Ceramics major Somany Ceramics saw a 68 percent year-on-year (YoY) jump in net profit at Rs 10.50 crore for Q2. It has seen a strong volume growth of 9 percent this quarter.
In an interview to CNBC-TV18, Abhishek Somany, joint managing director said the company will perform better in H2 as a lot of capacity has started kicking in now and that is likely to continue until January.Below is the verbatim transcript of Abhishek Somany's interview with Nigel D\\'Souza and Ekta Batra on CNBC-TV18.
Nigel: Topline looks quite good, could you break that up for us in terms of volumes growth as well?
A: Yes, if you look at Q2, our volume growth is about 9 percent and balance is in value terms and if you look at H1, our volume growth has been more or less 50-50 which is about 12 percent on a volume of about 11-11.5 percent by value.
Ekta: On P&L side, you have seen a good jump up in your other income though on a low base, it has come in at Rs 2 crore versus Rs 26 lakh year-on-year (Y-o-Y) which has helped your entire profitability despite your margins being flat, can you tell us what comprised off the other income and whether that would be sustainable for the remaining quarters as well?
A: There are two parts to it. One is the other operating income, which is scrap sales and all of that and the rest of it has been net out with the money in the bank which is the capital that we have raised earlier. So yes, it would be sustainable.
Nigel: Getting back to your operational performance, could you give us some clarity with regards to your other expenses because on a Y-o-Y basis, you had some forex movement and because of that you had booked around Rs 2.5 crore. This time around is there any kind of forex element because your other expenditure has jumped up close to around 8-9 percent sequentially while on a Y-o-Y basis, it is up close to around 15 percent?
A: Correct but if you look at the percentage of sale, our other expenditure hasn’t moved up, it has been pretty much flat and the reason for the absolute increase is that we are spending a lot more money on branding and brand building. So therefore, you will see a lot more visibility across the board from exhibitions to television to magazines etc.
Nigel: Your power and fuel cost have moved absolutely nowhere. Though we have seen a big bump up in your sales figure, how do you manage to achieve that?
A: The power and fuel has not moved up because the dollar has been pretty consistent over the last six months and also the gas prices have inched up very little but like I said even in my earlier interaction, we are already peaked out on the gas pricing. The rest of it is that our increase in joint venture - so increase in outsourcing has helped this keep it at base.
Ekta: Can you give us a guidance for the second half as well for example what do you think will possibly be a sustainable amount of volume growth that you could clock for the second half of the fiscal or what is it looking like in this quarter already even maybe pre-festive and secondly any sort of pricing power that you have in the market at this point?
A: Overall every year whether it is a good or a bad year, second half is generally better than the first half.
We are having a lot of capacity, which is kicking in within now to January. So we would see a slight increase in the volume growth versus the value growth. Therefore, the volume growth also would be very sustainable, it would only be better. On the other hand, I don’t think we are going to be seeing any price increase but we would definitely see more value added mix coming into the market on a whole.
Pre-festive -- this year October, there was Dusshera and there is Diwali. So I don’t think October we are expecting very much but we would make it up in November and December. So overall it is looking very good.
Ekta: You did 12 percent in the first half of the fiscal for volume growth. So when you say that second half will be better, you can hike it up to maybe 15 percent or less or more?
A: Generally the volume growth is between 60:40 and 50:50 depends on which quarter. So this particular quarter we have two plants kicking in so it might be a little more but it will average out to somewhere there. So considering we would be growing at 20 percent compounded annual growth rate (CAGR), I think 60:40 and 50:50 is hard to tell so precisely. It would be somewhere there.
Nigel: What is your current market share and you said capacities are coming onstream with good volume growth, what is your market share likely to go up to?
A: It is a very fragmented markets. We continuously gain market share but it is a slow and steady pace. There are 750 manufacturers in India. The industry is extremely fragmented. So from an absolute market share, I don’t think there is much to write home about. We are currently at about 13-14 percent of the organized sector. We would inch up maybe half a percent to one percent, like I said, it is super-fragmented the industry
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