See better growth next year on Anjali Tiles JV: Cera Sanitary

Cera Sanitaryware released its third quarter results on Tuesday where the company reported a revenue gain of 11.6 percent to Rs 233.5 crore and a margins improvement of 110 basis points (bps) to 15.3 percent on a year-on-year basis.

Speaking to CNBC-TV18, Vikram Somany, CMD of Cera Sanitaryware said that the company is expecting better results next year because of its new joint venture with Anjali Tiles.Below is the verbatim transcript of Vikram Somany's interview with Reema Tendulkar & Mangalam Maloo on CNBC-TV18. Reema: Could you walk us through the topline revenue growth at 11.6 percent. Can you break it up in terms of volume and value as well as what your projection is for the full year because in nine months you have only done revenue growth of above 14.5 percent? A: Our projection is we will maintain this growth and for our sales around 60 percent has been from our sanitary ware division, around 20 percent from faucets, 13 percent from tiles and rest is from wellness like mirrors and seat covers and so on. Mangalam: Can you break the sales in terms of volume growth in all these segments-sanitary ware, faucets as well as tiles? A: It is difficult for us to say but sanitary ware is around 5-6 percent, faucets are around 8-10 percent and accessories and all have grown at higher rates. So the average for the quarter is 11.58 percent and for nine months about 15 percent. Reema: It's in revenues. Could you tell us in volumes? A: It's difficult to say in pieces because there are so many items and varieties. Reema: You indicated that you expect this revenue run rate to continue but that will mean for the full year you would be significantly short of your earlier guidance of 20 percent topline growth, right? A: Yes because the market is subdued and we do not want to dump the material because payments are very difficult but we will see what best can be done because in this quarter there are good government orders and sales because this is a year ending. So generally the last quarter is better than the other quarters but let's see what best can be done. Mangalam: Could you also tell us what caused the weakness in the margins though we are seeing them increase year-on-year by about 100 bps. The competitors have seen a much sharper rise in the margins and also alluded to the fact that there was low power and fuel cost. So that actually substantially increased sequentially for you. Can you give us guidance as far as margins are concerned? A: We have increased EBITDA margins percentage by 1.5 percent compared to the last year. So we are trying to work on margins and improve further during this quarter and next year. However, regarding power and fuel; our gas cost was low by Re 1 per metric cube, so there was not enough saving in the power and fuel cost. However, we improved our margin by more efficiency and selling higher value products. So that is why sales in volume did not increase but in value we are trying to increase our selling price. Reema: Give us some numbers. What do you likely to end FY16 with in terms of revenues and margins? A: It is difficult to say but revenue should be Rs 900 crore plus and EBITDA margin like this quarter was around 15 percent, little higher than that. So we are trying to improve on our EBITDA margins. So it all depends on market conditions. Mangalam: For FY17, give us a sense of what topline and bottomline is going to be and at the same time specifically give us a sense of how your vitrified tiles business is likely to perform in FY17 considering that you will get the effect of the joint venture (JV) with Anjani Tiles coming in as well? A: Our tiles factory regarding our JV with that in which we have 51 percent stake, it is slated to commence production sometime in the middle of March. So next year we should get benefit of that and naturally our topline will also increase because of additional sales from our JV unit. Mangalam: Are you expecting them? A: We are expecting next year to be better because of our new JV venture and we are also expecting that next year the housing and the building industry should improve. So that will also give us some fillip.