Somany Ceramics Limited (NSE: SOMANYCERA) Q3 2025 Earnings Call dated Feb. 06, 2025
Corporate Participants:
Abhishek Somany — Chief Executive Officer
Unidentified Speaker
Analysts:
Navin B. Agrawal — Analyst
Unidentified Participant
Keshav Lahoti — Analyst
Amit Purohit — Analyst
Madhur Rathi — Analyst
Presentation:
Operator
Good evening good evening, ladies and gentlemen. Welcome to Somani Ceramic Limited’s Q3 FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the management’s opening remarks. Should you need assistance during the call, please signal an operator by pressing star then zero on a touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr Naveen Agarwal, Head Institutional Equities at SKP Securities Limited. Thank you, and over to you, sir.
Navin B. Agrawal — Analyst
Thank you. Good evening, ladies and gentlemen. It’s my pleasure to welcome you on behalf of Somani Ceramics Limited and SKP Securities to this financial results conference call. We have with us Mr Abhishek Somani, MD and CEO; Mr Somani; Mr Shaj Kedawa, CFO; and Mr Kumar, Head of Strategy and IR. We’ll have the opening remarks from Mr Somani followed by the Q&A session. Thank you, and over to you, Mr. Thank you.
Abhishek Somany — Chief Executive Officer
Thank you. Welcome, ladies and gentlemen, to the earnings call of Q3 FY ’24-’25. As you can — as you must-have seen the results by now, again, this quarter was a weaker domestic demand and it continued with the lower exports overall for the industry, not for our company, but a weaker domestic demand. However, within this domestic demand, which for the industry was negative and the export was also negative, I’ll come to those figures. Okay. Our sales grew by 4.5% in Q3, which is better than what we did in Q1 and Q2. Operating margins were maintained at 8.4%, which is similar to the last quarter. Gross margins improved by 1.4% in Q3. Capacity utilization went up from 77% To a little above 80%. Yeah. Gas price moved up by about 4% in Q3, purely on the account of a little bit of the movement on the dollar, plus a little bit on the natural gas prices on the spot. As you can see, the margins as I mentioned have been maintained at 8.5%. Of course, it’s down from the last quarter sequential Y-on-Y and from 9.7%. But from the previous quarter, we’ve been able to maintain it. As a result, PBT and PAT are also down. I would take you through the segment reporting, which is our ceramic tiles, we have done in-quarter three, 34% constituted of ceramic tiles of sales, 28% was PBT, that’s polished tiles and glaze tiles, which is the sunrise segment is 38% exactly as per our commentary. Last year, it was 34% in Q3 and we said we will take it up to 40%. So we are at about 38% and this is continuing to grow and it will cross 40% very soon. Bathware sales grew, we were very happy with the bathware sales considering all other manufacturers are either flat or negative and is what we hear. So bathware sales are at about 8.5% in Q3. Thank you. Our capacity utilization in the segment was better than the tiles. It was at 87% for and optimum capacity for faucets. Brand spends were maintained at 2.5% of sales. Working capital was largely maintained. We had a little bit buildup in the inventory. So whatever you see a little bit extra is on the inventory side, whereas the balance sheet has been under check and we have not bought any sales. Therefore, our receivables have only gone up by a day or two, which is in-line much better than the industry, but in-line with our expectations. Our distribution network increased. We added 134 net dealers and 46 showrooms in the nine months, which is up to Q3. The guidance again is the mid to-high single-digits, we do believe that quarter-four should be slightly better. Like quarter three, we’ve seen some green shoots. EBITDA margin, we will be improving or maintaining for sure, but improving a little bit depending on how much we are able to sell. Our brand spend will be maintained at 2.5%. The total — the total debt inclusive of JV has been has been brought down. It now stands at INR299 crores, inclusive of all working capital and term loans. Out of this, 78% of the INR299 crores is in two entities, which are our newest JVs, Sudha Somani, which is in the South JV, which is INR115 crores and INR107 crores is in the brand-new plant which started only almost just about a year-ago, which is the max — so many max. And out of this the term-loan is INR158 crores and the current majorities are INR41 crores and the working capital is INR101. So we’re very, very comfortable as far as our debt is concerned. Our asset turnover to consol level is 2.3 times. The MAX plant, I must say, is getting stabilized. We are now at 51% capacity utilization and we are doing another launch soon in the month of March or early-April, which should take-up the capacity even further, but we’re very happy. Again, here we are playing the patient game and not discounting the product. We are holding on to prices. And that’s how you can see that our average realization has not come off, whereas the — we’ve seen in the industry pressures on that. We’ve been able to maintain this by A, not discounting much and also by selling the more value-added at a — at a fair-value. We do have an exceptional gain of INR9.42 crores with the disinvestment of the two JVs and a capital release of INR20 crores, which can be utilized for new strategic investments. I would like to bring your — bring to your notice that we’ve got out-of-the two JVs. This is in-line with our statement earlier that we would be using our capital employed in a much better way. One of these JVs was not a very profitable one and that was the reason is because ceramic volatiles are losing sheen and it is selling less than what it was — what the capacity of this plant was. Plus also ceramic volatiles because it’s become so competitive, we have found better vendors in regional areas. So we found a vendor in the north and we found a vendor in the South. So it was only prudent to get-out of this JV so that we can source better, smarter, cheaper from regional sources and get some profit in the bottom-line. So — and the P&L will look better by disinvesting from the JV. So although this JV will continue to be our supplier. But by releasing him from a joint-venture agreement with us, he now can sell to other people, we being the largest buyer any which ways. But then in that case, the minute he starts using a larger amount of his capacity, we will be able to also buy from it at slightly better and cheaper prices. So the JV was again another exit. This exit was prompted by again the same reasons of this particular product losing sheen, which is the normal tiles. And also this JV had come of age. We needed some investments here to renovate this plant in terms of the polishing line, etc. And the third reason also was that they exited — one of the partners sold some stake to Millennium to Inframart. The Millennium Group Partners offices sold to Inframart and that also was on discomfort to us. So therefore, we exited the JV. Again, this would be value crediting as far as the P&L of Somani is concerned. Largely, I think it’s been a fairly decent quarter. Like you can see, we have not bought any sales. Our balance sheet is on the check. Our free-cash flows are only getting better after the buyback, which we did is getting better slowly and the first two quarters were very muted. So since then it’s only becoming better and better. We are looking at some other strategic investments, one of which has been announced just in the in the Board meeting this quarter, whereas we’re buying a construction chemical business. So I have been talking about it and this was a very, very small acquisition and we’re looking at this to build-up our construction chemical business in various other categories other than the — other than the adhesive and the grouting business which we already have. So this would be something we’re very excited of. It’s early times. Let’s see how we can shape up this company. Very fortunately that this company which we’re acquiring is in, which is literally a 10 minute drive from our existing facility, facility. So that makes it easier for us to manage this entity and it comes with a sizable piece of land and building. So — and a lot of intellectual property in terms of various different formulations. So now it’s a question of strategizing with the — with the partner and seeing how we can ramp these products up the B2B and the B2B segment. Of course, very clearly, we have a right — we will be moving up to 100% ownership of this plant in the next three to five years. So that’s already agreed-upon as a prepaying acquisition over the next three to five years. We have 51% currently and then we will keep moving up from 51% to 100% in the next three to five years. So very excited about this new — the JV, which is the new acquisition, which is in-line with our products. It goes to the same B2B supplier. So it’s all to do with building, whether it’s commercial or whether it is residential. And also some of the products which this company makes is in-line with our existing dealerships. So some of it will flow into the same dealerships and some of it we will be contracting some other dealership, which again is very exciting times to form a new alignments with trade partners. So very excited about this business. Having said that, tile remains to be our focus. Sanitaryware, the next focus and construction chemicals will be the new foray. But we’ve been able — we are doing this because it’s a growing business and also the network is kind of common. So that gives us a lot of comfort, just like when we started adhesives.
Questions and Answers:
Abhishek Somany
So this is it. And I would now open the floor to the Q&A. Thank you so much.
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask questions may press star and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles to ask questions, please press star and 1. The first question is from Alreja from Nuvama. Please go-ahead we cannot hear you well.
Unidentified Participant
You are cutting off, please. Is it better now? Yes. Yeah, just wanted to understand demand perspective. From your end. Is it higher costing off, not being able to hear you. Sir, is it better-off? Yeah. Yeah. Just wanted to understand the demand perspective from year-end. We have seen, I think I don’t know which H2, but we always hope that demand would in H2. But somehow we have not been seeing that. And with the amount of completions that we would be seeing on-ground, I just wanted to miss out. I mean, just understand where are we missing this demand in terms of –
Abhishek Somany
– I don’t think we’re missing the demand, first of all, I think we’ve grown better than the industry. And the industry is only negative growth, some of them are shot permanently, some of them are shot for this whole month of January. So I don’t think we’re missing demand or we are losing market-share. So in most areas, we are only gaining or maintaining our market-share. And I think that question which is where the demand has gone considering so many buildings have come up. We are also looking at when these buildings will start getting into completion and eagerly waiting for it.
But to give you some kind of a sneak peak into it, the kind of orders we have secured with the residential builders and some commercial builders in the month of December and also in January, they’re very, very, very, very positive and some of them have started supplies from the month of February, March and but most of the supplies will happen in the — in the first and second-quarter onwards. So there are green shoots there, but it is kind of perplexing as to why the IHB, which is the individual home buying is being delayed and deferred because homes are being made, will have to get made, tiles are the preferred material, sanityware, there is no choice to — but to put a bath sitting in a sanitaryware.
So it is a little. I think this is a deferred purchase and there is overall slowdown in the economy. Having said that, I think looking at other people’s results in the building materials stage, I don’t think we are worse off than them. We are only better-off. And we’ve been able to maintain margins and most importantly, we’ve been able to maintain our receivables, which means clearly that we haven’t bought sales or we have not sold very cheap quality materials or a cheap quality new brand or anything like that.
Unidentified Participant
Very well-understood on the balance sheet part. I appreciate that effort. On the margin front, given that you also mentioned that you have secured certain orders on the project front, will it incrementally lead to any further margin dilution for us, given that we have heard leaders speaking on incremental project order coming in, which has led to certain margin dilution?
Abhishek Somany
Not really. I don’t think it is at a certain margin dilution because we’ve been able to maintain — I think we have slightly lower base. We have a little bit of a cushion. We have a slightly lower base on the upper-end spectrum of the tiles, which is the large-format tiles, etc., where some other manufacturers are selling more than us, especially industry-leader. So I think we have a little bit of cushion there. We are pressing the pedals there to increase that sales and I think it should be able to compensate and that’s what’s happening right now also. So yes, it’s a question of what we are selling to these builders. We’re not really selling the volt tiles and the standard floor tiles. We are selling GBT tiles, but here it’s a question of selling at slightly cheaper prices, but if that drives my capacity utilization up, then it kind of compensates for a slightly lower-margin on that particular project because my capacity utilization gives me a lot more leverage in terms of economies of scale and also more importantly, the quality of the that also improves when I increase and you run the plants at full capacity. It gives me cost leverages.
Unidentified Participant
Okay. Understood, sir. That was helpful. And last question, if I may ask, what would be a current mix of retail versus projects? And also if at all, you could give some sense on Tier-1, Tier-2, Tier-3 sales for us?
Abhishek Somany
Okay. That particular mix has remained largely the same, which is 10%, 11%, up to 12% is government. And I think the private sales is still at about 7%, 8%, but the kind of orders which we picked-up that will increase by 2% to 3%. 3% is — 2% to 3% is export. So we were always in the 77% to 80% range as far as retail is concerned. I see that coming down to 74%, 75% wherein the 2%, 3% will get converted to the residential and the commercial private builder sale. So that’s what I see in the next couple of quarters. Clearly, we are taking more orders from builders, but please be rest assured that these orders are not coming at the cost of any receivables. It may come at the cost of slightly lower pricing, but then that I just mentioned, it gets compensated by my capacity utilization.
Unidentified Participant
Okay. Understood, sir. That was helpful. Thanks a lot and all the best.
Abhishek Somany
Thank you, sir. Thank you.
Operator
Thank you. Before we take the next question, I request to participants to please limit your questions to two per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from Utkarsh Nopani from BOB Capital Markets. Please go-ahead.
Unidentified Participant
Yeah, hi, good evening, sir. Sir, my first question is regarding our type sales volume in December quarter. So if we see our own and JV type production grew by roughly 5% on a Y-o-Y basis, but our own and JV tile sales volume degrew by 7% in December quarter and at the same time, our outsourced tile sales volume grew sharply by 35%. So can you please explain the reason for the same?
Abhishek Somany
, you want to take that question, please? Yeah, sure. So okay, there is no significant change as far as this mix is concerned. It’s a by and large in-line with the sequential quarter-on-quarter basis. So it is a more like a broader change in the sourcing mix, which we have been doing off-lit. But otherwise, if you see Q2 and Q3, it’s largely in-line, wherein our own plant is giving us around 28% to 29% of revenue and close to 40% is coming from JV, which definitely will change in next quarter for sure because two JVs we are moving out. So that number will shift from one block to another block from JV to other OEMs. So for that matter, you will find next quarter OEMs will be moving up. But this quarter OEM will remained around that number, 33% 34%. So there is a movement of more than 1% or 2% here and there.
Unidentified Participant
Sorry, my question is regarding like we are seeing a degrowth in our own tiles manufacturing volume — sales volume, but we are seeing a sharp growth in our outsourced tiles volume. So just wanted to know what is the rationale for that.
Unidentified Speaker
So that is the level. There’s no rationale for it. I think you will — this is correct, it’s all momentary. It depends on what particular product we were making and what particular line. But the minute the demand picks up, obviously, our own manufacturing will be moving close to 86%, 87% capacity utilization and the JV is also at the same right. So this is nothing to highlight. It’s an aberration on a quarter of maybe a line being shut for some reason in the own capacity, which looks at — which then looks seems as a lower capacity utilization or maybe a particular line which had filed up stock of a particular category of product and for that reason, that got stopped. So, but this is an aberration. There’s no — there’s nothing by design. By design, very clearly our manufacturing gives us the best margins and after that it’s the JVs and then the outsourcing. So the focus will remain to line balance and make sure that our manufacturing is at optimum capacity.
Unidentified Participant
Okay. And sir, my next question is on the fuel cost. So if you can just help us what would be the average fuel cost by region-wise for December quarter and what it would be at present and do you see any impact of sharp rupee depreciation on fuel cost going-forward?
Abhishek Somany
So first of all, the second question first, the decrease in the devaluation of the rupee, the — the component which is of the foreign-exchange and the gas pricing to that extent, it will improve, it will move-up by 1% or two because on a weighted-average, everything is not on the dollar component. Only a part of the gas pricing is on the dollar component. So that will obviously increase with the rupee going from an average of 85 to now closer to 88. But having said that, in-quarter three, our pricing overall was 45. Last year same last year same quarter was 44 and last full-year was 44%.
So no major change. Our Northern plant, the pricing was 43. Our Western plants, all our Western plants, including the Morbi joint-ventures were at 49% and the Southern plant was at 51%. So no real change as far as the pricing is concerned. And this I am quoting figures only for the natural gas pricing, not for our biomass and our coal.
Unidentified Participant
Okay. And sir, lastly, I just need a few data points, if you could just give us a sense what would be the capacity utilization of our Somani Max plant in December quarter and what is the reason for 51 Ukrash, I had mentioned it earlier, 51%. Okay. And what is the reason for increase in depreciation cost
Unidentified Participant
On a quarter-on-quarter basis?
Abhishek Somany
Okay. Salesh, you want to take that question?
Unidentified Speaker
Yeah. So there is some accelerated depreciation we have taken on some of our equipment which we have discontinued. So we are doing the line balancing in our Qatar unit. And there are some old equipments which we have removed and we are putting up new equipment. So there is a one-off card which has come in this number. Okay. So the normal run-rate would be INR19 crore only going-forward. No, normal run-rate will not be INR19 crores, it will come down because this is an incremental charge which has come in this quarter. There is some more incremental charge which will come in-quarter four because we are still doing some line balancing. So there are some equipment which will come out and there are some new equipment which are getting put.
But the normal run-rate will be around 16 is what I — no, no, the normal would be around INR19 or 20. So this quarter it has gone up by INR4 crore. So we running the — I would say normalized amount of depreciation would be around 1920, 20 you can take.
Operator
Okay. Thank you. Thank you. Next question is from Keshav Lahoti from HDFC Securities. Please go-ahead.
Keshav Lahoti
Thank you for the opportunity. Sir, just wanted to get a sense, as you highlighted domestic demand has degrown in-market. So why is that only tiles sector that is degrowing, while the same trend we can’t see, be it, be it fly segment, be it cement sector. So what is missing in the tile sector or are something like laminate or something gaining market-share from ties, how should we read it?
Abhishek Somany
No, no, nothing is gaining market-share from tiles. How you read this is that if you see the branded segment, none of the branded segment has regrown, most of the branded segment have either grown or remained flat. Is the entire Morbi sector which has degrown because a large part of the Morbi sector was exporting and with exports going from last year, INR20,000 crores or INR2,000 — sorry, last year’s INR20,000 crores this year would be anywhere between INR13,000 and INR14,000 crores. So that has led to added pressure with the Morbi manufacturers. And with the stocks filing up, they’ve had to shut a lot of their sales. So therefore, there has been a reduction in their revenue and in their production.
So and also if the building, the real-estate sector was the earlier question with, there’s so much action with the building and why is it not translating to tiles. I think that is also a question where a lot of these Morbi guys who don’t have a very strong retail outlet, they’re mostly selling to the builders and the builders are not really buying at the same capacity that they should be buying considering that there has been so many launches. So — but please be rest assured that tile is the most preferred material as far as wall and floor coverings are concerned.
Obviously, we don’t compete with paint, which has a very-high replacement market. Neither do we compete with a laminate and ply because the areas of application are completely different when you talk of tiles. So tiles, the biggest competition or a rather another variant which one can put would be on the flooring would be some kind of natural stone and a very, very, very niche segment of wood. Otherwise, tiles remain to be the most preferred item.
Keshav Lahoti
Okay. Got it. One last question from my side is why you have the right to win over builder because normally you also getting outsourcing business. So if someone is builder might be very price-sensitive that way, that way one Morbi have a right to win over you in builder like
Navin B. Agrawal
That’s why builders, if you see Morbi’s domestic sale, a good 70% is builder. If you see our domestic sales, 70 plus percent is retail. So that’s the answer. So a lot of the smaller builders are extremely price-sensitive and they clearly look at Morbi as their preferred vendor and not larger companies.
Keshav Lahoti
Got it. But now as you are being the leader are indicating you are growing at a faster pace on the builder side. So what has changed? Why are builder now preparing you over Morbi while you are gaining market-share on that side?
Navin B. Agrawal
No. So I think the larger builders, the better builders across the country are — were never with Morbi. They were always with the branded players, but those are the builders who are on the long-lead where they finish the buildings and the finishing stage has not happen. So the DLS, the Lodas, the prestiges of the world are mostly doing with the top-10 brand players.
Keshav Lahoti
Understood. Got it. That is helpful. Thank you.
Operator
Thank you. Next question is from Ashutosh from Asian Market Securities. Please go-ahead.
Yeah. Hi, sir. I just wanted to ask what is the total capex outflow for FY ’25 and FY ’26?
Abhishek Somany
Could you repeat that question, please?
Unidentified Participant
I missed you? Yeah. I wanted to ask. But what will be the total capex outflow for FY ’25 and FY ’26.
Other than balancing equipment for FY ’25, which is a new INR10 crore acquisition which we’re doing other than the normal balancing equipment and FY ’26, as far as currently is concerned, we have no such plan for any major capex, but I do believe that the way my sanityware and bath fitting is going, we may need a small capex there to enhance capacity because I think we will run-out of capacity in the next 12 to 15 months. If Shivas, you want to add something there as far as the sanitaryware capacity is concerned as to when you think we will run-out and maybe need a small expansion.
Abhishek Somany
So I think, yeah, hi. I think the sanitaryware both — in both we need a little bit of expansion in spitting and because fittings already is hitting around INR5.5 crores of production every month consistently for last two months. So we’re running almost 110% capacity. So small expansions that we’ll be doing in machine shops and furnaces, etc. And on the fitting by when we would require it in the next 12 months and I would require in the. So we would require it in the — post the 12 months little bit of a and fitting until then, there is no major expansion.
And it will major one over the next 12 to 18 months and definitely this fittings, we are already in the process of doing the smaller. We have a figure of what the amount is for the expansion is not going to be normalized, we will let you know, but that we would be announcing or looking at that post 3rd-quarter next year.
Operator
Got it. Got it, sir. Thank you,. Thank you. Next question is from Jodi Gupta from Nirmal Bang. Please go-ahead.
Unidentified Participant
Good evening, sir. Just wanted to know any specific reason the employee cost has gone up? But by 12% — 13% employee cost in this quarter?,
Abhishek Somany
It’s all do with sales. I mean, we have got some new people in for new strategic initiatives such as this particular acquisition which we’re doing, but other than that, it is — all this will go down the minute the sales picks up. Up. So sales have remained flat and some new people have come in, increments have happened. So it’s absolutely in-line if we had the desired capacity utilization.
Unidentified Participant
So what’s the kind of sales out there? I mean, volume outlook are you actually projecting for FY ’25 and ’26?
Abhishek Somany
FY ’25, ’26,we’re looking at high-single-digits and low-double-digits. But we said that even last year that we will be doing low-single digits to mid — sorry, low-double-digits to mid double-digits and we’ve now revised it to, because of the new trade quarter one, quarter two. But we are hopeful with what I mentioned in the first question where the builders which have announced their buildings and there’s going to come into finishing, plus some green shoots as far as economy reviving, the new initiatives from the government towards a low-income housing and also the initiatives by the government to increase spending on infrastructure. They already had that desire but didn’t do it for some reason this year. So all of that should spur up the economy a little bit. With that, I’m very hopeful that this would be a high — very-high single-digit or a low double double-digit going-forward in FY.
Unidentified Participant
Sir, one more question in terms of freight — ocean freights, has this started with declining and is the movement on the sea improving gradually?
Abhishek Somany
Yes, some countries there’s been a decline but I’m not — we don’t export so much for me. I’m sorry to have that figure at the tip of my tongue. So I would — it would be wrong for me to comment. I would have to get back to you, but please feel free-to write to Sunit or Salesh and they can give you the figures exactly as to how much it has gone down there. I’m sorry, I don’t have it on my. No.
Unidentified Participant
Thank you so much.
Operator
Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. Next question is from Amit Purohit from Elara. Please go-ahead.
Amit Purohit
Hi, sir, thank you for the opportunity. Sir, just on your split between projects and retail, what it could That be? And second, is that in the event where somehow the retail growth rates may not pick-up so well, would you — I mean look to have kind of this kind of margins or 8% to 9% margin or a 10% margin? How do you think about from a medium-term perspective, the outlook on margins?
Abhishek Somany
Yes. I think this was already answered if the previous question in the call was similar, but I’ll repeat it, not to worry. What I’m saying is that, yes, there is a little bit of a muted demand in the IHB, which is the individual homebuilding, which is why the retail sells. My retail secondary sale is to individual homes, you and me, building a home. But the project sale is definitely increasing and that is not at the same pricing as the retail sale. But having said that, we have so much capacity which is underutilized and there is no-cost leverage over there. So we get a lot of cost benefits when we use extra capacity and optimum capacity, not in terms — not only in terms of efficiencies of the working, but also in terms of quality.
So whatever little the discounting will happen in the — in the project segment that will compensate for — be compensated by my extra capacity utilization. So yes, with the capacity utilization going up and my value-added mix only improving, you can very clearly see it improving. That’s why our margins have remained the same. I am very, very hopeful of the figures you just spoke.
Amit Purohit
Okay. No, I’m just wanted to know what would be the mix of project in our sales, sir.
Abhishek Somany
Oh, I’m sorry. Project currently is about 10%, 11% is government and about 9% is — 8% to 9% is the private projects and 3% is our export and the balance is retail. This will move-in favor of the private builders by 2% to 3%, which means the export remains the same, government will remain more or less the same as per the builders going up, which will bring the retail down from 79% to closer to 75%.
Amit Purohit
Okay. And for this quarter also, I mean the retail sales would have been flattish or you would say that it would have still grown in terms of volumes?
Abhishek Somany
Retail sale has grown in terms of volumes.
Amit Purohit
Okay. That’s fair.
Abhishek Somany
Because builders haven’t grown so — and the export has not grown. So whatever has grown has come from retail only.
Amit Purohit
Okay. I thought the project business has done well, right, or you were saying that now in this quarter, it will be doing it.
Abhishek Somany
Yeah, it will start moving from next year onwards. In fact, quarter one, quarter two, we’ve picked-up good orders, but those are all sample flats which have gone small little supplies which have happened, but the bulk of the supplies or month-on-month supplies haven’t really happened.
Amit Purohit
Sure. Thank you, sir.
Operator
Thank you. Next question is from Madhur Rathi from Countercyclical Investments. Please go-ahead.
Madhur Rathi
Sir, thank you for the opportunity. Sir, I wanted to understand as, could I request you to be a little louder, please? Sure, I’m audible right now. Yes. Yeah. Sir, I wanted to understand what level of capacity utilization would it take for our plants to get to that 10% to 12% kind of EBITDA margin?
Abhishek Somany
So it’s not only the plant utilization. Of course, I’ll answer your question. The optimum plant utilization for any tile company is near 90%. Anywhere from 88% to 92% is the optimum capacity utilization. That does aid, but one thing is to — currently, we’ve not been able to use the capacity for any kind of tile, the cheaper format, all the better ones. So one is to first ramp-up capacity in whatever we can sell and then it would be how we can ramp-up that capacity and make it more value-added. So both those really play on-market margin accredation. But to make it simple, if I move at steady-state, today’s pricing and today’s retail versus projected sales, which is project moving up by 2% and retail going down, we still be able to add about 1%, 1.5% in margins.
And after that, it would be a question of how much extra margin we can get from value-added sales combined with our efforts onto reduction of other costs. Like right now, we are 80% — above 80%. So if in the next year, if volumes grow as expected, like high-single-digit to low-double-digit, we could achieve a 1.5% margin improvement. Of course, of course.
Madhur Rathi
Okay. And sir, on the Somani MAX plant,
Abhishek Somany
And sir also reiterate, yeah, sorry. I would also reiterate here that while this is happening, mind you, there will be certain advantages which are going to flow-in because of the two JVs which were loss-making, which have gone off the balance sheet. That also will add a little bit to the margins.
Madhur Rathi
So can you quantify what would be that improvement on our margin?
Abhishek Somany
I can give that to you hello. Yes, sir. Yeah, I don’t have it at the fingertips. I would give it to you offline.
Madhur Rathi
Okay, okay. That will work. Sir, just a final question on the Somani match plant. Sir, I think is it at a breakeven level right now or do we still think that in a quarter it will go to the breakeven level,
I’ll require at least two more quarters to get to breakeven. Anyway first-quarter next year would be good. So from second-quarter next year, it should be at a profitable level, not breakeven, it should be at the profit level.
Okay. Okay. And sir, at optimal capacity utilization for that Somanu plant, sir, what could be the incremental revenue addition as well as margin can we expect from that plant?
Abhishek Somany
Please correct me if I’m wrong. I think that particular plant can give me INR250 odd crore of revenue.
Navin B. Agrawal
Yeah. Towards the north of INR250 crore depending on the optimal capacity utilization and the product mix for which it would be manufactured. So currently, we are half of that.
Madhur Rathi
Okay, got it. And sir, margin potential?
Navin B. Agrawal
But that would be a blended margin. I mean there is no separate calculation for that margin, it’s a blended margin, which will reflect in the blend — in our consolidated results but it would be margin-accretive to our overall business. Of course, obviously, it’s a value-added.
Madhur Rathi
Okay, got it. Sir. Thank you so much and all the best.
Operator
Thank you so much. Thank you very much. That was the last question in queue. I would now like to hand the conference back to Mr Somani for closing comments.
Abhishek Somany
Thank you so much. Looking-forward to a better Q4 and looking-forward to more initiatives from the government to spur up demand. The economy clearly is lagging and we need some government spending and to up the normal demand. They have done — it’s been a good budget from a looking at the increasing the disposable income at the lowest level of tax bracket. So hopefully, things should be looking up. And anyway from our form our point-of-view, the buildings which are unfinished and yet getting into finishing stages would give us a better outlook.
And with the way the war is looking, both the wars are looking to come to some kind of a conclusion that also will benefit the freight rates and increase the sales of exports from Morbi, which means that there will be lesser pressure in the domestic industry. So looking-forward to all the positives, we are very excited for the new acquisition and also be very excited for our bathware manufacturing and Max.Other than that, we be rest assured that we have our eye on the ball on the balance sheet and will not let that slip come what may. Thank you so much and we shall be together again for the earnings call of the FY ’24-’25. Thank you so much.
Operator
Thank you. Thank you very much. On behalf of SKP Securities Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines. None of the old guys.