See better demand ahead; price hikes unlikely: Whirlpool

Shantanu Dasgupta, VP-Corporate Affairs & Strategy (South Asia), Whirlpool of India says the company’s ability to manage costs helped better its EBITDA margins and profits in Q4 over Q3. However, he remains cautiously optimistic going forward.

Whirlpool reported a standalone sales turnover of Rs 626.85 crore and a net profit of Rs 24.75 crore for the quarter ended Mar 2013. Other income for the quarter was Rs 4.58 crore. “We are seeing a moderation in both food inflation and commodities also are plateauing out. As a result we have seen some reduction in interest rates. These are factors that are positive. The currency is still adverse, so that seems to be somewhat negative,” he told CNBC-TV18.  Dasgupta says price increases have been very frequent over the last 12-18 months for them, so they would be unlikely to increase prices in the near-term. Below is the verbatimg transcript of his interview on CNBC-TV18 Q: The numbers for this quarter were soft. Sales were down on a year-on-year (Y-o-Y) basis to Rs 603 crore from Rs 629 crore. Could you throw more light on this? Are you expecting the slowdown to continue, are you seeing any improvement at all at the ground level? A: You are quoting the quarter’s number, on the face of which there is a decline in the topline. I would like to contrast that with the previous quarter that is Q3 and you might find that there is a reason to be cheerful. Our topline remained pretty much the same in Q3 and Q4 but in Q3, our net profit was in the region of Rs 10 crore. The net profit in this quarter has been in the region of Rs 24 crore. So, although the topline remained the same, we generated much more profit this quarter. That suggests we have done some things well in this quarter. I would single out our management of cost as one thing. For the whole year, we have grown our topline modestly; we have grown our profits modestly. When you compare Q4 numbers with that previous year same quarter then obviously there is a decline but if you compare it with just the previous quarter that is Q3 then there are some underlying factors that are looking very positive. Also read: Overweight on India; consumption story intact: Aberdeen AMC Q: Do you see an improvement in realisations at all or do you have to take a hit on the margins as well? A: If you look at our EBITDA margins have improved between Q3 and Q4. Growth has been pretty much the same in Q3 and Q4. We have not seen any buoyancy on the demand side. It is just that the measures that we took in being able to control costs has played out in this current quarter, which is why we have been able to generate more profits. Going forward that gives us confidence that if we can keep our costs under control in a situation where there are still some inflationary trends and if we see pick up in demand then our results should be better. Q: There seems to be lot of optimism building up in the market, can you throw some light in terms of how exactly consumer discretionary expenditure is looking at this point in time? How do you see that formidable sort of demand at this point and how easy is pricing power, pricing flexibility for you all in order to pass it on to consumers? A: Price increases have been very frequent over the last 12-18 months and there is a limit to how much more one can increase prices. So, let us look at the positives - we are at a season where the off takes are very high, so summer has been good. We are seeing a moderation in both food inflation and commodities also are plateauing out, as a result we have seen some reduction in interest rates. So, these are factors that are positive.  The currency is still adverse, so that seems to be somewhat negative. These are indicators that are positive but when you look at the overall macroeconomic factors - has disposable income grown to the extent that people can indulge in discretionary expenditure, which is how our categories are defined because they are bought when people have disposable income. Then one has to be a little careful about saying whether we are seeing a buoyancy return to the market, which is over and above the seasonal impact. I would be cautious about saying that there is a huge amount of upsurge that has come in consumer confidence. Having said that, I think there are reasons to remain cautiously optimistic because of all the factors that I have just outlined. Q: What you are saying is you do not think that the coming quarter or the current quarter is worse than previous May, since you use the word cautious optimism, would you say it looks like things have troughed out say in terms of consumer power? A: Yes. I think so. If we see commodity prices stabilising, even if they do not reduce, we will not see that much of pressure on pricing. If we see the rest of the summer sort of playing out well, it should be good for some amount of offtake. If we see interest rates continue to reduce, it will provide some relief going forward. Q: I am asking about demand - since you have your finger on the pulse of the consumer, are you seeing any kind of improvement over previous comparable quarters or are things getting a little worse? A: No, I do not think they are getting any worse. We hope that it will get a little better.