Greenlam Industries Limited (GREENLAM) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Greenlam Industries Limited Q1 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Saurabh Mittal, Managing Director and Chief Executive Officer of Greenlam Industries Limited. Thank you, and over to you, Mr. Mittal.

Thank you. Good afternoon, everyone, and a very warm welcome to all of you. I hope you are all keeping safe and healthy. On the call, I'm joined by Ashok, our CFO; Samarth from the finance team, and SGA, our Investor Relations Advisers. The results and presentations are available on the stock exchanges and our company website, and I hope you've had a chance to look at them. So on this call, I will first focus on what's happened in the last quarter and then with just general direction on how we see things in the market right now and how we see things in the business for the balance period of the year. So in quarter 1, as you probably have seen in our core category of Laminates, we have been largely able to be similar production levels of Q4. So the factories have done at 110% utilization. The drop in -- on a sequential basis in quantity has been shy of 2%, which I think, in this environment, has been very satisfactory to us. While sales have been minus in Laminates by about 15-odd percent, and overall, our revenues are lower by about 19-odd percent on a sequential basis. Obviously, the year-on-year numbers are far different and far better, and Ashok will take you through those details. On the production and sales, we have not been able to convert approximately INR 30 crores worth of sales, while we ended up producing those goods. And these -- the gap of production of sales is largely backed up with orders, which comprise of the international orders and comprise the domestic orders, which has been due to the nonavailability of containers with inventory at ports increasing vis-a-vis what was in end of March and in domestic, too, markets opened up a bit late. So these factors have happened for certain items and personal items, dispatches have happened in the month of July. So that's where the gap is of production and revenue recognition. On the raw materials side, RM cost -- raw material costs continue to remain high. And in quarter 2, we see raw materials costs higher than in quarter 1. And I think the inflationary trend on the raw material is continuing. As we see things now, overall RM costs are still going up. We have been able to largely take entire increase in the domestic laminate market. In the international markets, there was some pending price increases, which we've reflected now. So they will start showing in partially this month, partially next month. And over the next 3, 4 months, we will be able to charge the customers for entire RM cost in the international market, too. Incremental sea freight was already passed on from the month of January. On the wood business also, we've seen raw material cost increase in base ply, veneer, sea freights, et cetera, where all necessary price increases have been passed on to customers. So as we talk right now, besides certain international price increases, which have also been done, which will start showing in our books from this month onwards, more or less, we've been able to pass on the entire RM cost to the market. On the working capital side, the debtors have been reasonably well managed. So we've been by and large under control on the debtors despite the 6 to 8 weeks of lockdown in India across various parts. On the inventory side, the finished good inventory, like I explained earlier, has gone up, which will get corrected within this month or rather at most within this quarter. On the raw material inventory, there's been an increase in the raw material inventory, too, which is a function of price increases in terms of -- so the value has increased, and quantities have also increased because productions for the wood Veneer business and some parts of Laminate was also lower, which too, we think that within this quarter, we should be able to streamline. So really not much stress on the working capital side, too. So in this quarter, by and large, all expenses were there for the company besides certain fixed overheads like traveling, et cetera, which couldn't happen because markets were shut. We continued with our marketing programs in certain markets. We continued with our recruitment plans. We implemented the salary increases, which have shown -- which have partially been absorbed in Q1 and balance will be absorbed in quarter 2. So that's on the business side. On the demand side, on the domestic market, we think the residential demand will improve as things move ahead. July looks to be okay month for us. I think things are kind of coming back to normalcy. International, on the international markets, certain markets, there's still lockdowns or partial lockdowns in Southeast Asia. Some parts of the markets are showing extremely good demand like the European markets, the U.K. market, the U.S. market. So I think it's a mixed bag. Certain markets look good, certain are still having their own challenges. We also see that there will be a shift from unorganized to organized. And we clearly see the regional unorganized players under tremendous pressure because of cost increases, lockdowns, challenges of supply chain, disruption on the demand side. And we think this is an opportunity where we can take more market share and the industry will move towards further or improved consolidation. So by and large, we think we are in a decent grip and control on the business. And the gaps of production in sales will be overcome -- will largely be overcome in this quarter. And we should kind of correct our debt position also. Debt went up -- our net debt went up by about INR 90-odd crores in Q1 because we had to put capital, purchases kept happening, production continue while we couldn't convert production into sales, and the mix of domestic and international also got a bit altered. We think all of that, by and large, barring any unforeseen circumstances should get streamlined within this quarter. So that is it from my side at the moment. I will hand over the call to Ashok. Ashok will take you through the financial performances, post which, we'll be happy to address queries. Ashok, over to you.

Good evening, friends. I'll take you through the financial performance for the quarter. For the Q1 FY '22 on a consol basis, net revenue stood at INR 336 crores, a growth of 110% on a year-on-year basis and a degrowth of around 19% on a sequential basis. Gross profit stood at INR 154 crores, a growth of 93% on a year-on-year basis and a degrowth of 24% on a sequential basis. Gross margin stood at 45.9%, a degrowth of 380 basis points on a year-on-year basis and a degrowth of 280 basis points on a sequential basis. EBITDA stood at INR 38.2 crores, a growth of 386% on year-on-year basis and a degrowth of 43% on a quarter-on-quarter basis. EBITDA margin stood at 11.4%, a growth of 650 basis points on a year-on-year basis and a degrowth of 480 basis points on a quarter-on-quarter basis. Net profit stood at INR 17.3 crores as against a net loss of INR 7.7 crores in Q1 last year. PAT margin stood at 5.2%. Moving on to segmental performance. Firstly, the Laminate & Allied products, which form around 92% of our quarter 1 sales. Laminate revenues stood at INR 310 crores in this quarter, a growth of 113% on a year-on-year basis and a degrowth of 15% on a sequential basis. Domestic Laminate revenue grew by 148% on quarter-on-quarter -- on year-on-year basis in value terms and a growth of 135% in volume terms. On a sequential basis, domestic Laminate revenue, degrew by 36% in value terms and degrew by 35% in volume terms. International Laminate revenue grew by 97% on year-on-year basis in value terms and a growth of 112% in volume terms. On a sequential basis also, Laminate -- international Laminate revenue grew by 3.6% in value terms and same in volume terms. EBITDA margin stood at 13.3%, a growth of 490 basis points on year-on-year basis and a degrowth of 460 basis points on quarter-on-quarter basis. Production volume were at 4.28 million sheets and at a utilization level of 110%. Sales volume for the quarter stood at 3.82 million sheets and our average realization for the quarter was INR 782 per sheet. Moving on to another segment, Decorative Veneer & Allied segment, which constituted around 8% of this quarter sales. This segment includes wood veneer, engineered floors and engineered doors. In the Decorative Veneer segment, revenue for this quarter stood at INR 12.2 crores, a growth of 95% on a year-on-year basis and a degrowth of 62% on quarter-on-quarter basis. We are witnessing sequential uptick in our Veneer business, which was down in the first quarter. The capacity utilization for the quarter stood at 16%. Sales volume for the last quarter stood at 0.16 million square meters. Average realization stood at INR 750 per square meter. Moving on to another product, engineered wood flooring. Floor revenue for this quarter stood at INR 7.4 crores, a growth of 121% on a year-on-year basis, the capacity utilization was at 11%. In terms of engineered doors, Revenue grew by 35% and stood at INR 7 crores. Capacity utilization for the quarter stood at 20%. Net debt has gone up by around INR 90 crores and stood at INR 213 crores as against INR 123 crores at the end of March 21. Net working capital for this quarter stood at 101 days as against 64 days at the end of Quarter 4 FY '21. That's all from our side. I would now like to open the floor for question and answers. Thank you.

[Operator Instructions] The first question is from the line of Sneha Talreja from Edelweiss Securities.

Couple of questions from my end. Firstly, it's related to margins because we have seen a few drop in margins. Just wanted to understand the key reasons. Firstly, it could be due to volume decline? And how much was it due to raw material cost decline and how much would be due to product mix change? And is there a big difference between export margin and domestic margins currently?

So Sneha, on the margin, one, as you have seen, there's been a volume decline. The value mix of the production and sales have been lower or weaker in Q1 versus what should have been. So realization in Q1 per sheet has been the same as -- largely same as what we did in Q4, while we didn't take an increase in the month of April. So that did not reflect on the margins. The conversion of production to sales also did not happen of that value. So I think that also is showing up on the margins at the EBITDA level, right? And certain RM costs in the export market could not be passed on to customers or could not get affected, which will get affected from July onwards. So to my mind, I think it's a combination of all of this -- all of these factors has contributed to lower gross margin. And because of overall revenue being lower, the wood veneer business also being lower. And while most of these fixed expenses of employees, administration, et cetera, being there as affected a bit lower EBITDA margin also. So if you imagine only if INR 30 crores, INR 35 crores of produced inventory would have got sold and that would have added approximately INR 12 crores to INR 15 crores of EBITDA only of the items we produced, the value mix should have been better if the markets were open. So I think we would have had a normalized -- a near normalized margin, that's our view, yes. Ashok, you want to...

And secondly, the differential between the exports market margins and the domestic margins since you said there are certain components which were not passed on this side. So do you think that export margins would be slightly lower than the domestic margins?

So if you look at -- again, and we've said this in the past, it depends on the time and the mix, currency situation. So clearly, now in this quarter, even a 1 millimeter -- sorry, even the domestic mix got a bit worsened versus what was there in Q3 and Q4 because most of the urban markets were also shut and they are largely 1 millimeter markets. So on a consol basis, it could be possible that in Q1, export margins were slightly lower than domestic margins because entire increases could not get passed on. So really, I think, yes.

All right. Got it. Sir, second question was related to -- I mean, one was related to your export growth momentum. So despite all these lockdowns, container availability issues and shipment issues, we have been seeing growth in the export market. what is the normalized level of export growth rate that you see over the years, maybe you can give a flavor of growth rate for 3, 4 years, assuming that there are no -- these issues are not continuing. And I'll just follow it up with the other question which is related to this.

Yes. So Ashok Ji, can you give the last 3 years export. So you see FY '20 -- '19, '20 and '21, I think after we grew -- entire international business grew by -- no, total value, Ashok Ji -- see the international business. So I think going ahead, this year, probably export growth, obviously, will be higher because last year, we lost one quarter. So I think the sales moving at anything between 10% to 12% value growth you can expect. So if I look at last year, FY '21 -- one second, Sneha, international business -- one second, international business...

FY '21, even your international business was flat volume-wise.

So we -- so CAGR for 10 years of international business coming to 18.6%. And 5 years is 6%. But we don't have the wood veneer business. I think going ahead, you can take a 10%, 12% growth.

Which will be higher than the domestic market is what we wanted to understand?

Say again, please?

Which will be higher than the domestic market is what we understand.

Not necessarily, because we -- as I said, we're also seeing this shift from unorganized to organized.

Unorganized to organized.

Yes. So I guess both the businesses will grow, the domestic and international businesses, Sneha.

Right. Got that. Sir, one last question before I come for the follow-up. Sir, you mentioned that, okay, both the businesses assuming they will grow by 10- to 12-odd percent. You have been talking at various capacity expansion, let's say, Merino has announced capacity expansion and related businesses. Skylam recently announced hidden particle board businesses. And sir, you -- also we have heard that you would be looking at capacity expansion in other related categories, but you haven't -- category -- come out with which categories. Any call taken on that? And I'm sure that the team would be working on it. When can we get something? And what kind of a category could be -- it could be how related category?

So you know we are putting up this plant in Andhra Pradesh, where we have announced capacity expansion of Laminates of 2 lines. And so I cannot comment on the other questions you have at the moment because we'd like to be much more clear and informed before we come to you. But yes, we will be looking at many opportunities in Laminates itself and in adjacent categories.

Sure. And does the AP plant capacity expansion stands at? And when are we expecting the completion?

So the land, et cetera, the registrations, which didn't happen earlier has happened. And as we see things now, just last leg of some approvals are pending. So we hope to start building a plant sometime in the third quarter of this financial year. And I think from the construction date to commercial production should be about 12-odd months.

The next question is from the line of [ Faisal Awan ] from [ HT Awan and Companyn ].

Yes. Sir, my question is regarding the digital channels. Are we actively pursuing any kind of sales through digital channels? And how do you feel that this sector could come up for you given the fact that many of the customers want to touch on this kind of an approach? And secondly, are we planning to export to more countries also? And do we have anything in terms of our research and development budget? And if so, how much are we spending in terms of percentage of revenue?

So as far as the digital channel point is, we are working with e-comm companies who are doing design services, design and build services like doing kitchens, doing wardrobes and they are promoting the laminate as part of their collection where designers and customers can choose laminate and they are fabricated in the OEMs, sometimes they send it to the customer. So we are not directly selling a laminate through a digital channel. But we have aligned with several of these e-comm furniture companies who are supplying our service to the customer with ready interiors -- with interiors or specific furniture objects. So that is something which is being pursued. Your second question on exports to more countries. At the moment, we think we're already quite well spread, and we're not necessarily focusing on adding more countries. The focus now is to really build more depth in these markets, and there is an opportunity across most of the markets we're present in to increase both volume and value mix sales, right? The next question was on the R&D part of it. So in the Laminates business, there are 2 kinds of R&D. One is the resin technology, which is a chemistry and other is the design development part. So design development, which is working with designers, printers, place producers, doing sampling of products, showing it out to architects, IDs, both domestically and internationally. So that's an ongoing process. We don't necessarily account for that as R&D. So that's more like a marketing expense or routine product development expense. On the resin part, we do some R&D, but the chemistry or the formulation changes are not significant in our industry. So we have come up with certain products in the past like the antivirus, antibacterial, HD gloss high scratch. But it doesn't require too much of capital on those R&Ds as far as the chemistry part is concerned.

The next question is from the line of Achal Lohade from JM Financial.

My first question is, can you help us understand on a Y-o-Y basis, what is the cost inflation in each of the raw material components in terms of the design paper, kraft paper and chemicals?

So I will ask Ashok for this one.

Yes. So Achal, if you see in terms of -- in the chemical, we have 3 types of chemical, as you know that, ethanol, melamine and methanol. On a Y-o-Y basis, it will range from, let's say, 30%, 35% to some of the chemical has gone up to like 70%, 80% also. And in terms of kraft and base paper, since the rate will keep varying depending upon the mix of what we do. But in the base paper, what we safely presume that it has gone up by around 8, 10 percentage in 1 or 2 paper or few paper, it will be lower or higher. In the kraft paper, again, there are a range of kraft paper being used. So mix of that will keep changing. On a consol basis of all kraft papers put together, it has gone up by around 3.5%, 4%. But in the individual segment, it can be somewhere around 8% to 10%, again.

And would it be possible to give broad sense in terms of what is the mix typically in terms of how much would be kraft paper of the total raw material cost? How much will be base paper and the chemicals?

So Achal, sorry, I'm coming into the conversation. So certain kraft papers have also gone up over 30% to 40% here. So it depends on the category one is using. On the mix in safely assume of the RM cost, 1/3 is kraft, 1/3 decopaper, 1/3 chemicals. So some changes might have happened now with the chemical costs shooting up. So let me see what the current market prices...

So roughly -- yes. ry, sorry. Please go ahead. Yes.

So you can safely assume for ease of back of the envelope calculations, 1/3 crafters and 1/3 all specialty paper, 1/3 chemicals.

Right. So it basically means the RM cost inflation is up to, say, about 15-odd percent on a Y-o-Y basis. So how much of that is already passed on? And have you taken any price increase? Sorry, I missed the introductory remarks.But, yes, if you could comment how much price increase have we taken in the current quarter? And cumulatively. What price increase have we taken in last 4 years?

So of the RM cost, which has gone up, Achal, some would -- some value engineering, cost controls, yield improvements, value mix improvements have already -- are getting negated or will get negated. On the price increases, like we said, in domestic market, we have largely taken the entire RM cost increase. We passed on the entire increase to market. In the international markets, 2 things have happened. Besides the raw material cost increase, the sea freight increase have also -- has also been significant. So on 1 side, there's been a raw material cost increase because of shipping contracts, our CIF or C&F, the sea freight increase has been substantial. So in the international markets, what we've done, all incremental sea freights as on January '21, have been passed on to the customers, right? So that's been done including the 10%. All the sales prices, one round of increases were done by March '21. Other, approximately 2% to 2.5% increase has also been -- has been communicated and that will start showing -- that will start getting affected starting July '21 up to maybe September. So we are hoping that with some value mix improvement, value engineering at the plant, sea freight increase already being passed to the customers and the 2 round of increases, by and large, will be able to cover up the RM cost increase. For certain commodity items of exports, we may not be able to cover the entire RM cost increase.

And would you say that one of the reasons possibly for the first quarter margin contraction was to do with the sea freight given -- how much of the total exports are CIF basis, sir, broadly?

So by and large, you can assume that over 90% -- 80%, 85% is CIF or C&F. But this increase has already been -- the incremental increase in sea freight has already been charged to the customer starting Jan '21. So the margin drop is not due to sea freight. It's due to it's due to the mix -- production mix, unabsorbed overheads, lower production -- a little bit lower production Laminates and the Veneer business. So I think it's a mix of all of this, not really sea freight in terms of the export part of it.

Sure. And if I may follow up on that in terms of how do we look at this margin from a -- given the price increase and the other cost optimization measures we will be taking. How do we look at the margins from an annual perspective for the Laminate business and also the other business?

So it's very hard to say because as we talk right now, raw material costs are on the upward trend still, right? And not all raw materials, some specific chemicals are still inching upwards. So very difficult to say that very clearly. So our strategy will be to maximize volumes, keep focus on the value mix, right, pass on the increases, which we've already done, get that impacted at the earliest possible. We have visibility of raw material costs at least for the next 3 to 4 months, and they don't seem to be softening or even stabilizing for that matter. So actually, in Q2, this quarter, RM costs are going to be higher than Q1, right? But we have adequate opportunities on improving value mix in both exports and domestic market. And that's where we're going to be focused on. So improving value mix, driving volumes, which will -- and the price increases we've already impacted in the market. So that's the way we want to move ahead, Achal.

[Operator Instructions] The next question is from the line of Hrishikesh Bhagat from Kohat Asset Management (sic) [ Kotak Mahindra Asset Management ].

So my first question is, what is the volume on your flooring and door business in current quarter, in Q1? And what was it, say, in Q4 compared to the sales volume?

Yes, Hrishikesh. The engineered floor was 44,800 in terms of this quarter, and it was -- one moment. And it was 44 -- sorry, 44,800 for the quarter 4 and for this quarter, it was 23,400 square meters. And for the doors, this quarter was 5,300 and for the quarter 4, it was around 8,000.

Quarter 4 was how much, sorry?

8,000.

8,000. Okay. The other question is related to the container freight issues and logistics challenges. I understand it has been for a fairly long time and it's a global issue. But at margin compared to, say, last year, have you seen those challenges easing out? Or those continues to remain at the savings level on the container freight availability?

Container freights are not necessarily worsening as we see around, but they still continue to remain high. Container availability, I have feedback from my team that this one's looking okay. But I still think for certain destinations, especially for Latin America and North America, the challenges continue.

Okay. And just on -- from the -- to earlier participant regarding this value mix in the sense in domestic market now as we have seen markets opening up, quite a few states -- in few states, is our mix between, say, 0.7 and 1 mm back to what it was used to be in earlier times? Or do you think it's still that 0.7 mm still remains fairly heavy in overall welding?

So 0.7 was never heavy in our setup.

No, I understand. But I think you had launched a folder in 0.7 mm.

Yes. So we did. I'm just saying the mix -- so 0.7 was never very heavy. It was a very small -- it is a very small part of our mix. So has it gone back to normalcy? As we talk right now, you could assume it's very close to normalcy. I will not say -- if you assume if Q4 was normal or Q3 was normal. So you can -- so we are around the corner, we are very, very close to it. And the way it seems, I think, we'll get there very soon.

The next question is from the line of Gaurav Agrawal from Bowhead Investments. [Operator Instructions]

Sir, a couple of questions. So if I understand in this quarter, you have done 110% of capacity utilization. And what is in our working progress in terms of greenfield expansion that's around 10% of our overall capacity? So beyond this, how do you intend to grow yourself maybe not in FY '23 or FY '22, but let's be in FY '24.

I'm so sorry. So is the question about utilization and new capacities being added on? I think the...

That is -- okay. is my voice clear now?

[Foreign Language] Please go ahead.

So sir, what I'm asking is you are adding 10% of capacity on your current base. And already, we are running at 110% capacity utilization.

Yes, correct.

So at leat 10%, I think it will come by the end of this year, which will take care of the growth in FY '23. But what-- when you look at, let's say, years like a '24, '25, how do you plan to grow yourself for those years?

So currently, like in Q4, our capacity utilization was about 112%. And we can go up to -- with our experience of the past, we can go up to like 115-odd percent utilization. We are building -- we bought 65 acres of land in Andhra Pradesh, where we've announced expansion of 2 lines. So that's something which will which will help us support the growth in the market and our market share expansion. And we are actively considering to review that expansion plan on whether we should add more capacity. And since the land is quite large, we can just continue doing brownfield expansion like we've done in the past, right, that you started with 2 or 3 lines and every year, the incremental CapEx is very small. And your incremental margins and incremental revenues is significant. So with that location, we can expand capacities over the period of time. And we've left so much provision while designing the plant in terms of equipment space, et cetera.

Got it. So sir, greenfield expansion is INR 175 crores for 1.5 million capacity. So let's say, in terms of brownfield, we want to put a similar capacity of 1.5 million. So how much incremental CapEx would you need to incur there?

So typically, in the past, it has been around INR 25 crores to INR 30-odd crores. Now with increased steel, cement, CapEx prices might go up a bit more. But normally, one production line, brownfield, depending on characterization will be -- should be in the band of -- at this moment, I think, Ashok, INR 30 crores, INR 35 crores, maybe.

Gaurav, there is a small difference between what we've done in the past as a brownfield and what we are doing as a greenfield. So in the past, we have had -- the dimension of these sheets are different. So these are 2 press lines. And what service type -- the one press line normally, it will depend upon what dimension you are putting. One press line normally gives 2 million capacity, which we have done in the past 2, 3 times. And right now, the cost will be somewhere around the INR 35 crores. And these are the 2 lines, but since it's a greenfield unit, so that's why it is costing slightly higher.

No, sir, that's okay. I was only intending to ask the incremental CapEx for the brownfield one in Andhra Pradesh. So I got the answer. It's INR 30 crores, INR 35 crores for the quarter -- for 4.75 million sheets, right?

That will depend upon, again, the dimension and whether it's boards or sheet. Normally, in the past, we have only one line, which was the capacities around 2 million sheet. And since these are bigger dimension and these are mostly boards will be there issued of sheets that's why it is coming higher -- coming lower, the capacity seems to be lower marginally.

Marginally.

But the sales value will be similar or higher than what we normally have on plan.

Okay. Sir, I'm sorry, I'm asking another question on this. So in this INR 35 crores to INR 40 crores that you said. So what is the context? So -- like, for how many sheets or for what kind of revenue can it go for INR 30 crores, INR 40 crores of CapEx?

Say again, with this CapEx, how much capacity you can grow?

Yes, volume or how much revenue changes are there?

Volume, approximately, you can assume this will generate about 2 million sheets a year on a thumb rule, right? And we can generate 2 million into the pricing of...

Got it. 2 million. So the number you gave me is for 2 million. Okay. Got it.

Approximately in that range. So sometimes when you...

Yes. Sure. Sure. And sir, on the international side, if you could explain what are the key markets, not for you, but for the India as a sector, as a laminates producer? Which are key markets for us? So how has been the overall export market for India has been -- for Indian laminates been doing? Since there is another company which has recently raised money. And they have big plans to export some India-based laminate products. So if you could give some light on what the overall opportunity size is? How is it growing? Which countries are we competing with? And whether we have gained some competitive advantage over the years? So anything which you can share with us?

Sure, sir. Sure, Gaurav. These are probably -- these are question which will require more time and interaction.

Yes, so we can take it off line.

We can touch these independently. And then we can discuss this in detail.

[Operator Instructions] The next question is from the line of Amit Zade from Antique Stockbroking.

Am I audible?

Yes, absolutely.

Congrats for good set of numbers. So my question was a follow-up to the earlier question on our competitive side in export markets. So basically -- and we have seen these issues of nonavailability or, say, high sea freight rates. So has that impacted our competitiveness in the export market vis-a-vis other competition? Has that impacted -- and has that impacted the overall demand as well, sir?

So actually, as we talk, the export demand looks quite healthy to us. And I think in the last few months, there's been a lot of disruption in the international markets due to raw materials not being available. Certain -- so many other markets have also gone through their own challenges of COVID or shutdowns, like Malaysia was shut, Indonesia was shut. Some parts of Europe are partially open. Latin America was shut for a while. So I think there's been so much of disruption globally. Certain International producers -- one of the most important ones in Europe, they didn't have -- post merger, they didn't have melamine for a while. So I think the disruption is not just limited to India. It's also -- it's happening worldwide. On the demand side, actually, demand is quite strong, if I may actually say that to you. So the export demand is quite strong, and it has not altered the demand situation in the international markets.

So maybe you're trying to say that supply side constraints are still there, maybe they are different for different exporters. For we, we are facing container availability, too, but other exporters are facing other challenges. So that's why supply is getting impacted. Is that fair, sir?

So the supply side -- yes. So yes, and to add supply side disruption is not only limited to Indian producers, it's a global phenomenon. So producers in Europe, Southeast Asia, Latin America, U.S., are also facing supply side disruptions. So that's one. As far as Greenlam is concerned, our inventory position, availability of material, et cetera, has been well managed by our teams, and we didn't have much challenges. On the container availability, it's not as if no containers available. So we have -- our quarter 1 exports, international business has been higher than Q4 despite these challenges. So we want to address it on the fact that our numbers would have been even more superior had the issue not been there. So it's not as if the numbers are reducing or something in that sort of. Q1, overall international business has grown by about -- I think, Ashok Ji, it's 4%, right?

3.6%

If you add...

3.6%, yes.

3%. So this could have been higher by approximately you can assume 250 -- so approximately by about $3 million. But on the INR 20 crores, INR 25-odd crores, we could have recognize these revenues. So we had the orders to produce them. So this is what we're trying to explain.

Got it, sir. Our competitiveness has not impacted ourselves is what you're trying to say, right?

No, I would say our competitiveness has improved rather than worsening, yes.

[Operator Instructions] The next question is from the line of Bhavin Chheda from Enam Holdings.

What was the export revenue in the overall consolidated sales or international revenue in the sales in the quarter?

Yes. INR 206 crores, Bhavin.

2-0-6?

Yes.

Okay. And regarding expansion plans in AP, I just missed out, you said that the land purchase has already happened, right?

Yes. Yes, Bhavin.

And equipment ordering and there is -- so what's the road map or the time lines now?

So Bhavin as we see things now, we are hopeful to start building the plant sometime in quarter 3 of this year. We have announced that we are setting up 2 production lines, which we are actively reconsidering on whether we should add maybe one more production line there. So if we start the construction of plant some time in quarter 3 from the date of starting the plant, you can assume at least 12 months to get into production.

So basically, it's a quarter -- so quarter 3 FY '22, may be?

Yes. Quarter 3 of FY '23.

And probably in a couple of months, you'll decide whether you're going ahead with 2 lines or 3 line.

That is correct, Bhavin.

Okay. And if I recollect, so land cost was INR 50 crores and the overall other plant-related cost was INR 125 crores to INR 175 crore purchase?

That is correct, Bhavin. The land cost, obviously, is not only limited to 3 lines. It was 65 acres. So this will get a portion of a more lines and possibly some adjacent category of products also, Bhavin. So you're right on your numbers.

Okay. And apart from this, we are not doing any other capital expenses in the Decorative Veneer & Allied. That will be normal?

So no, Decorative Veneer & Allied business don't need any capital, rather we are working towards reducing a little bit of -- streamlining a little bit of the working capital, but it does not require any capital expenditure. The last leg of certain construction that one of the factors is pending, which is going on Otherwise, existing plants will consume routine CapEx of plates and some heating equipment and some routine CapEx, but that's about it.

Okay. And so July sales, has it normalized to the 100% run rate or you say 90% run rate? Domestic sales, let's say.

So July sales, domestic, the Laminate business is on 100% normal run rate. The wood veneer business is also significantly up. You can assume that's like a -- at 80%.

And the last one on the engineered wood flooring and doors, would we achieve breakeven by quarter 3, quarter 4? What's the internal targets there?

So I think we've been falling short on awards in this category. It's -- each time we think we were so close to it. Even this quarter, we've done floor and door together what?

INR 14.35 crores.

INR 14.35 crores of sales. And the loss actually in...

INR 2.5 crores.

INR 2.5 crores of EBITDA loss, we had in Q1, Bhavin. So Obviously, we wanted it to happen the earliest, but it's just like it's there, yet not there also.

So we should be [indiscernible].

[indiscernible].

Okay. Okay. Laminate capacity utilization in [indiscernible] quarters. So existing capacity also operated over 100%, I think. The maximum number I saw was 112% in March. So technically, this 15.6 million can produce how much, on an annual basis?

Bhavin, that depends on so many factors, but I think the run rate we had in Q4...

Assuming a normal -- assuming there is a business across product segment or demand revives, so that...

So we can maintain Q4's utilization level and even better it by a few percentage. So we can go up to, let's say, you can assume [Foreign Language] 115 types.

115. So your 15.6 million can roughly give, say, 16.5 million sheets. That would be the peak potential? Actually, it should be more. If I see the Q4 run rate...

No it will be -- it can be higher, Bhavin.

It can be higher because, I see 4.4 million in the March, so if I annualize that number, technically, it can give you just under 18 million.

So I think just under 18 million will be a stretch number but yes, a doable number.

The next question is from the line of Arun Baid from BOB Capital Markets.

Just -- you did mention that you will get into adjacent categories over a period of time. So do we have some time lines by which we can expect when this will come through?

So I don't think we can comment much on that moment. But yes, we are actively reviewing the possibilities and starting the opportunities here.

So can we see it by end of this financial year sir, FY '22?

I just think I can't put some time line to it.

Arun, I think it's difficult for us to comment as of now. We are working on various things, which management as a part of investment strategy does. Once we finalize the plan, we will get back to the market soon.

[Operator Instructions] The next question is from the line of Achal Lohade from JM Financial.

I think you did address the export in terms of the probable growth from a medium-term term perspective. Possible to also talk about domestic given the trends we are seeing, whether it is residential, commercial or readymade furniture, et cetera. What kind of growth at the industry level one could look at and -- for the company from a, let's say, a 2- or 3-year perspective?

Achal , domestic markets, I think will also grow. And in domestic, we have, I think, 2 significant opportunities. One is just the market growing and we're growing with the market. The other is the formalization of the market where we have a large number of smaller producers who are increasingly becoming inefficient in terms of their business model. So this potential shift from unorganized to organized, I think that's also an important opportunity within companies like us have. So I think doing a -- like, again, now value is not so critical because prices have only gone up by 10%, 12%. So saying I'll grow 10% value means only price rises happen. So probably, my guess is this year, the growth percent could be higher, right? But eventually, on a normalized run rate, I think 10%, 12% growth is something one can expect.

Sorry, I think -- I'm a bit confused. So you think 10% to 12% is the revenue growth from a medium-term perspective? How much would be...

On a normalized basis, where you don't factor in price increases. When price increase gets factored, depending on the base year, then the growth will be higher for that particular year, but eventually, assuming that prices don't fall for the -- fall marginally if RM cost comes down, steady state 10%, 12% growth is something one can expect.

And of this 10%, 12%, 2-odd percent will be price increases or it could be much more than that?

No. This is without price increases, I'm saying 10%, 12% growth. So if we add price increases...

Okay. Without pricing. That is the volume growth you're talking about. Okay. Okay. Sorry, my bad, sir. Okay. Understood. And secondly, what is the contribution for us from the south region because we understand from our appliances companies that south is actually seeing far major impact in the quarter gone by and even as we speak. So just sort of checking what is our exposure in South as a percentage of total domestic business? And are you also seeing difficulty in terms of the momentum?

Actually, we are not seeing a difficulty in south at present, and we're just havening stream. The mix hasn't got altered in any meaningful manner. And the south remains our largest market. And with our excellent supply chain, warehousing network we have -- even in the lockdown period, several OEMs, people producing kitchen wardrobes, sites were still ongoing. And I think we are one of the few companies which could maintain supplies to customers. So we are not experiencing that or maybe our base is so small, It's not showing up.

And what would be our mix? Of the total domestic, how much would be south?

Achal, I have to see if I'm supposed to say that or not. So I think Ashok will connect with you separately on that.

Okay. Understood. Sorry, you were saying something Ashok Ji?

Yes. I was saying that I'll come back to you. We don't have the figure as of now in hand. I'll come back to you.

Sure. Sure. No problem, sir. No problem. And just one more question I had, more on a macro front. In terms of these exports opportunity, I recall last time around, you had said we really don't compete against China in terms of the product segment, which we are kind of exporting. So is -- are things getting better from a competitive intensity perspective like we are -- as the country, we are getting more benefited from this momentum?

So our competition, communication, which we had remains the same. That has not changed, right? And -- when you say country competitiveness, yes, I do believe that as a country, we probably have already become -- and this will only get stronger going ahead that we've become one of the strongest countries in the world in producing high-pressure laminates and shipping it world over because the cost of setting up new manufacturing facilities globally is extremely -- the mathematics is completely different versus what it can happen in India with trained people already at a large domestic market. So yes, I think India as a country will become increasingly stronger, will gain competitive advantage in producing and exporting of laminates.

Understood. Understood. And sorry, I'm just kind of delving into it a little bit more. So you talked about the setting up facilities, the CapEx part of it and the OpEx, I wanted to check. What would be the ballpark? I mean I know it's hard to say for any country, but ballpark, would we be like cheaper by 25%, 30% in terms of CapEx and in terms of the operating cost?

So CapEx surely will be cheaper by maybe even higher. On operating costs, it depends on the size of plant -- yes, operating, also manpower will clearly be lower cost. RM, there will not be much gap besides depending on the size of the products you're producing. For larger-sized laminates, RM cost will be same or probably will be slightly more expensive. But yes, manpower, overheads, larger production base, I think all that will add value on the operating part and even the working capital cycle management would be superior. But like we said in the past, the focus has not been the cheapest or the most competitive in manufacturing only. It's also about building a brand, building the distribution network, working with architects, creating demand for the product. So I think that's where I think companies like us are working. And we've been working on that for several, several years already. So our direction is not just to be the cheapest producer. It's to be obviously produced efficiently, but more to market the brand, to create a global brand, create more demand for the product, get your product specified. So it's on the demand side and the markets side where we think more value can get treated, Achal.

As there are no further questions from the participants, I now hand the conference over to the management for their closing comments. Over to you.

Thank you, everyone, and thank you for your time and your queries, and really, really appreciate your intelligent questions. And Ashok will get in touch with you for those unanswered questions or the dialogues he needs to have with you. Thank you once again for your time. Please be safe.

Thank you.

Thank you.

Thank you, everyone.

Thank you. Thank you very much, members of the management. Ladies and gentlemen, on behalf of Greenlam Industries Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.