Demand picking up; Japan exports down: TTK Prestige

Below is the verbatim transcript of TT Jagannathan’s interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.

Sonia: You have been talking about a slowdown in demand, a slowdown in consumption sentiment for a while. When do you expect that to pick up?

A: I can tell you that it has started picking up. June was good, July is good, so it has started picking up. Actually, our profit margins did not actually decline. Because of the one-time charge of Voluntary Retirement Scheme (VRS) and Corporate Social Responsibility (CSR), the profit appears to have come down, but we have made roughly the same profit that we did in the same quarter last year.

Latha: It is actually very good to hear from you that demand has started picking up. I guess no one knows the urban and rural consumption patterns as well as you do. What makes you say it has recovered? Is it that you see volume growth even if there is no value growth?

A: There is a volume growth, but I did not say it has recovered, I am saying it is recovering. What is going to happen in August, we will have to wait to see.

Latha: Exactly, if you can give us some idea of how much in terms of volume growth or what makes you say demand is recovering. You noticed that the more recent months reported higher volume sales?

A: Yes, to give you an example, for the last quarter, April-May, there was no growth at all. The entire growth came in June. June growth was 13 percent in volume.

Sonia: So, in the month of June, you have seen 13 percent growth in volumes, so the fag-end of the quarter, you have seen some improvement in terms of demand. But, just take us through the segmental-wise performance because your cooker sales continue to remain quite subdued with just a five percent growth. Do you anticipate this single digit growth to continue?

A: The cooker market is not growing. If you look at the market share, we have actually gained market share in cookers. But the market is not growing in cookers. It is slowing down. But there is a rapid growth in cookware and appliance, so we are making up there.

Latha: Do you not have an advantage of falling raw material costs?

A: It is going to kick in only next quarter.

Latha: You will see the impact in the next quarter – falling commodity prices?

A: Yes.

Latha: How much might that improve your margins?

A: By, I presume, nearly one percent.

Latha: Oh that is important. Your exports saw a drop. Is that one-off and do you expect to make up? What are the trends you see in the export market?

A: Actually, our largest export customer is Japan and the Japanese yen has depreciated very sharply to the dollar which is one reason why the exports in Japan have slowed down. We expect it to pick up in the third and fourth quarter, but I do not think it will meet last year’s levels.

Sonia: Nowadays, for companies it has become so competitive, it is like survival of the fittest and everyone is able to survive only with innovation. You, yourself had mentioned that in Q2, you have a lot of new launches that will drive growth. Just take us through how you plan to innovate in your own product profile?

A: We have, in fact, in pressure cookers, we are launching four new pressure cookers. In cookware, we are launching two whole new series and in a lot of appliances, we have got 100 new stock keeping units (SKU) for launch this quarter which we expect to help us grow.

Sonia: So, when you say help us grow, what kind of top-line growth would you be looking at? I mean, it is still just about four percent this quarter. So, on an average quarterly, when do you think it can get back to double digits?

A: I am afraid with the economy being what it is, I am not able to predict at all. In fact, for 10 years we gave predictions and we were bang on, but last two years, I have been completely wrong because the economy has really let us down. You will have to wait one more quarter to be able to predict.