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Heritage Foods Limited Q1 FY2025 Earnings Conference Call Summary
Historic Revenue Milestone • Surpassed Rs. 1,000 crores in quarterly revenue for the first time. • Consolidated revenue: Rs. 1,033 crores (12% YoY increase). • EBITDA: Rs. 94 crores (133% increase). • Net profit: Rs. 58 crores (249% increase).
Operational Highlights • Milk sales volumes grew by 4.26%. • Revenue from value-added products increased by 20%. • New product variants launched. • Significant growth in subsidiary Heritage Nutrivet Limited.
Milk Pricing and Market Dynamics • Stable procurement prices in southern India despite price hikes by competitors. • EBITDA margins currently at 9%, with a target of 7% to 8%. • Seasonal dynamics may affect future profitability.
Ice Cream Business and Subsidies • Ice cream business growth: 18-20% in Q1. • Heavy rainfall impacted sales in southern India. • New Rs. 5 subsidy in Maharashtra for private companies.
Competition and Market Share • No market share loss reported despite competitors reducing prices in Telangana. • Increased local competition may soften future volume growth.
Industry Structure and Growth Drivers • Organized sector accounts for 40% of the dairy industry; growth driven by consumer shift to organized brands. • Value-added products expected to see significant growth.
Stock Levels and Supply Management • 4,586 tons of skimmed milk powder (SMP) available for the year. • Industry managing high SMP and butter stocks with stable milk production.
Branding and Marketing Strategies • Unique procurement and distribution network connecting farmers and consumers. • Marketing spend at approximately 0.9% of revenue.
Procurement and Distribution Commitment • Emphasis on transparency, fair pricing, and timely payments to farmers. • Omni-channel distribution strategy contributing to revenue growth.
Future Growth and Margin Strategies • Shift towards increasing value-added products from 30% to 40% over two years. • Targeting annual growth rate of 17% to 18% over the next three years. • EBITDA margin targeted to remain between 7% to 8%.
Conclusion • Ongoing efforts to meet consumer expectations and logistical challenges. • Invitation for further inquiries through investor relations.
Heritage Foods Limited Conference Call Summary (May 31, 2024)
Financial Performance • Q4 Results: • Operating income: INR 951 crores (16% YoY increase) • EBITDA: INR 70 crores (68% increase) • Net profit: INR 41 crores (126% increase)
• Full-Year Results: • Operating income: INR 3,794 crores (17% increase) • Net profit: INR 107 crores (84% increase)
Operational Highlights • Significant growth in milk procurement and sales volumes. • Successful new product launches and expanded distribution network. • Management addressed seasonal trends in milk procurement prices.
Key Inquiries and Responses • Fat Sales: • Bulk fat sales decreased from 2,000 tons in Q2 to 1,000 tons in Q4. • Consumer fat product sales increased from 560 tons in Q1 to 800 tons in Q4.
• Milk Sales Growth: • Confirmed growth in all markets, including Hyderabad. • Weather impact on VAP sales and butter provisions discussed.
• Milk Procurement vs. Sales Growth: • Milk sales growth aligned with population growth and organized sector expansion. • VAP products experiencing higher growth due to market shifts.
Financial Metrics and Projections • Fat Losses: • Reported at INR 13.45 crores for the quarter. • Focus on reducing fat losses and improving gross margins (Q4 gross margins at 23.34%).
• Value-Added Products: • Long-term profitability noted, with a goal to increase their share from 29.6% to 40%. • Current margins for VAP: 10.48% (Q4) and 9.75% (full year).
Capital Expenditure and Growth Strategy • FY'24 capex: INR 136 crores; planned for FY'25: INR 150 crores. • Projected growth rates of 11-13% for the dairy industry. • Focus on volume growth rather than price increases, targeting 15-20% year-on-year growth.
Strategic Initiatives • Optimization of milk supply with a shift towards cow milk. • Geographic expansion into new states and deeper market penetration in existing areas. • Emphasis on inventory management and stable milk procurement prices.
Conclusion • The call highlighted strong financial performance, operational growth, and strategic initiatives aimed at enhancing market position and profitability. Further inquiries from investors were welcomed.
Heritage Foods Limited Q3 FY2024 Earnings Conference Call Summary
Key Financial Highlights • Revenue: ₹941 crores (20% YoY growth) • EBITDA: ₹52 crores (60% increase) • Net Profit: ₹27 crores (96% surge) • Milk Procurement: Increased by 14.3%
Conference Call Insights • Losses from Bulk Fat Disposal: • Actual losses of ₹15.5 crores clarified as not just accounting allocations. • Heritage Touch App: • Shift to WhatsApp commerce model after successful pilot in Bangalore. • Customer acquisition cost: ₹400 with over 98% retention rate.
Modern Trade and E-commerce • Revenue Contribution: • E-commerce and modern trade account for 11% of revenue. • Improvements noted in Tamil Nadu.
Future Strategies • Stock Management: • Maintaining only two months of stock to avoid speculation. • Value-Added Products: • Targeting 40% contribution to revenue. • Focus on energy-saving initiatives to reduce costs.
Market Position and Growth • Volume Growth: • 19% growth in value-added products, with only 4% from price increases. • Milk Price Trends: • Current conditions normalizing; procurement network expansion underway.
Challenges and Solutions • Balancing Procurement and Sales: • Strategy to shift output mix towards value-added products to mitigate surplus milk losses. • Expansion of Collection Centers: • Added 2,200 centers over two years to enhance procurement capacity.
Margin and Revenue Outlook • Current EBITDA Margin: Approximately 7.5% without bulk fat losses. • Future Revenue Target: Aiming for ₹6,000 crores in the next 2-3 years. • Long-Term Margin Goal: Targeting 8% margin, currently at around 5.5%.
Conclusion • Growth Expectations: • Anticipating 15-20% revenue growth for the next year. • Market Competition: • New entrants unlikely to significantly impact volumes. • Appreciation for Engagement: • Call concluded with thanks to participants.
Heritage Foods Limited Q2 FY24 Earnings Conference Call Summary
Financial Performance • Record Revenue: INR 979 crores, 20% YoY increase. • EBITDA: INR 47 crores, up 18%. • Net Profit: INR 22 crores, up 18%. • First Half FY24: Revenue grew 16% to INR 1,902 crores; net profit increased 49% to INR 39 crores. • Challenges: High raw milk procurement costs and fat sales losses affecting gross margins.
Procurement and Sales Insights • Procurement Prices: Decreased since mid-September; expected to decline further in Q3. • Cattle Feed Prices: Anticipated to remain stable in the short term. • Liquid Milk Sales: Turnaround from a 1% decline in Q1 to 1% growth in Q2.
Operating Margins and Profitability • Operating Margins: Below 5%, with aspirations of reaching 7-8%. • Profit Before Tax (PBT): Improved from 2.55% in Q1 to 3.14% in Q2; projected PBT of 3.86% in Q3 without butter losses. • Fat Sales Losses: Historically between INR 20-45 crores annually; significant losses this year due to inventory and procurement price fluctuations.
Value-Added Products and Growth Strategy • Value-Added Products Growth: 18% increase; curd sales up 16%. • Cost Reduction Initiatives: Achieved one-third of a 10% cost reduction goal. • Capacity Expansion: Plans for growth in Chittoor district to access new markets.
Future Outlook • Capital Expenditure: Planned at around INR 100 crores annually for FY'25 to FY'26. • Raw Milk Procurement Target: Increase by 8-10% in the second half of the year. • Value-Added Product Segments: Significant growth in paneer (28%) and ice cream (45%). • Profitability Improvement: Adjusting pricing to enhance margins, targeting an EBITDA margin of 8%.
Heritage Foods Limited Conference Call Summary (August 2, 2023)
Financial Performance • Record Revenue: Achieved INR 924 crores, a 12.5% YoY increase. • EBITDA Growth: Increased by 68% to INR 40 crores. • Net Profit: Grew by 129% to INR 17 crores. • Milk Procurement: 9% increase in average procurement despite challenges.
Product and Market Developments • New Products: Launched 10 value-added products. • Distribution Expansion: Significant growth in distribution network. • Sales Mix Shift: Increased focus on value-added products contributing to margin expansion.
Operational Insights • Inventory Management: Current inventory primarily for internal use; expected liquidation in 3-4 months. • Procurement Stability: No challenges faced; improved milk production noted. • Direct Payments: 28% of payments made directly to farmers.
Strategic Goals • Long-term EBITDA Margin: Targeting 7-8%. • Revenue Goal: Aiming for INR 6,000 crores with a focus on value-added products contributing 40%.
Shareholding and Growth Concerns • Promoter Shareholding: Static at 41%; no plans for increase or stake sale. • Sales Volume Growth: Increased from 13.5 lakh liters in FY '22 to 15 lakh liters in FY '23, with 8-10% growth expected.
Weather Impact and Future Strategies • Adverse Weather Effects: Growth below expectations due to weather conditions in April and May. • Mitigation Strategies: Focus on strategies to address weather-related impacts moving forward.
Conclusion • Engagement and Transparency: Management expressed commitment to ongoing communication and addressing stakeholder concerns.
Heritage Foods Limited Q4 FY2023 Earnings Call Summary
Conference Call Overview • Date: May 29, 2023 • Participants: Key management members including Dr. M. Sambasiva Rao (President) and executives. • Communication to BSE and NSE on May 31, 2023.
Financial Performance • Q4 FY2023 Results: • Consolidated revenue: INR 818 crores (0.5% increase) • Net profit: INR 18 crores (44% year-on-year growth) • Full FY2023 Results: • Revenue: INR 3,241 crores (21% growth) • Net profit: INR 68 crores • Average milk procurement: 1.43 million liters per day. • New value-added products launched.
Milk Production and Pricing • Flush Season Outlook: • Normal flush expected in October and November. • No significant increase in availability due to subsiding lumpy skin disease. • Inventory Levels: • Increase in inventory typical due to rising volumes and prices. • Milk Pricing Trends: • Prices softened from April peak; Q1 averages uncertain.
Margin and Growth Projections • EBITDA Margin: • Target margin: 7% to 8%. • Ongoing price corrections and efficiency measures improving profitability. • Growth Projections for FY '24: • Industry growth expected in double digits; Heritage aims to outpace this.
Operational Strategies • Retail and Procurement: • Servicing 120,000 to 130,000 retail outlets through distributors. • Expansion of procurement network to meet projected 70% increase in milk procurement. • Key States for Milk Procurement: • Andhra Pradesh (40% contribution), Maharashtra, Tamil Nadu.
Focus Areas for Improvement • Energy and Fuel Efficiency: • Reducing energy consumption and optimizing logistics. • People Productivity: • Initiatives expected to yield benefits in FY '24.
Product Development and Market Positioning • Continuous consumer studies and benchmarking against competitors. • Aim to maintain premium positioning, especially for curd and drinkables.
Ice Cream Business Insights • 50% growth in the previous year. • Sales potential exceeding INR 100 crores with gross margins of 33% to 35%. • Focus on product innovation and market presence.
Conclusion • Increased competition positively impacting product quality and consumption in the dairy sector. • Management expressed optimism for future growth and operational efficiencies.
Heritage Foods Limited Q3 FY2023 Earnings Conference Call Summary
Key Financial Highlights • Q3 FY2023 Performance: • Consolidated revenue: INR 786 crores (up 17.8% YoY) • EBITDA: INR 33 crores (decrease due to rising raw material costs) • Net profit: INR 14 crores • First Nine Months of FY2023: • Revenue: INR 2,423 crores (up 22%) • Net profit: INR 40 crores
Operational Insights • Milk Procurement and Sales: • Increased procurement and sales of milk. • Significant growth in revenue from value-added products. • Cost Pressures: • Rising raw milk prices impacting profitability. • Employee costs remain manageable.
Management Commentary • Srideep Kesavan's Insights: • Ongoing inflation in procurement prices expected. • Operational improvements in logistics and transportation. • Focus on direct consumer sales over B2B market risks. • Advertising and Marketing: • Strategic investment planned as markets mature.
Market Challenges • Milk Price Trends: • Historical upward trend in milk prices; unlikely to decrease. • Concerns about the impact of the flush season on prices. • Cattle Feed Prices: • Expected stability followed by a potential drop.
Strategic Initiatives • Value-Added Products: • Focus on higher-margin products to improve profitability. • Anticipated improvement in EBITDA margins (8-10% target). • Procurement Efficiency: • Initiatives to reduce operating costs by 10%. • Enhancing procurement productivity and logistics optimization.
Growth and Expansion Plans • Farmer Engagement: • Increased farmer base by 30,000. • Welfare activities and support for farmers. • Technological Advancements: • Launch of Heritage VET+ app for farmers.
Supply Chain Management • Logistics: • Use of hired temperature-controlled vehicles to ensure quality. • Quick turnaround from procurement to consumer to maintain freshness.
Credit Rating Upgrade • Company Credit Rating: • Upgraded from A to A+.