X

Apex Frozen Foods Limited Q2 FY24 Earnings Conference Call Insights

Key highlights from Apex Frozen Foods Limited (APEX) Q2 FY24 Earnings Concall

  • Quarterly Performance
    • Volumes down 13% due to weak US demand.
    • Realizations down 10% with lower shrimp prices.
    • Change in sales mix with higher EU share where no RTE sales.
    • Cost corrections in some key items.
    • Enabled 300 bps sequential EBITDA margin expansion.
    • 1% EBITDA margin in Q2FY24.
  • Debt Reduction
    • Reduced debt by INR7 crore in H1FY24 to INR83 crore.
    • Debt to equity at favorable 0.17x.
    • Working capital cycle also improving.
  • US Demand Outlook
    • Situation easing slowly, better by end of calendar year.
    • Optimistic on demand revival by Q4FY24 as inventory backlogs clear.
    • Retail customers also planning promotions for next year.
  • New Market Expansion
    • Exploring markets outside US to diversify.
    • Focusing more on Europe, other East European markets.
    • Move will enhance resilience to market fluctuations, but remain cautiously optimistic on overall scenario.
  • Farm Exits
    • Exited 1,500 plus acres of shrimp farms from 2021-2023.
    • Done due to difficulty in managing spread out farms and for better profitability.
  • Ecuador Production Outlook
    • Seeing viability issues currently at farm level due to withdrawal of subsidies and other government support.
    • Impact expected in 2024 with new production planning.
    • Constraints on market’s ability to absorb supply volumes.
  • India Dynamics
    • Costs and low prices causing cautious approach currently.
    • Aggressiveness of past not there but still slowly stocking ponds.
    • India farm gate prices around INR300 per kg on average.
    • Stable over 2022 and 2023 so far.
    • Changing stocking densities, harvest sizes, crop lengths.
  • Capacity Expansion
    • Apex recently expanded capacity by 25,000 metric tons, including 5,000 metric tons for ready-to-eat products.
    • However, new capacity not yet approved for exports to EU, which is company’s second largest market.
    • Other companies have also expanded capacity based on their specific business strategies and target markets.
  • Indian Shrimp Export Barriers
    • Currently 4-9% duties on shrimp exported from India to EU.
    • India-EU free trade agreement discussions could reduce or eliminate these duties.
    • Approval for 25,000 metric tons of new capacity exports contingent on India-EU agreement.
    • Petition filed in US to impose countervailing duties on Indian shrimp imports, alleging subsidies; could impact industry in 2024.
  • India Facility Approval Delays
    • New shrimp processing facilities awaiting regulatory approval from EU for exports for past 3 plus years.
    • Holdup seems to be more political/diplomatic rather than related to facility audits or inspections.
    • May be linked to broader trade discussions between India and EU.
  • Shrimp Production Costs – India vs Ecuador
    • Ecuador focused on commodity whole head-on shrimp.
    • Ecuador Lacks value-added ready-to-cook (RTC) and ready-to-eat (RTE) capacity.
    • Lack skilled labor, trying to use machines, but difficult to achieve same yields and quality as manual processing.
    • Asian countries like India, Vietnam, Indonesia have access to skilled labor for RTC and RTE production.
    • Ecuador’s costs likely higher than India due to labor constraints and dependence on automation.
Related Post