LTFOODS - LT Foods Limited Share Price

In the conference call for Q1 FY26, LT Foods management shared an optimistic outlook based on strong performance and strategic initiatives. Key highlights include:

1. Record Financial Performance: The company achieved its highest quarterly revenue of INR 2,501 crores, marking a 20% year-over-year increase. EBITDA rose to INR 302 crores, up 17% compared to the same quarter in the previous year.

2. Consumer and Market Dynamics: Growth was driven by increased consumer demand, entry into new markets, and improved supply chain efficiency. The Basmati and Specialty Rice segment grew by 18%, and the organic business experienced a remarkable 32% growth, primarily due to soya meal.

3. Geographic Performance:

   • North America contributed 43% of revenue with a 32% increase year-over-year, largely due to consolidation with Golden Star.
   • European Continental revenue accounted for 18%, growing 57% year-over-year, aided by a new operational facility in the UK.
   • India contributed 31%, with a 10% growth, emphasizing strong market penetration.

4. Future Growth Projections: The management anticipates an EBITDA margin of 12.5%-13%, alongside targeting a 21%+ return on capital employed (ROCE).

5. Brand Investments: The company remains committed to brand investments, expecting to maintain 3%-4% of sales for branding expenses, with current expenditures increasing by 1.2% of sales this quarter.

6. Inventory and Costs: As of June 30, the inventory included 285,000 tons of paddy and 300,000 tons of rice. The management expects stable paddy prices with anticipated crop performance improving in subsequent quarters.

7. Strategic Focus Areas: Continued emphasis on organic growth and capturing consumer preferences in evolving markets, with plans for further acquisitions within the basmati and specialty rice segments.

Overall, LT Foods positions itself to capitalize on rising global demand while continuing to innovate and enhance its market footprint.

Question and Answer Summary from LT Foods Q1 FY26 Earnings Call

1. Question: Can you comment on the SG&A trend this quarter and quantify the impact of freight costs? Answer: SG&A expenditure as a percentage of revenue has increased by 1.2% this quarter due to higher brand investments. Specifically, logistics costs reduced by 0.90% while brand spending grew by 1.20% year-on-year, reflecting our commitment to strengthen brand presence.

2. Question: Do you expect any inventory gain and margin improvement from the increase in paddy prices due to Pakistan's water crisis? Answer: We don't foresee a significant impact on Indian basmati rice production, which contributes 80% of exports. India has experienced a 15% growth in export volumes, indicating strength in our market despite external factors. We remain optimistic about growth and profitability in both domestic and international segments.

3. Question: Will the increase in brand spending pressure margins in the medium term? Answer: While brand spending will remain elevated, we expect improvement in gross profit margins, similar to trends seen in previous quarters. Our focus is on sustainable growth without compromising on profitability metrics.

4. Question: Why did the Middle East market see a 33% year-on-year decrease in revenue? Answer: The decline reflects the discontinuation of certain private label businesses that did not fit our strategic vision. However, our branded products continue to grow, and we remain optimistic about our market position in the region.

5. Question: North America has shown remarkable growth; how do you anticipate maintaining this double-digit growth going forward? Answer: Our 32% growth includes consolidation from the recent Golden Star acquisition, but if normalized, the core category growth stands at 18%. Factors like the rising popularity of Indian cuisine and increased distribution network contribute to our growth expectations of 10-12%.

6. Question: What is the expected impact of lower inventory paddy prices on future sales? Answer: While the competitive landscape dictates pricing, we are focused on growth, anticipating an EBITDA margin between 12.5% to 13%. Our ROCE should exceed 21%, implying confidence in maintaining profitability.

7. Question: Can you elaborate on the HoReCa segment's contribution to U.S. and Europe revenue? Answer: Approximately 20% of our revenue comes from the HoReCa segment globally, while the rest is home consumption. In the U.S., this figure may be slightly lower, indicating significant home consumption trends.

8. Question: What is your approach for acquisitions in new geographies or products? Answer: We're focused on acquisitions within the Basmati and specialty rice, organic, and ready-to-eat food segments. Synergistic benefits with existing operations are a priority in our acquisition strategy.

9. Question: Can you update on the soya meal litigation status? Answer: The rebuttal was filed, and we expect a decision by the end of October 2025.

10. Question: Why does the inventory remain high at 277 days, and what steps are being taken to optimize this? Answer: High inventory days are normal for basmati rice as it requires aging. We anticipate inventory levels to decrease post new crop arrivals in September. Overall, this tracking is part of our regular operational process.