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Last Updated : Jul 23, 2015 02:42 PM IST | Source: CNBC-TV18

Demand muted; will grow 6% above industry average: Somany

Speaking to CNBC-TV18, Abhishek Somany, Joint M D says 60 percent of the sales have come from joint ventures (JV) and outsourcing while 40 percent from manufacturing.


Somany Ceramics expects an 18-20 percent topline growth--5-6 percentage points above the industry average--this fiscal, says Abhishek Somany, Joint M D of the company.

"If we divide the demand in to various segments, government has not done very badly but the private builder segment has done little more poorly than expected and the retail is not too bad," he adds, saying broadly demand was muted. 

Speaking to CNBC-TV18, Somany says 60 percent of the sales have come from joint ventures (JV) and outsourcing and the rest from manufacturing.

For the quarter, profit before tax (PBT) rose to 4.1 percent, he says adding, "The reason for that is a higher volume in the market and also the focused concentrated thrust on high value added products which is the glazed vitrified and polished vitrified tiles."

Talking about the volume growth of 14 percent, he says: "We have been able to do various marketing initiatives to open more counters and to go down to the grass root to push this product, open new showrooms etc., a whole host of lot of things which have pushed the volume for us.

Below is the transcript of Abhishek Somany’s interview with Mangalam Maloo & Reema Tendulkar on CNBC-TV18.

Reema: Your margins have expanded by 20 basis point 6.1 percent versus 5.9 percent what was the key reason for that and can we expect further margin improvement going forward.

A: A correction the EBITDA margin has also gone up a little bit very small from 6.4 to 6.5 percent but the profit before tax (PBT) has increased quite significantly from 3.7 to 4.1 percent. The reason for that is a higher volume in the market and also the focused concentrated thrust on high value added products which is the glazed vitrified and polished vitrified which continues to be. Over quarter and quarter we have been growing on that particular segment. Our base has been low and base still continues to be low therefore the next few quarters also the growth would come from the polished vitrified and glazed vitrified segment.

Mangalam: Could you give us a sense of proportion as to what proportion of your total revenue comprises of the polished vitrified and glazed vitrified tiles?

A: Currently both combined glazed vitrified and polished vitrified versus ceramics it is more or less 50:50, I think about 48 percent is from vitrified and the other from ceramics.

Mangalam: We spoke to a lot of ceramics and building products company as well, they said that demand has been muted, so in the face of that what is it that Somany Ceramics did because of which the volumes have grown by about 14-15 percent?

A: They are very clear that the demand has been muted and we also maintain the same that the building sector specifically. If we divide the demand in to various segments, government has not done very badly but the private builder segment has done little more poorly than expected and the retail is not too bad. So, overall it is correct to say that demand is little stunted.

Like I said earlier in the conversation that our base for the vitrified tile and the glazed vitrified tile is slightly smaller than some of the larger competition, therefore that keeps continuing to grow at a lower base and we have been able to do various marketing initiatives to open more counters and to go down to the grass root to push this product, open new showrooms etc., a whole host of lot of things which have pushed the volume for us.

Mangalam: In that case what would your FY16 guidance be then?

A: I have been saying the FY16 guidance will be anywhere between 18-20 percent or the other way of looking at it is whatever the market growth, we would grow about 5-6 percent larger than that, so I continue to maintain that.



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First Published on Jul 23, 2015 02:42 pm
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