Jyothy Laboratories' September quarter consolidated net profit advanced 90 percent at Rs 25.1 crore against Rs 13.2 crore, Y-o-Y, but the company witnessed some margin pressure. K Ullas Kamath, joint managing director and CFO of Jyothy Laboratories says it experienced some raw material pressures in the second quarter. He adds that margin suffered on the back of raw material forward booking.
He says the company will get the benefit of softer raw material costs in the third and fourth quarter. The company’s expenditure rose to 12.6 percent this quarter, higher than the usual 10 percent, he adds.
However, he sees 13-14 percent EBITDA margin the second half. He expects 20 percent topline growth in FY15.
Below is the verbatim transcript of K Ullas Kamath's interview with Reema Tendulkar and Sonia Shenoy on CNBC-TV18.
Sonia: Can you take us through what led to the pressure and margins this quarter and do you think that because of these pressures you will have to see sub-10 percent margins in the second half of the year as well?
A: In fact, we have grown the topline by 16 percent. The bottomline specifically the raw material pressure was there in the quarter, which we ended on September 30, it is mainly most of the commodities that we have done the forward booking till December not expecting commodities to ease so much, so quarter-ending December and March we should get complete advantage and gross margin has come down from 49 percent to 48 percent that is one percent reduction, which is mainly because of the raw material forward booking till December.
Our advertising budget has gone up to 12.6 percent in a quarter, which is sub-10 percent and that is only because of new product launches which we have done which has done exceedingly well both Henko and Margo face wash which we have re-launched that has done very well and that is just for the quarter but otherwise overall it is a very healthy number.
Sonia: So by the end of this fiscal would you hold no to that 13 to14 percent margin guidance or do you think that- that would have to be scaled down?
A: We are very comfortable between 13 and 14 percent earnings before interest, taxes, depreciation, and amortization (EBITDA) margin for the year and top-line growth well by 20 percent and we expect the material commodity price is ease down now. We should get at least 200 basis points advantage in the second half of the year. So we are very comfortable in giving the guidance between 13 to 14 percent EBITDA margin and 20 percent top-line growth.
Reema: Your homecare business which is about 20 percent of your over all revenues is had a bit of a sluggish quarter so the revenue growth was sub three percent. What led to the pressure in your homecare business and what can you guide on that front for the second half of the year?
A: Homecare business is predominantly a mosquito repellent business and because of extended summer and because of rainfall reduction the mosquito repellent category did not grow it was flat. Despite that we grew by 5 percent and mosquitoes are not there, it is difficult to sell the mosquito repellent but the second half we expect that we should be able to make up. Other than that all other segments have done upward of 20 percent despite doing mosquito repellent business at just at five percent growth we have still clot 16 percent top-line growth but answering you question the second half the big season should happen February and March we should be able to make up the deficit as well.
Sonia: Going ahead what kind of growth are you seeing in revenues for the mosquito repellent business and what about the margins?
A: As far as the mosquito repellent business is concerned I should be happy even if I grow by what 15 percent on year-on-year that’s what we are projecting internally. As far as other than the mosquito repellent business we should be growing upwards of 22 percent. So overall 20 percent growth is what we are seeing for the current year. Where in EBITDA will be between 13 and 14 percent keeping advertisement budget at about 12 percent and consistently we are giving this steady numbers for last six quarters now is all because of the new management team which we have brought in and complete credits to them they have done a wonderful job.
Reema: Viewers Question: Manoj Shukla - Bhopal
Whether the big margin drop seen this time is a one off and given the under performance would you still hold on to the 13-14 percent? Would you like to add some more colour in addition to what you had already told us for Manoj may be on advertisement spends what it will be?
A: The quarter is as you rightly said is only a one off kind of a thing because one percent reduction in material cost, gross margin reduction that’s only because of that we had booked everything in advance not expecting the fall in the crude price that is now it is behind us. Second one is that advertisement spend when you do a big launch like Henko and with Margo face wash we went upto 12.6 percent of revenue which is again which will eased on in the coming quarters and over all 13 to 14 EBTIDA we will be able to do it with ease and if the crude goes down then probably it could be much better than that.
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