Greenply cuts FY16 revenue growth guidance to 6-8%

Greenply Ind on Wednesday posted a net-profit at Rs 27.2 crore against Rs 26.8 crore year-on-year (YoY). Speaking to CNBC-TV18, Shobhan Mittal, Joint MD Of Greenply Industries, said the company was revising the company's revenue growth guidance to 6-8 percent from the previous 10-12 percent.He is of view that volume growth in FY16 will remain flattish and the margins in medium-density fibreboard (MDF) business will sustain at the levels of 27-28 percent.Furthermore, Mittal expects Greenply to rise by 100 basis points (bps) on the margins front this year.Below is the verbatim transcript of Shobhan Mittal's interview with Sumaira Abidi and Nigel D'Souza on CNBC-TV18.Sumaira: What is the reason that you are seeing this kind of weakness in the plywood business, is it that there isn’t just enough demand or is it that you are losing market share, what is the big problem here?A: I wouldn’t say that we are losing market share. The markets are very challenging currently and if you look at our competitors, I would assume they are also facing challenging conditions. We are very strongly focused on reduction of our working capital investments. If you see our overall working capital number of days has gone down from Q1 by almost eight days. So we have taken a strong stance on reduction of working capital so that is also affecting sales volume to a certain extent.Nigel: Could you give us the volume growth, was there any growth in the past quarter because the numbers have missed street estimates by close to around Rs 15 crore roughly and for the year that you are expecting a 10-12 percent growth in the first half of the year, you have done only around 5 percent? Will you look to revise that downwards?A: I would like to say that we maybe at a overall companywide 6-8 percent revenue growth considering the current scenario and that is why we would stand. So yes, we would like to revive that number for the year-end.Sumaira: Let us come to the rest of your business, which is medium density fibreboard (MDF), so last quarter we saw big expansion in margins there, this quarter again we have seen about 500 basis points but on a Y-o-Y basis there is still some improvement that needs to be done, so what is the sustainable level of growth for MDF and going forward how much do you think it is going to end up contributing to your topline?A: I think Q1 generally is better for the MDF business because raw material costs are lowest because these are hot summer months and we get a gain on the moisture quantity in the wood that we purchase. So that is why we have better margins in Q1. I think the current levels are sustainable, we should be looking at EBITDA margins of about 27-28 percent on a Y-o-Y basis.Nigel: The plywood business is not doing so well. We have seen there is a bit of a cut on the topline as well as margin compression as well -- the EBIT margin is at around 8.5 percent, can it get much worse or is it only going to get better from here?A: If you see, the margins have improved on a Y-o-Y basis to a certain extent. The EBITDA margins have improved on a Y-o-Y basis. So at a companywide level we should see about 100 bps improvement over last year on the margin front.Sumaira: What about volume growth this quarter?A: Volume growth should be flattish but revenue growth should be about 5-6 percent.Sumaira: Any guidance you want to leave us with for FY16?A: We are looking at about 5-6 percent of revenue growth, EBITDA margin improvement by about 100 bps, volume growth should be about flattish.Sumaira: You have scaled down your revenue guidance for FY16 because the last time you had told us about 10-12 percent?A: So I am revising that looking at the six months scenario. So we would like to say that overall revenue growth should be anywhere between 6 percent and 8 percent.