Revenue growth is on-track, says Globus Spirits

In an interview to CNBC-TV18 Ajay K Swarup, managing director, Globus Spirits spoke about the financial performance of the company in the quarter gone by. He informed that the company’s growth is on track.

However, the company is facing margin pressures because of escalating raw material prices. “We use not really food grain, but spoiled grains and broken rice as our input and on the back of increase in food grain prices there has been cost push in our raw material prices,” he elaborated. Swarup expects the company to clock revenue growth of 20% in FY13. The EBITDA margin for the year might stand at 13%. Below is the edited transcript of Swarup’s interview with CNBC-TV18 Q: For the revenues the numbers are looking a bit tired, EBITDA is down 4%, margins are down by about 4% points, profit is down even on quarter on quarter terms your revenues are looking a bit under the weather but I guess quarter on quarter its not the way to look at it. Tell us what are the highlights? A: Yes, it is incorrect to compare quarter on quarter for the spirits business. You would need to compare Q1 with the Q1 of the last year, but coming back specifically to the Q1, our growth in terms of revenue is absolutely on track. We had difficulties in margins because of an increase in raw material costs which are in our case an agriculture product. We use not really food grain, but spoiled grains and broken rice as our input and on the back of increase in food grain prices there has been cost push in our raw material prices. That has been a significant contributor to the margins. The specific area is the fact that we have invested in upping our capacity even further. Now our company would be 120 million litre capacity distillation company. As a result we took some debt on our portfolio so that would show up in higher interest cost. The results of this will be seen from Q3 of this year. Q: Given the fact that you are seeing an inch up in your raw material cost monsoons are expected to be weak, are you expecting the pressure then to persist with the rest of the year as well? A: Certainly we would see this go through into Q2, but with the new crop coming in early Q3 the prices will come off, which is a regular feature. One of the things which has happened is that government has banned the export of rice. That will certainly soften some of the pressure on prices. Q: What would revenue growth look like at the end of the year for FY13? A: The guidance for this year is 20%. We are looking at an EBITDA margin of 13% for the year. Q: You do some bottling work for companies like United Spirits. Are you seeing any kind of a slowdown in United Spirits and its numbers did show a weak volume growth? Is that visible at your end? A: We bottle for brand owners like United Spirits, Jagatjit Industries in specific states namely Haryana and Rajasthan, for these markets of their products. We haven’t seen a slowdown in these markets just yet. Q: Tamil Nadu and West Bengal - the key weak areas are not affected? A: No, we are not bottling for them in those areas, in fact we do not have production capabilities in those areas.