In an interview to CNBC-TV18, Abhishek Somany, Joint Md of Somany Ceramics shares his views on the company’s performance and his expectations going ahead. The company aims to grow at 20 plus percent for the next three years.
"The driver is going to be urbanisation. Apart from the value drivers the product mix, the industry by volume is growing at 10-12 percent," he says from the sidelines of the Anand Rathi Emerging India Conference.
Below is verbatim transcript of the interview:
Q: What are the volume trends looking like right now, what is the kind of volume growth you exhibited in Q1 and what are the growth drivers for the rest of the financial year?
A: Industry has been growing by volume of approximately 10-12 percent and volume value combined about 13 percent. Somany has been growing by almost 20 plus percent. So, last quarter was a better growth, we grew at 26 percent of which 16 percent was volume and the balance was value.
However, going forward if we look at a figure of 20-21 percent somewhere there, about 14-15 percent will come by volume and the balance would come by value.
Q: Can you just highlight the correction in spot LNG prices? How is that playing out for your cost overheads? Also, there is a fear among analysts now that the differential that you enjoyed with unorganised players is gone. It would impact your ability to undertake price hikes going forward adversely; would you concur with this view?
A: Yes. The price increase is very minimal in our sector and has always been the case even in the past. The game in our sector is the value added mix. So, as we premiumise the brand, as more consumers are looking at becoming more brand conscious, we are able to change our product mix for better, which is our product mix towards the value addition is becoming larger and larger.
If you see our capital outlay we are expanding about 11-12 million square meters this year of which 8 million square meters is from the vitrified segment which is the premium end of the spectrum.
Clearly pricing pressure has always been in the industry. The game is to play a sensible play, a game of value added mix and also increase price minimal while we are doing this.
On the oil front, I think oil prices or gas prices have more or less flattened out. We are already at the peak at about USD 15 per mmbtu which translates to about Rs 42-43 a standard cubic meter.
We have topped out here, maybe another 10-20 cents increase but from then onwards it should start going down.
Q: You have spoken about improving your margins to 7 percent levels. By when are you likely to achieve that target?
A: I don’t think EBITDA is a right perspective to see. You should look at our PBT margins because our outsource component is much more than our own manufacturing component. Therefore, our PBT margin increase from 4 percent would be at least 0.5 percent year-on-year (YoY).
Q: In our past interactions you have guided for around 20 percent growth in the fiscal. What will be the growth drivers apart from the change in the product mix that you highlighted?
A: I maintain that growth. We do hope to grow at 20 plus percent for the next three years which we have been doing in the last six years.
The driver is going to be urbanisation. Apart from the value drivers the product mix which you just talked about, the industry by volume is growing at 10-12 percent.
If we see some of the traction which Modi has talked about, it will only improve going forward. So, 12-13 percent is the growth of the market which we are having. The balance growth is we are taking market share from our other competition.
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