HUHTAMAKI - HUHTAMAKI INDIA LIMITED Share Price

In the earnings call held on April 25, 2025, Huhtamaki India's management provided a mixed outlook amidst challenging market conditions. Dhananjay Salunkhe, the Managing Director, noted that the company experienced lower volumes compared to both the sequential quarter and year-on-year figures, largely due to muted consumer sentiment and urban demand. Despite this, they reported improved margins attributed to a better sales mix, with net sales remaining flat at INR 593 crores compared to the previous year and slightly down from the previous quarter.

Key financial highlights include:

• EBITDA increased significantly to INR 49.7 crores, reflecting a 55% rise from INR 32 crores in the previous quarter.
• Profit Before Tax (PBT) before exceptional items was INR 34 crores, relatively flat compared to INR 35 crores in Q1 2024 but significantly up from INR 15 crores in Q4 2024.
• Net Profit for the quarter stood at INR 26.1 crores, slightly up from INR 26 crores in Q1 2024, and showing growth from INR 11.7 crores in the previous quarter.
• Earnings Per Share (EPS) reached INR 3.47.

Management emphasized ongoing efficiency measures and highlighted that the company aims to drive sustainable growth by focusing on enhancing operational efficiencies and maintaining a profitable portfolio mix. They acknowledged the importance of their "blueloop" sustainable products and anticipate further improvements as market conditions stabilize.

Debt remains low, with a ratio of 0.1 and a debt-to-EBITDA ratio of 2.1, showcasing a strong liquidity position. The management expressed confidence in navigating current challenges while seeking profitable growth opportunities in the long term.

Major Questions and Answers from the Q&A Section:

1. Question: What are the key reasons for the 450 bps increase in gross margin? Do you feel this kind of margin is sustainable in the short to medium term?

   Answer: We focused on the right portfolio mix and improved operational efficiencies. The combination of product selection and aggressive cost management has contributed to this margin increase. While we are optimistic about maintaining this trajectory, sustainability will depend on continuous improvements and market conditions.

2. Question: What is the contribution from blueloop products this quarter, and when do we expect them to significantly impact EBITDA margins?

   Answer: Blueloop products contribute to approximately 27% to 32% of our sales. We are progressing with our investments in this area, but it's tough to quantify when they will notably enhance EBITDA margins as it relies on broader market acceptance and regulatory developments.

3. Question: Is there any plan to expand into non-FMCG items like stationery products and electrical equipment?

   Answer: Our core focus remains on food, beverage, and healthcare packaging. While we continuously evaluate opportunities in industrial sectors, we are dedicated to our existing product areas and do not plan heavy expansions into stationery or electrical products at this time.

4. Question: Can you clarify how loyalty payments from the parent company are creating value and keeping you competitive?

   Answer: There are no specific royalty payments involved. The IT and digital investments are evaluated rigorously, and while these services come from the parent company, they enhance operational efficiencies and provide a competitive edge rather than creating any direct royalty-based advantage.

5. Question: Can you elaborate on the steps being taken to improve cost efficiency, especially concerning employee costs?

   Answer: We are examining all aspects of operations for efficiency improvements. This includes evaluating purchasing, supplier contracts, and operational expenses. Also, we are focused on enhancing productivity through automation and digital initiatives, aiming to gradually lower employee costs as a percentage of sales.

6. Question: How are your margins aligned with BOPP and BOPET manufacturers in terms of competition?

   Answer: We compete in a different space, encompassing more complex products beyond base films. Our overall margin structure tends to be higher due to this complexity and added value, but direct comparisons with single manufacture film companies may not accurately reflect our market position.

7. Question: What are the current trends in the export market and capacity utilization?

   Answer: Our export split is generally around 70-30 in favor of domestic sales, and we see no significant risks associated with this balance. Our capacity utilization can be increased, though it varies with product mix; therefore, it's challenging to provide specific percentages.

8. Question: What are you doing to improve sales volume and revenue given the stable performance?

   Answer: The stagnation in sales is due to various factors, including inflation impacts and changing consumer patterns. Focused strategies on enhancing our product mix and penetrating more sustainable categories are in place to boost sales moving forward.

9. Question: Can you share how the shift towards digitalization will enhance your operational efficiency?

   Answer: Our partnership with Huhtamaki Oyj aims to leverage technology for operational efficiency. Investments in IT infrastructure and digital tools will streamline processes, ultimately reducing costs and enhancing our competitive positioning in the market.

10. Question: How are you navigating the current challenges affecting your major customers like MNCs?

    Answer: It's indeed a challenging environment with MNCs facing their pressures, notably in terms of cost controls. This situation affects our margins too. We remain committed to robust partnerships and aim for innovative solutions that offer sustained value despite these pressures.