Sheela Foam Limited (SFL)

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Summary from August 2024

Conference Call Overview • Date: August 5, 2024 • Participants: Key management including Rahul Gautam (Executive Chairman), Tushaar Gautam (Managing Director), Nilesh Mazumdar (CEO), Amit Kumar Gupta (Group CFO), and moderator Amit Purohit (Elara Securities). • Officially signed by Md. Iquebal Ahmad (Company Secretary & Compliance Officer).

Financial Results for Q1 FY 2025Standalone Performance: • Revenues: INR 504 crores (10% YoY increase) • EBITDA: INR 48 crores (22% decline) • Net Profit: INR 32 crores (25% decline) • Consolidated Performance: • Revenues: INR 810 crores (26% increase) • EBITDA: INR 60 crores (23% decline) • Net Profit: INR 47 crores (8% increase) • Integration of Kurlon Enterprise Limited causing temporary disruptions.

Integration of Kurlon • Integration process approximately 85-90% complete. • Expected annual savings of INR 250 crores. • Kurlon's revenue contribution for the quarter: INR 170-175 crores.

Management Insights • Rahul Gautam addressed revenue targets and assured achievement of INR 1,000 crores soon. • Amit Kumar Gupta explained EBITDA decline due to fixed costs and integration disruptions. • Anticipated growth rate of 15% YoY in upcoming quarters.

Operational Challenges • Rapid ERP integration completed in one week. • Concerns raised about sluggish performance in the consumer durables sector.

Future Outlook • Confidence in stronger fundamentals post-integration. • Plans to expand distribution networks, particularly in small towns. • Target of 10% increase in active channels for the current financial year.

Market Strategy • Focus on creating consumer demand rather than competing on price. • Introduction of affordable products targeting low-income groups.

Dividend Policy and Market Share • Discussion on the company's longstanding policy of not paying dividends. • Assurance that the company is not losing market share, with growth in both volume and value expected.

Conclusion • Current challenges viewed as temporary; business fundamentals remain strong.

Summary from May 2024

Sheela Foam Limited Investor Conference Call Summary

Date and ContextDate of Call: May 22, 2024 • Financial Results: Quarter and year ending March 31, 2024

Key Executives PresentRahul Gautam: Executive Chairman • Tushaar Gautam: Managing Director • Amit Kumar Gupta: Group CFO

Significant DevelopmentsAcquisitions: • Kurlon • Investment in Furlenco • Performance: • Kurlon: 7% EBITDA margin in Q4 • Furlenco: Profitable for three consecutive months • Operational Updates: • Completion of Jabalpur plant • Integration of ERP system with Kurlon

Financial HighlightsQ4 Revenues: INR 845 crores (up 16% YoY) • Q4 Net Profit: INR 65 crores (up 49% YoY) • Full Year Revenues: INR 2,982 crores (up 3.8% YoY) • Full Year Net Profit: INR 184 crores (down 8.4% YoY)

Volume Growth InsightsCurrent Quarter Volume: 675,000 pieces (up from 665,000 YoY) • Brand Growth Rates: • Sleepwell: 31% • Kurlon: 17% • Revenue Guidance for FY '25: Projected 15% CAGR growth

Market Share and Growth ExpectationsEstimated Market Share: 29% to 30% • Growth Drivers: Primarily volume increases rather than pricing

EBITDA Margins and Cost StructureCurrent EBITDA Margins: Lower than expected despite reduced raw material costs • Future Margin Improvement: Potential 3% increase over the next few years through cost efficiencies

Brand Performance and StrategyFocus on Category Growth: Emphasis on overall growth rather than individual brand performance • Kurlon Growth Factors: Expanded distribution, price rationalization, and new marketing initiatives

E-commerce and Market TrendsE-commerce Contribution: Expected to stabilize at 10% to 15% in the next 2-3 years • Raw Material Pricing Trends: Fluctuations anticipated due to market factors

International Market PerformanceAustralia and Spain: • Declining revenues noted • Capacity increases in Spain despite market shrinkage • Focus on market share expansion in Australia

ConclusionCall Closure: Management thanked participants and invited further inquiries.

Summary from February 2024

Sheela Foam Limited Q3 FY '24 Earnings Conference Call Summary

Key Management Participants • Executive Chairman: Rahul Gautam • CEO: Nilesh Mazumdar • CFO: Amit Kumar Gupta

Financial HighlightsConsolidated Revenue: INR 879 crores (15.5% YoY increase) • Net Profit: INR 31 crores (49% YoY decrease) • Sleepwell Mattress Segment: 26% YoY growth

AcquisitionsFurlenco: Updates on profitability expected in February. • Kurlon: Achieved annualized revenue of INR 890 crores post-acquisition.

New Brand LaunchesTarang: Targeting lower-cost mattress consumers, priced around INR 2,000. • Nexa: Premium mattress starting from INR 24,000. • FitRest: Affordable option for specific market segments.

Strategic FocusPhase 1: Focus on profitability. • Phase 2: Selling furniture through stores and online, funded by generated capital.

Operational UpdatesGoodwill and Purchase Price Allocation: Ongoing process for Kurlon acquisition. • Return on Equity (ROE): Confidence in achieving 18-20% ROE post-QIP. • Marketing Expenses: Significant spending on mattresses, especially during high-impact events.

Revenue and EBITDA Goals • Targeting INR 1,000 crores in revenue and a 10% EBITDA margin. • Operational synergies from procurement expected to materialize soon.

Export ChallengesU.S. Exports: Difficulties due to 27-30% antidumping duty. • Production Centralization: New facility near Mumbai fully utilized.

International Market InsightsEurope: Maintaining volume share despite recession. • Australia: Stable market with slight decline; capacity expansions completed.

Conclusion • Invitation for further inquiries and appreciation for participant engagement.

Summary from November 2023

Sheela Foam Limited Investors' Conference Call Summary (November 3, 2023)

Financial PerformanceQ2FY24 Results: • Revenue declined 10% year-on-year to ₹613 crore. • Consolidated revenues for H1 FY24 also down 10% to ₹1,258 crore. • Profit After Tax (PAT) reported at ₹88 crore.

Factors for Decline: • Increased online pricing for Sleepwell brand. • Falling raw material prices affecting revenue. • Delayed festive season impacting sales.

Segment DevelopmentsTechnical Foam Segment: • Positive growth driven by OEM.

Furniture Cushioning Sales: • Lower due to festive season delays.

Acquisitions and OperationsRecent Acquisitions: • 35% stake in Furlenco and 95% stake in Kurlon.

New Plant Operations: • Jabalpur mattress production plant to commence in December.

Capital Expenditures: • Investments in Australia and Spain on track.

Financial OutlookFurlenco's Financials: • Total debt around ₹350 crore; significant reduction in interest costs. • Targeting operational EBITDA positivity by month-end.

Revenue Projections: • Kurlon expected to generate ₹1,000 crore with 10% EBITDA margin. • Furlenco projected at ₹300 crore, aiming for profitability. • Total revenue for Sheela Foam projected at ₹3,200-3,300 crore.

Distribution and Brand StrategyTarang Distribution Model: • Focus on smaller towns using FMCG-like distribution.

Brand Positioning: • Sleepwell as modern/technology-driven; Kurlon as natural/organic.

Market ChallengesCannibalization Concerns: • Management addressing potential overlap between Kurlon and Sleepwell brands.

Top-line Growth Decline: • Influenced by raw material price drops and lower volumes.

Margin ImprovementsGross Margin Enhancements: • Improvements due to conversion from SleepX to Sleepwell mattresses.

Segment Performance: • Varied performance in technical foam and furniture foam segments.

Overseas OperationsMargin Dynamics: • Australia and Spain facing different margin pressures; expectations for improvement.

Seasonal ImpactFestive and Wedding Seasons: • Delayed festive season effects felt in October; wedding season shorter but balancing out.

Inventory Management: • Generally low inventory levels; slight increase to meet festive demand.

Conclusion • Management expressed gratitude for inquiries and encouraged further questions.

Summary from August 2023

Sheela Foam Limited Q1 FY '24 Earnings Conference Call Summary

Key HighlightsDate of Call: August 3, 2023 • Submission: Transcript submitted to BSE and NSE on August 8, 2023 • Management Present: Chairman and Managing Director Rahul Gautam

Financial PerformanceQuarter Ending: June 30, 2023 • EBITDA: • 13.3% for India business • 12% consolidated • Revenue Trends: • Decline in topline revenue due to rationalization of loss-making SleepX products • Significant reduction in raw material prices positively impacting profitability

Strategic AcquisitionsAcquisitions: Kurlon and Furlenco • Expected to enhance market position in mattress and furniture sectors • Kurlon to operate as a subsidiary initially, with potential merger plans

Brand FocusSleepwell Brand: • Emphasis on promoting Sleepwell in e-commerce • Marginal growth in Sleepwell volumes and revenues • SleepX Brand: • Strategic downsizing of online presence due to unprofitability • Expected phase-out of online sales

Operational InsightsGross Margin Improvements: • Attributed to reduction in SleepX and lower raw material costs • Volume Data: • Temporarily omitted due to ongoing acquisitions; will be provided in future reports

Future ProjectionsFurlenco: • Expected to become EBITDA positive by October and PBT positive by December • Debt Status: • Kurlon operates on a debt-free cash-free basis

Marketing and Growth StrategiesProduct Mix: • Combination of Sleepwell and Kurlon offerings • Geographical Presence: • Enhanced growth potential beyond sum-of-parts • Marketing Investment: • Need for increased investment to capture market share from unorganized sector

Challenges and RisksExport Issues: • Challenges due to anti-dumping duties and supply chain issues, particularly in the US market • Fire Incident: • An INR 11 crore exceptional item due to a fire at a vendor's unit; no business disruptions reported

Management OutlookRationalization of SleepX: • Largely complete; revenue decline attributed to raw material price fluctuations • Future Growth: • Optimistic outlook for operations and growth prospects, with no specific sales targets provided for FY '24.

Summary from May 2023

Date and ContextDate of Call: May 18, 2023 • Financial Results: Quarter and year ending March 31, 2023 • Key Participants: Chairman and Managing Director Rahul Gautam, Nilesh Mazumdar, Rakesh Chahar, Nihal Jham, Ritesh Shah

Business EnvironmentChallenges: • Low consumer footfall in the mattress segment • Varying performance across industries • Optimism: • Stabilizing raw material prices • Upcoming capacity expansions in India, Australia, and Spain • Launch of a new mattress for low-income consumers

Strategic FocusGrowth Opportunities: • Commitment to reinvest profits • Pursuing organic and inorganic growth • Management Changes: • Nilesh Mazumdar appointed to lead Indian business • Focus on organized market shift and upgrading consumer products

Financial ClarificationsRevenue and Expenses: • Recent reclassifications suggested by auditors had no impact on profitability • Mergers and Acquisitions: • Exploring opportunities with a focus on affordability

Market PerformanceExports: Slow recovery noted • Indian Railways: • Revenue over INR 60 crores achieved • Target to increase revenue significantly despite competition • Footfalls and Conversion Rates: • Healthy conversion rate of 30-50% • Need for increased footfalls through channel expansion and advertising

Advertising and Sales StrategyAdvertising Expenditure: • Targeting 5-6% of net sales, with increased spending during peak seasons • Channel Expansion: • 20% expansion in active channels for Sleepwell brand planned • Online Sales: • Currently 8-9% of mattress sales, expected to reach 10%

Future ProjectionsGrowth Rate: Projected blended growth of 12-14% • Market Share: No loss in market share despite mattress segment challenges • Gross Margins: Expected improvement due to stable raw material prices

ConclusionFocus: Emphasis on core products amid market challenges • Gratitude: Participants thanked for their attendance as the call concluded.

Summary from February 2023

Sheela Foam Limited Q3 FY 2022-23 Conference Call Summary

Financial PerformanceDate of Call: February 3, 2023 • Key Management: Managing Director Rahul Gautam • Revenue Growth: Slight increase, but EBITDA below 10% due to one-off expenses. • Challenges: Inflation and fluctuating raw material costs impacting performance.

Market InsightsMarket Shift: Transition from unorganized to organized markets; increased market share for Sleepwell brand. • Subsidiary Performance: Positive developments in Australia and Spain. • Sustainability Initiatives: Ongoing efforts highlighted.

Inventory and MarginsGross Margins: Improved but affected by old inventory in TDI and polyol. • Current Pricing: Gross margins reflect current raw material costs.

Expansion and Growth StrategiesVolume Recovery: Focus on increasing foot traffic in Exclusive Brand Outlets (EBOs) and Multi-Brand Outlets (MBOs). • New Outlets: Plans for 400-500 new outlets annually. • International Expansion: New plant in Australia and modest recovery in Spain.

Sales ProjectionsExports: Expected to reach INR 40 crores this year, with potential growth to INR 100 crores next year. • Online Sales: Projected to exceed INR 100 crores this year, with a 50-60% increase anticipated next year.

Product InitiativesSofa Market: Ongoing refurbishment pilot program. • Technical Foam Growth: Significant growth driven by the auto sector, holding a 70-75% market share.

Competitive LandscapeFurniture Retail Competition: Establishing "Furniture-First" stores to compete with retailers like IKEA. • Consumer Preferences: Noted trend towards one-stop shopping.

Strategic InitiativesAffordable Mattresses: "Mattress for Every Indian" initiative targeting underserved populations. • European Market: Gaining market share despite a 25% slump in demand.

Marketing and Future SpendingMarketing Expenses: Recent one-time expenses necessary for post-COVID recovery; future spending expected to normalize.

Plant Installations and Revenue ExpectationsJabalpur Plant: Estimated revenues of INR 350-400 crores in 2-3 years. • Export Plant Utilization: Currently around 10-15%, leading to losses.

Inorganic Growth FocusAcquisition Strategy: Interest in consumer-facing businesses in India and foam manufacturing abroad.

Industry TrendsOnline Sales: Stabilizing, with expectations to account for 15-20% of the market. • Consolidation: Anticipated in the organized mattress market over the next two years.