YOY. - When will be the PVC pipe line plant will get fully utilized and what kind of sale company can generate once it get fully utilized ?
o In first quarter itself company was able to clock a turnover of 34 Cr in the market. The products has been very well established. Overall plan is to build the plant of 30,000 tons and facility which has started is around 14,000 ton and company is in process of putting more machines. It will not require many fittings so just molds are used. Adding more machine and machine capacity will also increase and reduce the down time to change the moles regularly. Once fully utilized than company expect turnover of 400 Cr and it will take another 1-1.5 year to bring to that level. - Did Glass furnace show growth even after one furnace was closed ?
o Yes around 12-12.5 %. It is a mix of volume and pricing both because company carry inventory on the projections from the customer so volume growth is around 8 % and balance is price growth. - When will be the consumer business start making money ?
o Company had run a media campaign both for air coolers as well as water purifier so that cost has been debited to P&L. But in terms of Gross margins that is pretty good above 35 % on an average and directionality of the business is right , company now have 8500 touch points in the market. - When will be the new company will get out and listed ?
o On 29 September there is a shareholder meet and after that 60 day will be taken to get the clean chit and than company will approach to exchange to list the shares.
o Once Demerger happen than the Brand Hind ware will move to all the Building product business. - How does the company see both the Building and packaging sector for the rest of the year ?
o In Building Products , Sanitary ware company is expecting growth of around 10-12 %. Faucet will grow at 25 %. Going forward as the Pipe plant has also started so it will also give revenue so that will be additional revenue of around 15-20 Cr rupee per month going forward.
o In Packaging , main is glass where there will be pressure in cost because of one of the furnace under maintenance and that will completed by middle of September and will start by end of September. Starting from the Q3 onwards the glass would be back on the last year EBITDA level. - Kindly give some brief on EBIT margin ?
o It is reasonably good it can go up by 1 or 2 % . Company is looking for the price increase in Q3. - What kind of cost will be there for incurring Glass furnace in P&L ?
o Rebuilding cost goes to capitalize because it go for work in next 9-10 years. - Kindly provide guidance on consumer product business ?
o Company is hopeful to get EBIT positive from next one or two quarter. Business is doing good and gross margin level are doing good. So company is fairly bullish on this business. - Why the assets are not transferred to the Demerger company ?
o Because whole world is moving toward a asset light model. Perloca and Somany ceramics are more on consumer side of business. SO company invent product followed by market research followed by consumer research , final product to eh market with arranging distribution channel. So it is a cycle of interacting with the consumer. 75-80 % of activity are focused toward this and the management is working on creating energy on two verticals
ļ§ Totally Procuring on Manufacturing
ļ§ Excellence of Consumer facing vertical
o This is the rational on which the whole demerger was constructed. - In Building product how much revenue will be contributed from the outsourced products ?
o Company outsourced around 45 % of company product in Building products like parts of faucets and majority of fittings company outsourced. Once demerger happen the Perloac will be engage under HSIL for manufacturing of product and rest of the product which company buy out from outside will be continue from Preloca. - How much EBTIDA margin will be generated in Perloca ?
o It will be in double digit. - How much company had loss on Glass because of maintenance of a Furnace ?
o Company donāt lost anything because it always carry inventory with respect to annual projection given by customer. - Why there has been loss on EBITDA if the maintenance cost is capitalize ?
o It is more because of increase in fuel and raw material cost which can be pass on to consumer with a lag. - Is there any price hike taken in Sanitary ware because of price hike in Gas?
o Yes company had price increase in Sanitary ware in April to around 3.5 % and it is sufficient to take care of the price increase in L&G and in Q3 there will be another price increase of similar kind. - How much will be the capacity of the furnace which is going for repair and maintenance ?
o Total capacity of Glass plant is 1600 tons . One furnace has 350 tons and another of 450 tons . So out of 1600 tons the repair is furnace of 475 tons per day. - How much EBITDA margin can be expected in Caps and Closure , Pipes segment ?
o Once Caps and Closure plant get fully loaded company expecting 25 % EBITDA margin and 12-13 % for the pipes. - What will be the planning for the debt ?
o Debt will be there on the balance sheet going forward as it is on cost of 8.5 % yearly. - To which industry company serves in glass industry ?
o Large customer are Liquor and Beer , food , Pharma , Beverages like soft drink. - Going forward there is a talk that milk will get sold in Glass bottles instead of pouch so how company will utilize that opportunity ?
o After the maintenance of the furnace and lead up of the 300 ton of furnace company capacity utilization will increase to 70 %. So company still have 30 % capacity to utilize the opportunity.
Management Comment - One must look at the foreign exchange loss during the quarter and then analyze the results .All Segments are doing good only Packaging segment should be considered to be focused. From Q3 and Q4 there will be a turnaround expected. But company is bullish on overall strategy that company had built.
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Anybody attended the HSIL concall on 5th Feb? Please share notes if possible?
Demerger put in place:
Any Idea when the shares of SHIL will be listed?