Avanti Feeds Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Avanti Feeds Ltd (AVANTIFEED) Q2 FY24 Earnings Concall

• Raw Material Cost Trends
  • Fish meal prices are high due to export demand.
  • Soybean meal prices have fluctuated but remain around 54 Rs/kg.
  • Wheat flour prices increased from 29 to 33 Rs/kg.
  • Overall raw material costs increased 1% compared to previous quarter but decreased 2.5% compared to same quarter last year.
  • Raw material prices fluctuate based on seasonality, production, and global trends.
• Production and Sales Trends
  • Feed sales volume decreased 30% quarter-over-quarter due to seasonal changes.
  • Feed sales increased 2% in first half of current year compared to previous year.
  • Export shrimp sales volume decreased 5% in first half of current year.
  • Company maintained feed production and sales despite 15% decrease in overall Indian feed consumption.
  • Company’s export shrimp sales decreased slightly compared to 2.34% decrease in overall country’s shrimp exports.
• Government Incentive Schemes
  • Company qualified for Production Linked Incentive scheme, eligible for up to 79.44 crore incentive over 7 years.
  • Received 6.84 crore incentive in FY22 under this scheme.
  • Also received grant under Operation Greens scheme for new shrimp plant.
  • Submitted documents for first installment of grant.
• Industry Growth Forecasts
  • Global shrimp production forecasted to increase 4.8% in 2024 after slight 0.4% decline in 2023.
  • Early signs of recovery in U.S. shrimp import market after over a year of declines.
  • India remains top shrimp exporter to U.S. but at lower prices.
  • Recent increase in India’s palm shrimp exports of 17% year-over-year.
  • Trends indicate potential increase in shrimp exports going forward.
• Shrimp Feed Sales Outlook
  • Shrimp feed sales increased marginally in first half of FY2024 vs previous year.
  • Field reports indicate similar shrimp feed sales likely in calendar year 2024 vs 2023.
  • Despite 10-15% forecasted decline in total Indian shrimp feed market.
  • Rest of current year appears optimistic for shrimp industry.
• Diversification
  • Subsidiary incorporated to manufacture pet food and products.
  • Partnering with Thai company for technical expertise.
  • Company to invest 51% equity, Thai company and others remaining.
  • Market research commissioned to evaluate demand.
• Expansion Plans
  • Adding 7,000 tonne shrimp processing capacity by end of FY2024.
  • Focusing on maximizing value-added shrimp products.
  • Expects higher sales volume from new capacity.
  • Also diversifying into pet food manufacturing, to commence end of CY2024.
  • Expects pet food sales to start in Jan 2025.
  • Anticipates higher revenues from processing expansion and pet food in FY2025.
• Exports to US Market
  • Recent increase due to seasonal demand around holidays and not related to issues in other exporting countries.
  • However, high Indian fishmeal exports concerning, impacting availability and inflation for processors.
  • Representations made to government for export regulations.
• Ecuador Competitiveness
  • Ecuador’s farmgate shrimp prices lower than India due to vertical integration of processors who are also large farmers.
  • Ecuador focused on commodity products like headless shell-on.
  • India competitive on value-added products like breaded shrimp.
  • But Ecuador expanding production rapidly, now largest global producer.
  • On basic processed shrimp, costs comparable between countries.
• Protein Inflation Impact
  • Beef and pork prices rising in US and China respectively.
  • Many other factors affect shrimp demand like disposable income.
  • No observable change in shrimp demand forecasts yet.
  • Hard to attribute any shifts solely to other protein prices.
• Seasonality and Inventory
  • Shrimp business sees seasonal sales fluctuations.
  • End of year sees seasonal uptick in demand.
  • Single digit inventory days maintained through seasons.
  • No issues liquidating inventory.