CCL - CCL Products (India) Ltd. Share Price

Management's outlook for CCL Products (India) Limited remains cautiously optimistic, marked by significant growth in both the second quarter and the first half of FY 2025-26. The company's turnover reached INR 1,128.21 crores in Q2, a substantial increase of 52.7% compared to INR 738.74 crores in the corresponding quarter of the previous year. For the first half, turnover climbed to INR 2,186.25 crores, showing a 44.5% year-on-year growth. Key financial highlights include an EBITDA of INR 198.61 crores in Q2 (up 44.3%) and a net profit of INR 100.86 crores (up 36.4%).

Management noted that the domestic market continues to thrive, with gross sales of approximately INR 160 crores in Q2 and INR 310 crores for H1, of which nearly INR 210 crores came from branded business, showcasing strong market share improvement across channels.

Forward-looking points highlighted by management include:

1. Debt Management: Management aims to maintain a net debt target of INR 1,350 crores by December and INR 1,200 crores by March, projecting a significant reduction from previous levels.

2. Green Coffee Price Volatility: Prices remain uncertain due to fluctuating global supply conditions. Management expects clarity post-December as new crops come in.

3. Brand Expansion: The company is focusing on building its FMCG presence, aiming to leverage its distribution network, which currently reaches 140,000 outlets.

4. Volume Growth Targets: Management is targeting 10%-20% volume growth annually, with the first half of FY 2025-26 showing a blended growth close to 15%.

5. Market Share Gains: The company reports achieving a double-digit market share in e-commerce and modern trade across India, indicating robust positioning against competitors.

Overall, management expresses confidence in sustaining growth metrics while navigating the complexities of the coffee market landscape.

Here are the major questions and the respective detailed answers as per your request:

Question 1: "What is the indication of the coffee crop performance and pricing for the next three months considering the recent volatility?"

Answer: As I mentioned, there's been conflicting news regarding crop performances, especially with reports of flooding in Vietnam affecting supplies. This creates unpredictability in pricing. Softening in agricultural commodities contrasted with the robust demand for coffee has kept prices volatile. We expect to have a clearer picture in December once the crop begins flowing in.

Question 2: "How is the growth performance in the e-commerce and quick commerce segments for the branded coffee business in India?"

Answer: Our growth has been impressive, around 40% to 50% for the first half, driven by strong volume. Notably, our share in e-commerce and modern trade has exceeded our overall market position with double-digit growth in specific channels. We're performing well, particularly in states like Andhra Pradesh and Telangana.

Question 3: "Can you provide insights into the recent improvements in working capital and whether it is sustainable?"

Answer: The enhancements in working capital stem from operational efficiencies such as early payment incentives for customers and renegotiated contracts for reduced credit periods. The current level of receivables and inventory reduction is partly seasonal, particularly as we head into the coffee procurement season, affecting future capital positioning. We maintain guidance on net debt reduction to INR1,350 crores by December.

Question 4: "What can we expect regarding the company's future vision"”will it remain focused on coffee, or expand into FMCG?"

Answer: We aim to transition into an FMCG company while maintaining our coffee roots. We are actively testing and launching complementary products including iced tea and snacks. This dual approach"”strengthening our distribution while introducing new products"”aligns with our long-term vision of becoming a diversified FMCG player.

Question 5: "How does the tariff situation impact business, especially regarding competition with Brazil?"

Answer: The high tariffs for Indian exports remain, but our operations in Vietnam have enabled us to sustain competitiveness in the U.S. market. While Brazilian coffee may divert to Europe due to lower costs, our pricing and strategy have remained resilient. We continue to anticipate reduced tariffs that can foster further growth.

These summaries encapsulate the key components of the Q&A section from the earnings call transcript. Let me know if you need any further details!