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CCL Products (India) Ltd Q3 FY24 Earnings Conference Call Insights

Key highlights from CCL Products (India) Ltd (CCL) Q3 FY24 Earnings Concall

  • Financial Performance
    • Revenue of INR664.48 crores for Q3 FY2024, up 24% vs last year.
    • Net profit of INR63.29 crores, down 13% vs last year.
    • EBITDA of INR112 crores.
    • About 800 metric tons of shipments deferred from Dec. to Jan. which led to lower Q3 sales than expected.
    • 9 months YTD revenue of INR1,926 crores, up 24% vs last year.
    • 9 months YTD EBITDA of INR329 crores, up 15%.
  • Outlook
    • Expects to meet full year revenue growth guidance.
    • Volume growth expected to recover in Q4.
    • Profit guidance impacted by Vietnam issue pending insurance claim.
  • Coffee Outlook
    • No slowdown in coffee demand seen.
    • If anything, pent-up demand driving prices higher.
    • Vietnam crop concerns adding to tight supply perceptions.
    • Coffee prices at multi-decade highs and keep rising.
    • Tight supply outlook and speculative buying driving prices.
    • Prices expected to remain high in near term.
  • Capacity Expansion
    • India capacity expansion on track for March.
    • Vietnam expansion on track for Jul-Sep quarter.
    • Vietnam has 40-50% volume growth from new capacity and aggressive selling.
    • Low margin contracts impacted consolidated margins by 2-3%.
    • Expansions to help meet robust market demand.
  • India Business Growth
    • India domestic business at INR230-235 cr in 9 months.
    • Branded business at INR145 cr in 9 months, projected to reach INR200 cr this year.
    • Seeing 40-50% growth momentum in brands after correction in Q1/Q2.
    • Growth across GT, MT and e-commerce channels.
  • UK Acquisition Update
    • Transition period over, started taking over operations from July.
    • Spent 4-5 months reworking product, packaging, promotions with partners.
    • Relaunch with new packaging and products end of March.
    • This year’s numbers not significant, only 15 stores.
    • Will update after March relaunch on market response.
  • Margin/EBITDA Outlook
    • No major deviation expected in margins.
    • Product mix changes between spray dried and freeze dried to impact margins.
    • Focus on small packs and specialty coffee to improve margins.
    • Offset by factors like Vietnam lower margin contracts.
    • Guidance of volume and EBITDA growth remaining aligned holds at annual level.
    • Confident of achieving 18-20% EBITDA growth guidance.
    • Vietnam losses and margin pressure while catching up volumes impacts growth.
    • Volume-led growth in next 2 years rather than margin expansion.
    • Small packs ratio increasing gradually from 20% now.
    • 30% ratio over time to drive margin improvement.
  • Working Capital
    • Working capital facility increased by INR200 cr in India to INR600 cr.
    • Vietnam working capital limit increased from $15 million to $45 million.
    • Overall working capital increased from INR600 cr to INR1000 cr.
  • Business Growth
    • Currently have 4,000 vending machines, looking to build aggressively.
    • Adopting cautious approach for sustainable model.
    • Target to build INR100 cr business from vending in next 3-5 years.
    • Work with many coffee D2C brands and chains on backend.
    • Aiming for INR200 cr branded business this year.
  • Gross Margin and Ad Spend
    • 30% gross margins for overall domestic business.
    • 5-7% higher for branded business specifically.
    • Ad spend at 8-10% of sales.
  • China Business Potential
    • Negligible volumes currently to China.
    • Seeding market in partnership with associate.
    • Expect volumes to start picking up going forward.
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