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.