Key highlights from Arvind Ltd (ARVIND) Q2 FY24 Earnings Concall
- Financial Performance
- Revenues up 4% sequentially to INR1,922 crores.
- EBITDA at INR206 crores, 10.7% margin.
- Volumes improved in exports and garments but still subdued.
- Textiles segment revenue grew 3% to INR1,455 crores, 11% margin.
- AMD revenue grew 13% with 20% plus volume growth.
- Outlook
- Expects significant textile volume growth from Q4, driven by China+1, sustainability demands.
- AMD to continue 20% plus growth trajectory.
- Aiming for uptick in government vertical volumes in H2.
- Continuing debt reduction, repaid INR49 crores in Q2.
- Investing in innovation, technology, people to compensate for weak demand.
- Input prices like cotton range-bound, not expected to see sharp changes.
- On track with strategic initiatives.
- Q3 will be better than Q2.
- Traceability benefits expected from Q4
- Garment Business Margins
- Currently in single digits, aiming for high single digits in a few quarters.
- Scaling up capacity utilization to 100% will improve margins.
- Automation investments underway to improve throughput.
- Focused on denim, knits and wovens; anchor customers in each segment.
- Subsidiary Simplification
- Reducing subsidiaries to the bare minimum.
- Will keep progressing subsidiary reduction over next couple of years.
- Capacity Utilization
- Denim at 80%, capacity around 60 million.
- Woven at 80%, capacity around 130 million.
- Garments around 75%, capacity 40-42 million.
- AMD operating at high utilization with 20%+ growth.
- CapEx Spends
- 600 crores total CapEx over 2 years as guided earlier.
- About one third allocated to AMD business.
- AMD having slightly higher patch margins than textiles.
- More commitments in coming quarters.
- AMD Margins
- Current 15% plus margins expected to be maintained in H2.
- As business scales, aiming for small improvements over next few years.
- Targeting 100 bps or more margin improvement in medium term.
- Domestic Demand
- Muted overall, uptick due to festivals but not robust.
- Pressure more in mass segments, premium holding up better.
- Well positioned due to higher exposure to premium segments.
- Industrial Segment
- Most segments doing well except conveyor belting.
- Belting weak due to lower warehouse demand and high inventory.
- Expects belting recovery in 1-2 quarters.
- Garments Capacity Expansion and Woven Margins
- Plan to expand from 40 million units to 60 million units over 3 years.
- Focus on denim, knits and woven shirts for vertical integration.
- Woven aiming to improve vertical integration and return on capital.
- Business Segment Outlook
- Expect continued growth in garments business with capacity expansion plans of 20 million in next 3 years.
- Targeting 20% growth in advanced materials business through capacity expansion and new products.
- Aiming to improve margins in textiles business by 100-150 bps over next 2 years through higher capacity utilization and operational efficiencies.
- Growth Strategy
- Focus on driving organic growth in garments, advanced materials and textiles businesses.
- Look for inorganic growth opportunities to accelerate expansion.
- Targeting revenue growth of 7-8% in textiles and 20% in advanced materials going forward.