Sahyadri Industries Limited (532841) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 Months FY '25 earnings conference call hosted by Sahyadri Industries Limited. [Operator Instructions] I now hand the conference over to Mr. Tuljaram Maheshwari, CEO, CFO and Whole-Time Director from Sahyadri Industries Limited. Thank you, and over to you, sir.

Good afternoon, everyone, and thank you for joining us on the Sahyadri Industries Limited Q3 and 9 months FY '24 earnings conference call. I'm accompanied by Mr. Arvind Garg, our Financial Controller; and SGA, our Investor Relations Adviser on this call today. I hope everyone had a chance to view our financial results and investor presentation, which was posted on the company's website and stock exchanges. Let me begin with our performance. Turning to the business highlights, followed by the financial performance. In 9-month FY '25, our business performance was influenced by weaker demand conditions and persistent challenges in the rural economy. The extended monsoon in the Western India, particularly in the Gujarat and in Southern India, along with the cyclone in Tamil Nadu, created additional challenges, disrupting supply chains and impacting consumer spending patterns. These weather-related disruption led to a slowdown in market activities. However, we are witnessing stabilization in raw material prices, which has led to a 180 bps improvement in our gross margin, reaching 43.7% in 9-month FY '25. Global supply chain disruption and rising logistic costs have created significant headwinds, placing pressure on our operations. The increase in ocean freight cost has had a direct impact on our EBITDA margin. To mitigate these challenges, we are closely monitoring cost dynamics and implementing strategic measures to enhance operational efficiency and safeguard profitability. Coming to building material segment in Q3 FY '25 reported a revenue of INR 129 crore, up from INR 100 crore in Q2 FY '25. This increase reflect a positive growth trajectory within the segment. Additionally, EBIT for the segment stood at INR 2.6 crore, a notable improvement from the loss of INR 2 crore in the previous quarter. Capacity utilization for 9-month FY '25 stood at 67% compared to 73% in the same period last year. This decline was a strategic decision as we calibrated production in response to evolving demand trends. We remain focused on optimizing operations to ensure efficiency while maintaining the flexibility to scale up as demand recovers. Looking ahead, we are optimistic about the opportunities that will emerge as the rural economy stabilize. Having said that, we might witness some forex impact in Q4 FY '25 as rupee depreciated compared to USD. And as you are aware, we import one of key raw materials, asbestos from Kazakhstan with improving macroeconomic indicators and visual pick up in consumer sentiment, we are well positioned to drive growth. For a strong operational foundation, combined with a disciplined approach to the cost management will enable us to capitalize on market recovery. Now moving on to the financial performance for 9-month FY '25, total income stood at INR 456.2 crore compared to INR 483.7 crore in 9 months FY '24, reflecting a decline of 5.7%. EBITDA stood at INR 44.2 crore, down from INR 55.8 crore in the corresponding period last year. EBITDA margin was 9.7% in 9-month FY '25. Profit after tax stood at INR 15.2 crore compared to INR 22.1 crore in 9-month FY '24. For Q3 FY '25, total income stood at INR 131.7 crore compared to INR 136.3 crore in Q3 FY '24, reflecting a decline of 3.4%. EBITDA stood at INR 9 crore, down from INR 13.8 crore in the same period last year. EBITDA margin stood at 6.8% in Q3 FY '25. Profit after tax was INR 0.8 crore compared to INR 3.2 crore in Q3 FY '24. With that, I conclude my opening remarks and would now be happy to take your questions.

[Operator Instructions] The first question is from the line of Aditya Sen from RoboCapital.

Sir, first I'd like to learn about the market share. Are we gaining any market share in our geographies? Or are we holding the same market share as of now? And also, about the demand, what are the key reasons for the lack of demand in our key areas apart from cyclone and extended monsoon?

See, the market share is more or less same. There's no any loss or gain so far. And as regards the impact of monsoon and that, as I said, that is impacted our Q2 -- Q3. But going forward, from February onwards, we see some positive vibes in the market demands.

So you are saying that in Q4, we are seeing some green shoots in demand. Is that correct?

Yes. From February onwards, there is a positive vibes.

And do we expect any further reduction in the raw material prices?

Raw material prices won't be reduced, as I mentioned in my opening remarks also that because of the rupee depreciating and as you know, that 50% of material mainly the fiber is being imported, and that is getting impacted. I don't see any reduction in the fiber -- in the raw material cost going forward on account of the rupee devaluation.

[Operator Instructions] The next question is from the line of [ Ravi Shah ] from [ VRS Capital ].

Yes. Sir, basically, I had 2 questions. So sir, how do you anticipate the fiber prices moving in the near-term? And are there any specific factors such as demand supply apart from the rupee depreciation, which you mentioned?

See, as I said, fiber prices are stable. And because of this devaluation of the rupee impacting to the most of the fiber price, if you see a landed cost.

So majorly its rupee driven now?

Yes.

Understood. Sir, my next question would be the currency fluctuation. So do you think expect this to like, persist in the long-term? And how is it impacting the entire industry?

It is going to impact everybody who is importing [ indiscernible ]. So how long it will last? I don't think anybody has the answer of it.

The next question is from the line of [ Tanya Desai ] from [ Elevate Research ].

I had 2 questions. My first question...

Can you speak a little loudly, madam?

Sir, am I audible now?

Yes, please.

Yes. So sir, I had 2 questions. My first question is that one of our competitors had indicated that the industry has experienced a slight decline of approximately 0.5% to 1%. Could you share your perspective on this? And do you agree with this assessment? And in terms of the overall industry landscape, could you just give some insights related to the growth trends, challenges and opportunities?

See, so far, whatever the results have come, they are in the line of overall results, we are at 3%, other maybe at 2%. But as you know, we are not a all-India player, we are mainly the West and South. So in other markets like North and East, if they have done good, so they are negative, maybe a little less. As regards the -- what was the second question? Can you repeat again?

Yes, sir. Regarding I wanted to ask that the industry landscape in terms of the trends and the opportunities.

See, as I said, generally, our Q4 and Q1 next year is always good. And this time, monsoon and everything is good and hopefully, as we see the demand in the February onwards, seems to be positive.

Now also, one more question that on the last earnings call, sir, you had mentioned that after Diwali, there was an uptick in demand. And while we have seen revenue growth, there has been a dip in the EBITDA and PAT. Could you provide some insights into the factors impacting our profitability?

See, as I mentioned, the demand generally Q3 onwards is always upside. But this time [ Audio Gap ] as well as the prices being moved the way it should be. So both have impacted on volume as well as on the profitability.

Sir, I'm sorry, but I lost you. Could you please repeat it?

What I said is generally Q3 onwards, the demand is always positive. But this time, it was not. And resulting there is a lower capacity utilization and also we could not increase the prices. So both have impacted the profitability as well as the [ performance ].

I was just wondering that why are we not able to increase the prices?

Yes, we could not increase the prices because the demand is not upward. Demand was at the lowest end.

[Operator Instructions] The next question is from the line of [ Dhruv Modi ] from DSM Securities.

So I have a couple of questions. So regarding from last few quarters, there has been a commentary around subdued visible demand and pricing pressures due to limited stability to pass on cost increases. How do you see demand recovering in the near-term? And are there any early signs of improvement? And also, what factors will drive the turnaround?

See, as you know that generally, Q4 and Q1 of the financial year always good for this industry. And February onwards, we are seeing there is a upside in the demand. So we feel that demand would be definitely upside. As regards the cost, as such cost is under control, but because of dollar fluctuation, that is impacting heavily on that. So if the demand increases, definitely something would be passed on to the market. So we are very positive in Q4 as well as Q1 next quarter.

And sir, what factors can drive the turnaround?

See, turnaround, as I said, it is only demand, nothing else.

And so the other question I had is, as you mentioned that the extended monsoon in Gujarat and the southern region along with the Tamil Nadu cyclone impacted the revenue this quarter. Could you provide some details on the extent of the impact, both in terms of operational disruption and potential recovery in the coming quarters?

There is no nay operational interest and mainly because that area was flooded, so we could not dispatch the material and those things. But otherwise, there's no any operational interest.