APEX - Apex Frozen Foods Limited Share Price

In the Q4 FY 25 earnings call of Apex Frozen Foods Limited, management provided an optimistic outlook despite acknowledging existing uncertainties in the global trade environment.

Key highlights from the management include:

1. Financial Performance: The company reported a net revenue growth of approximately 22% year-on-year to INR 197 crores in Q4 FY 25, driven largely by higher average realizations, which increased 20% to INR 794 per kilo. Gross profit rose 24% to INR 59 crores, with margins at around 30%. Profit after tax saw a turnaround, posting INR 20 million compared to a loss of INR 4 million in Q4 FY 24.

2. Sales Volumes: Shrimp sales volumes grew 2% to 2,349 metric tons in Q4 FY 25 from 2,302 metric tons in Q4 FY 24, while total annual sales for FY 25 were 10,534 metric tons, down from 10,949 metric tons in FY 24.

3. Market Outlook: The management expressed a cautiously optimistic view for FY 26, maintaining a sales volume guidance of 12,000 metric tons. They anticipate benefits from improving global demand and favorable farmgate prices, while continuing to monitor trade uncertainties, especially regarding U.S. tariffs.

4. EU Market Growth: The EU market has shown strong performance, contributing 36% of sales in Q4 FY 25 compared to 22% in the same period last year. A growth of 70% year-on-year in the EU was reported for Q4 FY 25.

5. Future Prospects: The management highlighted expectations for increased shrimp cultivation in India and emphasized that unlocking approvals for their Ready-to-Eat (RTE) product lines could significantly boost sales and margins, projecting an increase of approximately 30% to 50% in sales volumes from the EU in the first year post-approval.

Management reiterated a commitment to diversification, aiming to limit reliance on any single market to below 50% of overall sales, while also focusing on enhancing operational efficiencies amidst the prevailing trading conditions.

Q1: What is the current capacity utilization in terms of shrimp production?

Answer: Our current capacity utilization for Q4 was 20%, and for the full year, it was 30%. There was a decline in overall capacity utilization compared to previous periods, as we faced several challenges over the past year.

Q2: Can you guide on the inventory levels and global demand expectations for Q1 FY26?

Answer: We see encouraging sales on our customer end, creating demand for our products, which is aiding inventory usage. While tariffs of 10% are affecting Q1 FY26, customers are absorbing these costs. We remain cautiously optimistic about trade talks between India and the U.S., and we continue to diversify into other markets, especially the EU.

Q3: Is the guidance of 12,000 metric tons for FY26 still intact? What about the Ready-to-Eat division's approval status?

Answer: Yes, we are working towards the target of 12,000 metric tons for FY26, but we're awaiting clearer trade conditions. Regarding the Ready-to-Eat division, approvals are being processed, and we are hopeful for timely completion, which will support our growth plans.

Q4: How much of your shrimp production capacity is unapproved by the EU?

Answer: Currently, 25,000 metric tons of our capacity is pending EU approval. Once secured, this will enable us to open ready-to-eat production lines, significantly increasing our market access.

Q5: What is the expected contribution from EU sales post-approval?

Answer: We anticipate a growth of at least 30% to 50% in sales volume from the EU in the first year following the approval, translating to approximately 2,500 metric tons in additional volume based on our existing relationships.

Q6: What is the current borrowing of the company?

Answer: The company's short-term borrowing stands at INR 67 crores.

Q7: How are farmers faring with current shrimp prices?

Answer: It's difficult to generalize farmer profitability, as it depends on various factors such as their costs and yields. However, at the average price of INR 358, farmers seem to be doing okay, as most are reporting positive sentiments and increasing their stocking.

Q8: What is your company's vision for the next five years regarding geographical expansion?

Answer: Our vision focuses on reducing reliance on a single market, targeting geographical diversification. We aim to ensure no more than 50% of our total volume comes from one country, which will help mitigate risks associated with market uncertainties.