Dodla Dairy Limited (DODLA)

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Summary from July 2024

Dodla Dairy Limited Q1 FY25 Results Conference Call Summary

Key HighlightsRecord Performance: • Revenue increased to INR 912 crores from INR 823 crores in Q1 FY24. • Gross margin improved by 543 basis points to 29.1%. • Net profit reached INR 65 crores, with a margin of 7.1%. • Growth Drivers: • Higher sales of value-added products. • Improved procurement efficiency. • Strategic price reductions in milk.

Strategic InitiativesMarket Expansion: • Plans to expand product portfolio and market presence, especially in Africa. • Farmer Relationships: • Enhancing support initiatives for farmers.

Competitive LandscapeAndhra Pradesh Dynamics: • Stable competitive dynamics despite new government and competitors. • Strategic price cuts to balance consumer and farmer interests.

Financial InsightsMargins and Inventory: • No inventory losses reported; margin fluctuations attributed to product mix. • Revenue Outlook: • Significant growth projected for Africa and Orgafeed businesses.

Orgafeed Business PerformanceRevenue Growth: • Achieved INR 82 crores in revenue, with expectations to double to INR 160 crores.

Procurement and Sales StrategyProcurement Capacity: • Increased to match or exceed sales, especially during peak seasons. • Distribution Strategy: • 50% of sales from distributors; focus on modern trade and B2C approach.

Market ChallengesMilk Volume Growth: • Current growth at 2.5%, with curd growth at 6.6%. • Surplus Milk Impact: • Increased competition from smaller players affecting pricing.

International ExpansionKenya Plant: • Projecting sustainable revenue growth of 10-15% with higher margins than India.

Financial ProjectionsEBITDA and PAT Growth: • Projected year-on-year growth of 18% to 20% for both EBITDA and PAT. • Value-Added Products: • Expected share of 33% to 34% for FY’25, with slight margin decrease.

ConclusionOperational Challenges: • Surplus milk leading to price adjustments; consolidation expected in the industry. • Government Support: • New INR 5 subsidy for dairy farmers to increase minimum procurement price.

The call concluded with management thanking participants and expressing optimism for future growth.

Summary from May 2024

Dodla Dairy Limited Q4 FY24 Earnings Conference Call Summary

Key Achievements • Surpassed INR 3,000 crores in revenue for FY24. • Improved EBITDA margin to 9.2%. • 21.2% year-on-year growth in procurement, reaching 16.8 lakh liters per day. • Commenced commercial production in Kenya and expanded cattle feed capacity fivefold.

Management Insights • Focus on enhancing relationships with dairy farmers and operational efficiency. • Strategic investments and digital initiatives emphasized. • Inventory strategy involves cautious valuation to improve product quality.

Q&A HighlightsInventory Strategy: • Recent write-off addressed; no further write-offs anticipated. • Seasonal fluctuations expected, targeting 20-25 days of sales in inventory.

Margins and Growth: • Conservative margin estimate of around 9%. • Revenue growth projected at 12-15% for FY25.

Procurement and Pricing: • Current procurement price confirmed at INR 36.91. • Realization price for Q4 FY24 at INR 57.82.

Expansion Plans: • Discussed potential acquisitions in Maharashtra. • Plans for aggressive growth in the cattle feed segment.

Financial Performance • Curd sales for FY24 reported at INR 614 crores. • Ice cream sales increased by 33% from FY23 to FY24. • Daily milk procurement figures for Q4 and FY24 provided, showing slight decreases.

Africa Business Performance • Volume growth of 7-8% despite a 4% revenue decline. • Stable absolute EBITDA year-over-year, with expectations for improved margins.

Future Outlook • Anticipated recovery in liquid milk sales growth to 7%-8%. • Plans to reach 40,000 farmers with Orgafeed, up from 20,000-24,000. • Decisions on dividends or buybacks to be made mid-year based on inventory and acquisition plans.

Summary from February 2024

Dodla Dairy Limited Q3 FY24 Results Conference Call Summary

Financial PerformanceRevenue Growth: 12% year-over-year increase to INR 2,338 Crores for the first nine months of FY24. • Value-Added Products: Sales grew by 15.1%. • Milk Procurement: Peak procurement reached 17.5 lakh liters per day, a 36.7% increase year-over-year. • EBITDA Margins: Improved to 11.1%, returning to double-digit margins after eight quarters.

Strategic FocusGrowth Initiatives: Emphasis on organic and inorganic growth, with investments in cattle feed and a new dairy plant in Maharashtra. • Sustainability Commitment: Strengthening relationships with dairy farmers through direct procurement and support initiatives.

Q&A InsightsSales Realization: Consolidated sales realization at INR 57.49; procurement price at INR 37.67. • Curd Sales: Amounted to INR 132 Crores, representing 20.9% of consolidated volume. • International Operations: Temporary decline in Africa sales expected to recover with new production capacity in Kenya.

Future OutlookRevenue Growth Target: Anticipated 15% growth driven by dairy operations, cattle feed, and expansion in Kenya. • Volume Growth: Expected 7-8% for FY2025 despite industry-wide muted growth. • Capital Expenditure: Plans to invest INR 400-500 Crores over the next three years, with INR 150-200 Crores for Maharashtra expansion.

Marketing and Procurement StrategiesAdvertising Spend: Expected to increase from INR 7 Crores to around INR 15 Crores next year. • B2C Focus: Aiming to maintain a consumer sales focus, with wholesale sales constituting only 3%-4% of total sales. • Inventory Management: Increased procurement volumes converted into skimmed milk powder (SMP) rather than bulk milk.

Operational EfficiencyGross Margin Stability: Future margin improvements expected from operational efficiencies rather than gross margin changes. • Expense Management: Rising costs attributed to freight, power, fuel, and higher volumes handled.

ConclusionManagement Acknowledgment: Addressed recent management changes and confirmed plans for a soft launch of a new plant in Maharashtra. • Future Engagement: Call concluded with an invitation for further inquiries from participants.

Summary from October 2023

Dodla Dairy Limited Q2 FY24 Earnings Conference Call Summary

Financial PerformanceRevenue Growth: 10.4% year-on-year to INR 7,678 million. • Value-Added Products (VAP): Sales increased by 13.1%, contributing 26.1% to total revenue. • EBITDA: Rose by 19.2% to INR 702 million; margins improved due to lower raw material costs. • Profit After Tax: Grew by 10.5% to INR 436 million; EPS at 7.26.

Operational HighlightsMilk Procurement: Increased by 18.9% to 17 lakh liters per day. • Farmer Relationships: Procured milk from ~140,000 farmers daily; 89% received direct payments. • Cattle Feed Revenue: Generated INR 38 crores in H1 FY24 through Orgafeed.

Strategic InitiativesSustainability and Innovation: Commitment to long-term value creation with a strong balance sheet and net debt-free status. • New Processing Plant: Planned INR 15 crore investment in Maharashtra to enhance milk collection and production.

Market InsightsRevenue Growth Concerns: Addressed weak volume growth in liquid milk due to price hikes and unseasonal rains. • International Business: Expected growth in absolute terms but stable percentage of overall revenue.

Future OutlookCapital Expenditure: Budget of INR 109 crores for FY24; potential additional investments for the new plant in Maharashtra (INR 100-150 crores). • Revenue Projections: Anticipated double-digit revenue growth for the second half of the year.

Cattle Feed BusinessPricing and Margins: Minor increase in raw material prices expected; maintaining margin profile by passing costs to farmers. • Growth: 13% growth reported in the cattle feed business.

Market PositionKarnataka Market Share: Estimated at 8-9% despite Nandini's dominance. • Expansion Plans: Focus on Maharashtra with a new processing plant to increase capacity.

ConclusionCommitment to ESG: Emphasized dedication to environmental, social, and governance practices and stakeholder value.

Summary from July 2023

Dodla Dairy Limited Q1 FY24 Results Conference Call Summary

Key Financial HighlightsRecord Revenue: INR 8,234 million, 14.8% YoY growth • EBITDA: Increased by 33.9% to INR 603 million • Profit After Tax: Rose 40.3% to INR 350 million • Value-Added Products: Contributed 32% of total revenue

Management InsightsSustainable Growth: Focus on quality, innovation, and farmer relationships • Milk Pricing Strategy: • Maintained price of INR 34 despite competitor cuts • Cautious approach to support farmers while managing costs • Procurement Efficiency: Expected to improve gross margins

Competitive LandscapeSouthern India Focus: Stable prices maintained through organized procurement • Nandini Competition: Matching procurement prices while maintaining higher selling prices due to quality • Subsidy Dynamics: Clarified that subsidies primarily benefit farmers

Pricing Structure and Market DynamicsFarmer Pricing: Both Dodla and Nandini pay INR 15 to farmers, but Dodla pays upfront • Average Prices: • Procurement price: INR 39.62 • Realization price: INR 56.54 • Future Price Outlook: Stabilization or slight decrease expected

Africa Business UpdateRevenue and Margins: Flat revenues but improved margins in Uganda • Expansion Plans: New plant in Kenya to address regulatory challenges

Operational ChallengesImpact of Rainfall: Manageable but could affect certain products • Feed Prices: Rising feed prices due to erratic rainfall acknowledged

Value-Added Products and SalesSales Dynamics: Decline in VAP sales percentage due to ghee and butter shortages • Curd Sales Growth: Driven by price increases rather than volume growth

Financial ManagementCash Balances: Total cash balance of INR 467 crores • Capacity Utilization: • India: 60% to 75% • Uganda: 75% to 80%

ConclusionRevenue Growth Target: 15% for FY '24 with stable EBITDA margins • Long-Term Relationships: Emphasis on maintaining stable prices for farmers despite commodity price drops • Future Inquiries: Management invited further questions via email.

Summary from May 2023

Dodla Dairy Limited Q4 FY23 Results Conference Call Summary

Key Financial HighlightsRecord Revenue: INR 28,120 million for FY23, a 25.3% year-over-year growth. • Business Growth: • Domestic: 23.3% • International: 55.2% • Value-Added Products: 26% increase in sales. • Operational Performance: Significant rise in average milk procurement and sales. • Profit Decline: Decrease in profit after tax and margins, but maintained net debt-free status.

Milk Price OutlookPositive Trend: Anticipated flush season starting in October expected to improve milk production. • Stable Consumer Prices: Plans to keep prices stable despite potential corrections. • Procurement Insights: Majority from Andhra Pradesh, Karnataka, and Tamil Nadu, with plans to increase from Maharashtra.

Growth and Procurement StrategiesRevenue Growth Target: 15% with volume growth of 10-12%. • Procurement Expansion: Increase in number of farmers and procurement centers. • Current Engagement: 120,000 farmers with an average of 8-9 liters of milk per farmer.

Marketing and AdvertisingIncreased Spend: From INR 9.7 crores in FY23 to INR 15 crores in the current year. • Milk Procurement Volumes: FY23 showed a 9.5% growth to 12.85 lakh liters per day.

Cost and Margin InsightsCost of Production: Procurement prices should be about double the feed costs. • EBITDA Margins: Expected improvement in the first quarter; current margins at 4.7%. • Sales and Procurement Prices: Stable sales prices with decreasing procurement prices.

Working Capital and DistributionNegative Working Capital: Approximately INR 6 crore, influenced by inventory management. • Minimal E-commerce Engagement: Contributes less than 0.5% to revenue.

Farmer Economics and SatisfactionImproved Conditions: Favorable cash flow for farmers enhancing satisfaction with dairy farming.

Cash Reserves and Expansion PlansCash Position: INR 100 crore held in Singapore for expansion in Kenya. • Repatriation Costs: Dividends incur a 10%-15% tax; capital gains taxed at Indian rates.

Capital ExpendituresRegular CAPEX: INR 40-50 crores planned for procurement and marketing. • Tax Rate Reduction: Shift from 30% to 25% tax regime due to a tax refund.

Future ProjectionsNew Feed Plant: Expected to generate around INR 200 crores in revenue with a 10% EBITDA margin at full capacity.

ConclusionOptimism for Growth: The company remains positive about its growth and procurement strategies moving forward.

Summary from January 2023

Dodla Dairy Limited Q3 FY23 Results Conference Call Summary

Key HighlightsDate of Call: January 24, 2023 • Operating Revenues: Increased by 17.4% year-on-year to INR 675 crores. • Profit After Tax: INR 35 crores, up 31.7% from the previous year. • Growth Drivers: Higher sales of milk and value-added products.

Management InsightsGross Margins: Decreased from 25.6% in Q2 FY23 to 25.3% in Q3 FY23 due to rising procurement prices. • EBITDA Improvement: Despite margin decline, EBITDA improved due to other financial factors. • Future Expectations: Anticipated slight increase in raw material prices in Q4 FY23, with plans to pass costs to consumers.

Capacity and Growth StrategyCurrent Capacity Utilization: 64-65%, with potential for 77-80% if fully utilized. • Growth Targets: 10-11% by volume and 15% by value over the next 2-3 years. • Procurement Model: Shifted to direct farmer accounts, resulting in higher average milk yield.

Competitive LandscapeFarmer Network: Declined from 125,000 to 120,000 due to price fluctuations. • Market Competition: Multiple major dairies competing for milk in villages.

Operational DevelopmentsConventional Milk Coolers: Expansion at village collection centers to improve milk quality. • Market Dynamics: Price increases attributed to weather and global market influences.

Value-Added ProductsCurrent Focus: Growth in curds, flavored milk, and paneer; cheese potential acknowledged. • Sales Growth: Curd sales increased from INR 107 crores to INR 127 crores year-over-year.

Expansion PlansInternational Growth: New plant acquisition in Kenya to boost sales. • Organic and Inorganic Growth: Actively seeking opportunities in neighboring states like Maharashtra and Odisha.

Financial ConsiderationsCash Reserves: Accumulated due to lack of recent acquisitions. • Future Price Adjustments: Potential increase of around INR 5 to cover procurement costs.

ConclusionConsumption Trends: Strong despite high prices; slight adjustments expected with future price increases. • Closing Remarks: Management expressed cautious optimism about future growth and industry conditions.