Emami reported stellar numbers this quarter with revenue growth of 20.4 percent at Rs 490 crore accompanied by a gross margin expansion of 300 basis points to 66.2 percent. NH Bhansali, CEO of Emami Group says all flagship brands have reported increase in market share. Its international business has grown by 33 percent year-on-year this quarter.
He expects to sustain volume growth trend of 11 percent in the second half of FY15. He further adds that better scale will ensure margin expansion in the future.
Also, on the brighter side, he says: "Input costs and other cost overheads were benign this quarter.”
Bhansali says in the first half of this fiscal year, revenue from new launches stood at around 6 percent of sales. Emami Group invested heavily in ad spends to aid new launches. He expects to maintain ad spends at current levels ahead.
He says the company generates free cash of Rs 500 crore every year.
Below is the verbatim transcript of NH Bhansali's interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18.
Latha: A fairly strong set of numbers you announced. Give us an idea of how sales is panning out. You would have an idea of post September 30 performance as well. Does it look like we are going to see a secular improvement in demand and therefore your revenues?
A: There has been an all round improvement in the market, particularly for our kind of products. We have grown exceedingly well compared to peers, our growth has been good. The growth has come from all sectors, all our power brands like Navratna Oil, Zandu Balm, Mentho Plus Balm, Fair and Handsome have done very well and the market share of all these brands have increased.
Even new launches of face washes, Fair and Handsome face wash, deodorants and recently we launched She sanitary napkins also, all this have added to growth. In international business as well, growth in this quarter has been over 33 percent, so cumulatively for the first half our international business has grown by 57 percent. All this has resulted into a spectacular growth for the first half at 23 percent on topline and for the quarter 20.4 percent.
Sonia: Your volume growth at 11 percent has been very strong, much stronger than some of your peers like Hindustan Unilever (HUL) etc. Do you think this is a sustainable volume growth for the second half of the year?
A: We expect the same kind of growth to happen in the rest part of the year as well because growth is coming from existing and new launches as well and on the international business also we are growing. So this is very much sustainable.
Latha: What do you expect - continued 11 percent or will it be even better?
A: One can expect same kind of growth.
Sonia: Can you better your sales growth guidance of 16-18 percent that you had laid out earlier because in the last couple of quarters the trend has been improving. Do you think you would scale up that guidance?
A: It will be higher than what we have done. Our guidance has been lower and we have always outperformed our guidance. We would continue to maintain the tradition.
Latha: This expansion in margin largely because of mentha oil prices falling. What is the forecast for the second half?
A: Not mentha oil prices, we have gone for reduction across all other components as well, so it’s a function of all while mentha has also contributed to reduction in the cost of goods sold (COGS) and our administrative cost have also fallen as a percentage of sale and despite this we have invested heavily and we have been able to report margin expansion. So with an increase in scale and stabilisation of the new launches the margin may improve in the next year.
Latha: You do not expect price cuts to come from your competition to which you may have to respond?
A: We are into a segment where we cater to the market and our pricing is relative to the values we offer. We do not expect any price cut there.
Sonia: You told us about the products that have done well this quarter but going forward what is the pipeline of new products and how much revenue can you derive from these new products in the next half year?
A: In the first half our revenues from the new launches has been at 6 percent and these new launches are showing excellent result. I believe that kind of growth contribution would continue from the new launches.
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