FY15 'worst in 5 years', says industry-beating Kajaria

Reema: Just few weeks back you indicated that the demand hasn’t picked up especially in the month of January and February. However, your margins have come in lower; your revenues too have missed street expectations. How was the quarter and what were the pressures?

A: If you look at it overall you can’t only generalise this quarter because what happened in 13-14 Morbi had a strike in the third quarter. If you look at the 6 months - our revenue has grown up by 20 percent if you combine 6 months of last year and this year.

If you take it standalone, yes it has grown less but because some of the sales of third quarter of last year got postponed to the fourth quarter. If you see here year-to-year our turnover has grown by 19 percent and revenue has grown by 18 percent.

Mangalam: Can you break the sales figure down in terms of volume and price increases?

A: Volume is about 13 percent for the year. Roughly the price increase or larger sizes and better products the difference would be about 5 percent.

Mangalam: Are volumes in the tile segment picking up? We spoke to another couple of ceramic companies well and they are indicating that the volumes are not picking up so is that the same case for Kajaria as well?

A: Last year we had seen as a very tough year, I must tell you, first of all. Year ahead looks better because of the various reasons, economy has started looking up, then Swachh Bharat Abhiyan as I said earlier housing for all but the last year which has gone by has been one of the toughest year that we have faced in the last five years.

Reema: Even your FY15 revenues have marginally fallen short of your own expectation? You had told us that the sales guidance would be 20 percent plus. The company has delivered it 18.50 percent. What is the outlook for FY16? What is the revenue growth that you are internally targeting?

A: We are still looking at 20 percent plus but what we have thought of is if the industry has grown at 12-13 percent and Kajaria has grown to 18.50 percent plus. You have rightly said that our target was 20 percent plus we have grown at 18.50 percent. What we are looking at is if industry grows at 12-13 percent and I believe industry will grow a notch higher 13-14 percent, Kajaria will definitely grow at 5-6 percent more than the industry.

Mangalam: Looking forward you are also indicating a higher contribution from higher value projects. So do we see the margins increasing going forward if you have guidance for margins for next year as well?

A: Basically we are adding lot of capacity. Kajaria is today at 54 million square meters. We are already in the process of adding 13 billion square meters this year which will take it to 67 million. Many more things are on the anvil if you have to grow 18 to 20 percent plus. Margins I can’t say we have to spend a lot money of advertisement which we are doing but definitely it is in a positive scenario. We are looking at a very positive scenario.

Reema: The street thought that your margins would improve by nearly 300 basis points that has not played out. Were there any margin pressures that you saw this quarter? What was the reason that the margins couldn’t improve considering that we have seen cost of raw materials come down generally?

A: Cost of gas has slightly come down. We are getting two types of gas: regassified-liquid natural gas (RLNG) and spot gas. Cost of gas has slightly come down because of the prices of oil dipping. Margins have definitely have been under pressure as I said last year has been one of the toughest year. Things have started looking up from this financial year and margins will be okay to whatever guidance we are going to give, margins will be okay.