Will maintain margins, improve sales to 15% in H2: Eveready

Eveready Industries hopes to maintain margins at 8 percent for the second half of FY14, says ED Amritanshu Khaitan. The company had taken a price hike in October through which it is likely to see some margin expansion, he adds.

Speaking to CNBC-TV18 post Q2 results, Khaitan says the recent price increase should help the company improve its topline growth to around 15 percent for the remaining six months of the year. 
Khaitan further adds that the battery markets are being buoyant with good monsoon and compulsory digitisation of cable industry after many years and so, the company is looking at a very healthy volume growth and value growth both in its core categories of batteries and flash light after. Below is the verbatim transcript of Amritanshu Khaitan’s interview on CNBC-TV18 Q: Can you take us through the numbers on sales, earnings before interest tax depreciation and ammortisation (EBITDA), profitability of this quarter for Eveready?
A: Our turnover has grown by 11 percent to Rs 320 crore versus last year’s Rs 287 crore. We have seen an EBITDA growth of over 31 percent from Rs 19.7 crore to Rs 25.7 crore. This has come with an EBITDA expansion of over 120 basis points to 8 percent. Our profit before tax has doubled from Rs 2.61 crore to Rs 5.2 crore and we have declared a profit after tax of Rs 3.7 crore as against last year’s Rs 2 crore. Q: What has led to the decline in your profits on a sequential basis since we don't have your numbers because last quarter your profit was close to Rs 8 crore, now it has come down to less than Rs 4 crore?
A: The current quarter numbers are reflected after accounting for a depreciation of rupee by over 20 percent compared to last year. The first quarter had extraordinary income of around Rs 6 crore and if you remove that our second quarter numbers were actually better than the first quarter numbers. Q: You have recorded margins of 8 percent for two consecutive quarters now. Is that a sustainable run rate we can expect for the company?
A: The second half of the year should see margins being maintained at around 8 percent or better. We had taken a price increase just recently in the month of October. With that price increase going through hopefully we should see some further margin expansion taking place.
If you see the rupee depreciation, I think for Eveready it has been a landmark, after rupee depreciation of 20 percent we have managed to actually expand margins. Last year, first half, our margins were around 6 percent. This year for the first half our consolidated margins are around 9 percent. Q: In the 11 percent growth that you have seen in your turnover, how much of it was volume growth and how much of it was led by price growth? The steep price increase that you all have undertaken, what is your expectation for volume growth in the second half?
A: In the first half we have seen very healthy volume growth in our core battery business, we have seen 6-7 percent volume growth as well as 5-6 percent pricing action which has given us this kind of topline growth. Going forward, our current price increase should help us improve our top line growth to around 15 percent for the remaining six months of the year because there is additional 5-7 percent pricing which has come in.
I do not foresee much of a volume reduction because after many years we are seeing the battery markets being very buoyant with the monsoon being very good this year, with the digitisation of the cable industry taking place, every household in the country is having additional remote which consume batteries so Eveready is actually looking at a very healthy volume growth and value growth both in its core categories of batteries and flash light.