HUHTAMAKI - HUHTAMAKI INDIA LIMITED Share Price

Management provided an optimistic outlook for Huhtamaki India's performance during the earnings call for Q3 CY 2025. Despite experiencing volume challenges year-over-year, the company reported a significant increase in profitability and margins. Key financial highlights included a revenue of INR 6 billion for Q3 2025, marking a 4.7% decline compared to INR 6.3 billion in Q3 2024, but a 2.2% growth sequentially from INR 5.9 billion in Q2 2025. The nine-month revenue also declined to INR 17.9 billion, down 3.2% year-over-year.

In terms of profitability, profit before tax for Q3 surged to INR 492 million, a substantial 3.5x increase from INR 143 million in Q3 2024, and up approximately 50% from INR 331 million in Q2. The company achieved an EBITDA margin exceeding 10%, marking the first quarter in several quarters to do so.

Management indicated that the long-term strategies of optimizing the customer and product mix have begun to yield results. Notably, a focus on high-quality business segments is intended to support sustainable profitability. Additionally, the operational efficiencies and improvements in productivity across manufacturing sites contributed to margin improvements.

Looking forward, management expressed confidence in the potential for volume growth, especially with anticipated benefits from upcoming GST reforms that may enhance FMCG growth. They hinted at possible positive consumer behaviors aligning with these changes, leading to increased demand for flexible packaging.

Overall, while volumes faced headwinds, management assured stakeholders of ongoing efforts to enhance sustainable growth and operational effectiveness, with expectations for sustained margin improvement in the future.

Question 1: "Why is Huhtamaki not getting volume growth in a market that is growing at around 11-12%?"

I acknowledge the observation regarding the flexible packaging industry's growth. Huhtamaki faces volume challenges primarily because growth is driven by smaller regional players focusing on low-priced products, leading to commoditization. Our strategy prioritizes margin management and optimizing our product mix over chasing volume growth directly. While there's a short-term impact on volumes, our focus on profitability will continue to guide us.

Question 2: "What has led to the sharp dip in your employee costs?"

Our 15% reduction in employee costs stems from significant productivity improvements and operational efficiencies across all our locations. These enhancements have allowed us to achieve more output with flatter volumes, reflecting a structural change rather than a temporary blip.

Question 3: "How sustainable do you feel these quarterly numbers will be over the next two years?"

While predicting two years out is speculative, recent quarterly trends indicate strong sustainability, built on a solid business model. With our targeted strategies and ongoing operational improvements, I'm optimistic about maintaining these performance levels.

Question 4: "Can you comment on the impact of potential GST reforms on your business?"

We've observed the potential for GST reforms to positively impact FMCG demand, as consumers do not seem to downgrade despite price reductions. Early signs from our customers indicate a shift towards premium products, which could boost overall demand for flexible packaging, benefiting our business as FMCG companies invest in activations.

Question 5: "What is your current debt situation and interest rates impacting finance costs?"

Currently, we have a debt of INR 1 billion, down from INR 2 billion last year after a repayment. Our finance costs have reduced due to this decrease in debt levels, reflecting our efforts to maintain a strong liquidity position alongside stable interest expenses.