Will achieve guidance despite stiff competition: Jyothy Lab

Jyothy Laboratories today posted two-fold increase in net profit to Rs 28.70 crore for the first quarter ended June 30, 2013. Ullas Kamath, Joint Managing Director of the company told CNBC-TV18 that it has given the guidance of 20-25 percent on topline and 15 percent EBITDA margins.

“In terms of EBITDA margins the company is already there and is now working on the sales,” he added. According to him market is quite competitive and conditions are not that great, but still the company will work hard to achieve those guidance numbers. Below is the verbatim transcript of his interview to CNBC-TV18 Q: Fast moving consumer goods (FMCG) companies are still delivering good numbers, your margin performance was 15 percent versus 11 percent, EBITDA going up 15 percent. On this base, will the performance be sustainable going forward? A: Yes, absolutely and there is a new management team led by Raghunandan. The numbers were delivered by them and they are very commendable. The entire focus has been on EBITDA numbers and they have delivered 15 percent, as per the requirment. This is definitely sustainable because the kind of synergies that you have got from Henkel acquisition is clearly seen in this quarter. Q: What can you deliver in terms of profit margins as well as revenues for the full year? A: Full year we have given a guidance of 20-25 percent on topline and 15 percent EBITDA. In EBITDA we are already there and topline we will be able to deliver between 22 percent and 25 percent. Market is quite competitive and conditions are not that great, but still we will work hard to achieve that number. Q: You meant 15 percent in terms of margins? A: Yes. It is EBITDA margins and after that we only have the interest factor. Q: You said good synergies from Henkel, if you could break up the performance this quarter in between Ujala and the Henkel business and if you could give us guidance in terms of both businesses? A: The Henkel business has given us a robust volume growth and Ujala has given us a value growth. Between the two we are able to now take the business both from urban as well as in rural. So, new distribution set up and the new people on the top altogether have delivered the numbers. Q: Will you be able to squeeze out more using Henkel’s urban products to your rural reach, so should FY15 continue with the kind of 25 percent you are guiding for FY14? A: Absolutely. The whole synergy that we get in the years to come is that taking Henkel products to semi-urban and rural India and bringing the Jyothy products to urban and also into the modern trade where Henkel is extremely strong. This guidance we are comfortable and giving the same guidance for the next year as well. Q: Home Care says down 31 percent? A: It is primarily because of Maxo. It has been flat in the last quarter because of the season and we are working on new products in that category otherwise all of the segments have done well. Q: Within that what is interesting is that the bottomline performance is better than last quarter, so what explains that dichotomy? A: Bottomline improvement has come because of distribution changes that we have made and trade margin has been lowered and also some increase in the price we have taken in Ujala and also the product mix in the sales has changed and that is what has led to the increase in the EBITDA margin and is sustainable very much. If you see our advertisement spend has gone up by 69 percent and despite that we are still holding on to 15.3 percent of EBITDA. Employee cost has gone up by about 15 percent. With all this, the numbers looks commendable, thanks to the new management team. It has paid off. Q: What is your cash profit now and are you likely to look for more brand acquisitions? A: Brand acquisition will always be there in our mind. But cash profit is Rs 43.8 crore for the quarter. Rs 29 crore is the profit that is here in the pack but real cash profit is Rs 43 crore. Q: About Rs 150 crore cash profit for the year? A: More than Rs 200 crore. Q: That is a decent kitty. You could be buying something? A: We are looking for some strong regional brands. Now Jyothy has shown that we can take regional brands to the national level. So, we will always be keen looking at the strong regional brands.