Senthil Manikandan earnings call questions · Ithought PMS

CCL Products (India) Limited CC-Dec24.pdf · 2025-02-06

Good morning, sir. Thanks for the opportunity. Sir, first question is on the sales side. So, I understand that we follow the cost-plus model, but this time we have sort of 14% revenue growth with 3 to 4% volume growth, but year-on-year coffee price has gone up like upwards of 50 to 60%. So, how to look at this number, sir? Praveen Jaipuriar: So, you know, if you see, a large portion of our contracts are also long term. So, while the coffee prices would have gone up we probably are buying coffee. Buy could have been done 6 months, 12 months prior also. Yes. So, therefore, it gets averaged out. So, there are quarters you would have seen there is 20-30% growth. There are quarters you will see lesser growth in terms of price. So, that really is a combination of how far away did we do the contract and what contract we now do. That also explains because, you know, much of the opportunistic buying are very short term. Yes. And if you see, that's the volume we are not kind of got which has also explains that these are a lot of these volumes are coming from long-term contracts. So, we may not see such price spikes in the portfolio. Senthil Manikandan: Got it, sir. So, in that sense it makes us more competitive in the market in terms of pricing. Praveen Jaipuriar: Yes, it has to be competitive, you know, at these prices. Whenever the prices are high, you will see that there will be more desperation in market. People will be out to fill volumes. There were people who will sell it even in negative margins because they need to run the plant. So, I think it's been a very, very tough scenario for the whole industry globally. And that's the reason when I started my commentary, I did say that despite these challenging environment, the performance has been pretty good. Senthil Manikandan: Got it, sir. Thanks, sir. Thank you. Moderator: Thank you. The next question comes from the line of Richa from Equitymaster. Please go ahead. Richa: Thank you for the opportunity, sir. Sir, my question is, let's assume the coffee prices do not come down. And my understanding is that for FDC, the demand is a bit elastic, and maybe the customers will also get used to a high coffee price environment. For FY '26, considering the new capacity also coming in, what would be a conservative growth or volume growth estimate that you could share? Because 10 to 20 is quite broad, but with the new capacity coming in, do you think we could do 15% at least? Praveen Jaipuriar: So, we could actually, but really will depend on the couple of next quarters. We are trying our best to kind of, but you know, while we are being aggressive in the market, what we are focusing more is on the long-term contracts, building better clients. And that is why if you see, even if the guidance of 10 to 20%, you could see it as a broad. The other way to see it is that I would say that it's pretty specific because considering the kind of volatility that is present in the market, this is quite a specific guidance that we have given. The second thing is that, you know, the guidance, if you see ultimately what we have always maintained that our volume growth and our EBITDA, the operational profit growth, will be in line. So, in spite of getting a 10% or so volume growth YTD, our EBITDA growth is 20%, which means that we have concentrated more on, you know, better margin contracts, which has helped us to deliver these kinds of good operational profit numbers. Going forward, I think we will have to wait and see that how do we drive the business forward. Having said so, I am not wanting to say that there is any let up in our aggressiveness in the market to get a volume growth of 15%. You are right. We have got new capacities added. We would also like to fill it as quickly as possible. So, depending on how things are coming out, see what is happening. The Vietnam Coffee is now coming. Every day we are seeing fluctuations. We have to wait and watch where does it settle down to, what is the concerning point is that does it put pressure on consumption. As long as the consumption is intact, I think things should settle down and probably should not impact our long-term growth guidance of 15%. So, that we are committed. Again, as the market has become short-sighted, so has we. So, therefore, giving a very long-term predictions that we used to, let's say, two years ago, has become a little challenging for all of us as well. Richa: Okay. And sir, as a new client comes in, do you expect your employee and other expenses to shoot up as well or is this with the trial production, is this already factored in the cost of higher staff quarter expense? Praveen Jaipuriar: In the consol for this quarter that is already factored in India. There could be a little increase in Vietnam, but Vietnam was, as we had told you, it wasn't a Greenfield project. It was a Brownfield project, which meant that a lot of utility manpower and other common space manpower will be same. It's only the variable manpower in our country. And these are pretty much automated factories, automated lines. These don't require very heavy manpower. So, I don't see significant variations from the current numbers. Richa: And sir, what would be the effective tax rate for the… Moderator: Sorry to interrupt, Richa.