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CCL Products: Impact Of Volatile Raw Material Prices | NDTV Profit
NDTV Profit
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8/8/2024
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00:00
Shaila Srisanth, the Managing Director of CCL Products is joining us now on the show.
00:05
Mr. Srisanth, a very good morning to you and great to speak with you.
00:08
Let's take a look at your numbers, a decent quarter this time round,
00:12
even as the cost of raw materials have increased.
00:15
Is that the way you've been looking at it?
00:17
Pretty good performance despite one key raw material bump up.
00:23
Yeah, so since we work on a cost-plus model,
00:26
it actually doesn't really have too much of an impact for us.
00:30
So we've been performing as per the guidance that we have already given.
00:37
Mr. Srisanth, let's talk about how your top line is doing
00:41
and you've nailed impressive growth over the last many years.
00:47
Going ahead for the rest of FY25, I know the coffee industry is a mature product, right?
00:53
So you're not expecting to grow more than 4% to 5%.
00:55
You clearly are an outlier.
00:57
What sort of volume growth are you guiding for for FY25?
01:02
So one of the reasons why we took an aggressive step and we've doubled the capacities
01:08
is because we are quite confident of 15% to 20% volume growth year on year,
01:14
at least for the next two to three years.
01:17
So keeping that objective in mind, only we've got it for that expansion.
01:21
And the reason why we are an outlier is also because today we are actually at the base of the pyramid.
01:28
We are doing generic products.
01:31
We're doing a lot of bulk manufacturing.
01:34
We've slowly started transitioning to B2C segment.
01:38
We've also started working on more of small packs.
01:41
So we're going up the value chain,
01:43
which is also why we are confident that what we're doing is much more sustainable in the long run.
01:50
Shishant, just one quick question.
01:54
Continuing on the top line, 90% of your business still comes from B2B.
01:59
The last time we spoke, you talked about how you aggressively want to build out your B2C segment as well.
02:04
You know, tell me, where does that split between B2B and B2C sit at?
02:09
And where will that expansion come from?
02:11
Would it be B2C, B2B?
02:13
Break that down for us.
02:15
So it's actually coming from both areas.
02:18
It's just that the B2C segment is growing disproportionately higher.
02:23
So we are seeing almost 35 to 40% growth from the B2C segment.
02:29
And for the B2B segment also, we are seeing at least around about 15% growth.
02:35
So we feel that both are quite sustainable.
02:39
The B2C, because the segment is still a bit small, we're able to have higher growth rates over that.
02:47
Okay.
02:48
Shishant, good morning. Neeraj here.
02:50
You continue to maintain that growth rates for sure.
02:53
Just wondering if, as you alluded to, maybe partly or maybe I got it wrong,
02:58
that the composition of what forms a part of that 15%, 20% growth for the next three years,
03:06
would that be different in terms of high-value coffee versus low-value coffee?
03:12
And traditionally, you've been a company which doesn't get impacted at all
03:17
because you pass on the margin benefits or margin losses.
03:20
But could margins show an uptick because of a higher-value premiumization bend
03:25
that you might have over the next three, four years?
03:28
So our endeavor is to focus on improved margins in the longer run.
03:34
But at this point in time, for the next year or two, we've given the guidance,
03:38
saying that we're just going to maintain the guidance.
03:41
One has to keep in mind that we've come up with new capacity.
03:44
You have depreciation.
03:46
You have interest costs at an all-time high.
03:49
You have multiple issues which are currently there.
03:52
And we're trying to grow volumes in a space where a market category is growing,
03:57
let's say, single-digit, the low single digits.
04:00
So keeping all these challenges, we are creating a product mix
04:04
that combines premium products as well as value-volume products.
04:11
So with the combination of the two, we are saying that we will maintain
04:15
the existing guidance at least for the year or two,
04:18
and that foundation will help us to create better margins in the future.
04:25
Sushant, between Neeraj and me, we are both fighting
04:27
who's going to ask you the next question.
04:29
So I'm going to take this one very quickly on your expansion plans.
04:32
And also, you, I know, historically seem to identify a customer
04:37
and then make that investment in expansion.
04:41
What are your expansion plans for the rest of the year,
04:44
for the next couple of years?
04:45
Where do you see CCL?
04:47
And also, debt equity healthy?
04:49
Because I know you had taken on heavy debt to fund those expansion plans.
04:53
Yeah.
04:54
So for the expansion, we've taken about a total of 650 crores or so.
04:59
And India was actually debt-free earlier.
05:02
Now the new plan that has come online as a subsidy company
05:07
that is operational this year.
05:10
And for Vietnam, we have a freeze-dried expansion
05:14
that is coming online as well in the next two months' time.
05:18
So with these two expansions, we are now reaching
05:23
around 77,000 tons of production capacity.
05:26
So we don't have any major expansion plans in the near future.
05:31
We're just focusing on more of capacity utilization
05:34
over the next couple of years.
05:37
Okay.
05:38
Well, Srisanth, it was an absolute delight understanding this.
05:41
Congratulations on a very good performance
05:44
and all the best for the quarters ahead.
Recommended
24:00
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