Sutlej Textiles and Industries Ltd
NSE:SUTLEJTEX
Sutlej Textiles and Industries Ltd
NSE:SUTLEJTEX
Price:
38.5
INR
-4.32%
Market Cap:
₹6.3B
Add Note
Add Target
Capture your thoughts and set a target
Decide at what price you'd be comfortable buying and we'll help you stay ready.
Based on
Margin of Safety
0%
10%
20%
30%
40%
50%
Your Price Target
Linked to
current price
· In Buy Zone
Loading
Note attached
Choose the stock you wish to monitor with a price target
Popular Picks
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
Bank of America Corp
NYSE:BAC
|
US |
|
Mastercard Inc
NYSE:MA
|
US |
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
Pfizer Inc
NYSE:PFE
|
US |
|
Nike Inc
NYSE:NKE
|
US |
|
Visa Inc
NYSE:V
|
US |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
Coca-Cola Co
NYSE:KO
|
US |
|
Verizon Communications Inc
NYSE:VZ
|
US |
|
Chevron Corp
NYSE:CVX
|
US |
|
Walt Disney Co
NYSE:DIS
|
US |
|
PayPal Holdings Inc
NASDAQ:PYPL
|
US |
Ladies and gentlemen, good day, and welcome to Sutlej Textiles and Industries Limited Q2 and H1 FY '24 conference call. From the management panel, we have with us today, Mr. S. K. Khandelia, Adviser, Sutlej Textiles and Industries Limited; and Mr. Rajib Mukhopadhyay, Whole-Time Director and CFO. [Operator Instructions] Please note that the conference is being recorded.
I now hand the conference over to Mr. Rajib Mukhopadhyay. Thank you, and over to you, sir.
Yes, thank you. Good afternoon, everyone, and welcome to the earnings conference call for Sutlej Textiles and Industries Limited for the second quarter and half year of FY '24. I trust that you are all doing well. With me on the call today is Mr. S. K. Khandelia, who is at the helm of affairs of day-to-day matters of Sutlej Textiles and Industries Limited, and Stellar IR Advisors, our Investor Relationship team. We have already uploaded the investor presentation, and I hope everyone has had an opportunity to go through the same.
Let me start the call by giving you the financial highlights of the quarter and the half year gone by, after which Khandelia Ji will fill you in on the business highlights as well as the industry highlights. For quarter 2 FY '24, our consolidated total income came at INR 739 crores, which was 4% higher than Q1 FY '24, which was mainly on account of liquidation of finished goods inventory.
Due to sluggish demand, our margin impacted in Q2. Sales volume increased by around 12%, but on the same time, realization has dropped by around 8% on quarter-to-quarter basis. So increase in net sales is only 4%, while raw material average consumption prices dropped by around 1% only. Gross profit stood at INR 235 crores, which was lower by 17% on a on-quarter basis. Gross margin for the quarter stood at 32%, which is lower on a quarter-on-quarter basis. EBITDA for the quarter was minus INR 30 crores as against INR 5 crores positive in Q1 FY '24. For half yearly FY '24, our consolidated total income stood at INR 1,450 crores. Gross margin came at 36%. EBITDA stood at minus INR 25 crores, and PAT came in at INR 80 crores minus.
As we have been updating you our efforts at strengthening our balance sheet still continues. During the quarter, we have reduced our debt by INR 129 crores to INR 815 crores as against INR 944 crores as on 30th June. Our current debt to equity ratio continued to stay below 1 and currently stands at 0.80. During the quarter, we reduced our working capital level by INR 209 crores and reduced the fund blockage.
Those were my initial opening remarks, I will now request Khandelia Ji to please take it forward with the business and industry updates.
Thank you, Rajib, and thank you all for joining us today on this conference call. As we have been advising on our previous calls, the quarter gone by and this year has been challenging for the textile industry in general and the spinning sector in particular. Most developed markets were already seeing a significant reduction in discretionary spending on account of high inflation and recessionary pressures. Unfortunately, not only does this trend continue, but with the Israel-Hamas conflict, we anticipate that the pain will carry on for the remainder of the fiscal.
Due to slowdown in exports, capacities got diverted to domestic market, leading to oversupply in domestic market. Consequently, the domestic margins have also come into huge pressure. In our case, we are exporting about 40% of our products and most of the developed countries, as I mentioned, has seen the depressed demand, but the margins in these products were impacted adversely.
Similarly, in domestic market, as I said, that the proposed exports, overall country's exports were down. There was pressure in domestic market and demand was also impacted because of inflationary pressure in India also, and the consumer discretionary spending was reduced. In our case, we have been supplying premium quality yarns that is dyed yarns in domestic market as well as in export markets, like synthetic and blended dyed yarns, cotton and cotton blended mélange yarn, and this is the most affected segment because this is a premium segment.
Secondly, our specialty mélanges were going to garment exporters. But as the garment exports has fallen in 5 months of this fiscal year by 22.6%, that impacted the demand and margins in our specialty mélange yarn. And we were forced to run grey yarns, which we are not very competitive because of the different set of mills are there.
Quarter 2 financial year '24 has been yet another quarter that saw subdued demand for the spilling industry, unfortunately, that I have already mentioned. And then as Rajib mentioned, we were carrying excess inventory at the end of first quarter and that we have reduced significantly of the finished goods and the work in process. And if I remember correctly, it was about INR 110 crores. And since the markets were falling, we suffered heavy losses in that. And now I think that still will continue to remain challenging and market conditions are likely to remain subdued at least for the 2 quarters from now. And once the things gets clear and visibility is there, those things should improve.
Thank you. Now anyone can ask questions.
[Operator Instructions] The first question is from the line of Rahul Soni from ICICI Bank Limited.
Can you briefly explain the present situation like utilizations level at the industry level and also at the company level, and how the yarn spread is moving?
You see, as the position stands now, there is no visibility because Israel-Hamas war has further added a dimension would already depressed demand, so there is complete uncertainty in the marketplace. Demand is quite depressed. And India, as I mentioned, because of the inflationary pressure though it is stable at present, the purchasing power of the people is impacted, discretionary spends are not getting -- reduced to the orders. People like something else, and they don't have that much money for that, so visibility is not there. So it is very difficult to say when the situation is likely to improve. But as I mentioned that we see that for this quarter as well for the next quarter, things are going to be very challenging.
And what was our utilization?
Excuse me, I could not get you.
Our utilization.
Our utilization was 84% effective and capacity utilization was 94%. So normally, we use 100% of our capacity and utilization normally remains 95%. But this time, say, our capacity utilization was lower by 6%.
And our overall realization, you said dropped to 4% quarter-on-quarter?
No, overall realization depends upon different varieties and overall realization, if I talk in the yarn segment, it is, I think, dropped by 12%, overall realization of yarn segment dropped by 12%.
So in segment-wise, what is the breakup between [ manmade ] and cotton yarns?
No, no, our main segment is spinning, so there the overall realization dropped by 12%. And then there are different types of yarns. So somewhere, it may be 15%. Somewhere, it may be 5%. So on an average, it was 12%. And another segment where we are is the home textile, so it is a small segment. There, the realization has improved and the working has also improved, and that is on good traction.
Sir, if I ask about the breakup between cotton yarn and manmade yarn, what is the current breakup...
Not readily available with me. We will arrange to send you.
The next question is from the line of Dheeraj, an Individual Investor.
Hi, am I audible?
Yes, please.
Sir, you have a unique position of being part of the B2B as well as B2C space. So could you explain whether you are seeing any improvement? Because on all con calls, where there are consumer-facing industries, whether it is domestic or international, there seems to be a little bit of pain that is going on, like you mentioned in your speech as well. But since you're part of B2B as well, I'm sure you'll have some advance understanding of what the orders will look like for the next quarter or next few quarters. So any light that you would like to throw on that?
So far B2B segment is concerned, we find that the downstream industry, many of this getting close to maybe 20%, 25%. Say, for example, we were, whether it is Burhanpur, Bhiwandi, Ichalkaranji, Bhilwara, everywhere looms are closed and people -- 20% to 25%, and people are not finding way out to dispose of the inventories, which they have all built up. So it's a challenging time. And until unless the demand from export comes in because India, as a overall, net exporting about say about 40 -- 35 billion to 40 billion of textile products.
So wherever it is there, our yarn is required. So until and unless that export improves, say in the double of countries demand improves and the pressure on domestic is not reduced. Till then, I don't think in India, even domestic market for B2B segment or B2C segment, wherever we are, is going to improve. So times are challenging, as I mentioned. For 2 quarters, I don't see there is going to be any visibility or something. After that, let's see how does the things move.
And if I may just ask one more question. Do you think the festive season will improve the sentiment?
Basically, you see the festival season is almost over, so far. In our case, it ends more earlier because then they didn't convert into the growth, but the growth movement has also been very slow this year. And actual retail offtake from the retailers and other places, that is also very slow as compared to normal times. So festival season has not given the desired result, which the industry hoped for. So that is we can say that it was a lackluster and very poor.
[Operator Instructions] The next question is from the line of Amit Agarwal, an Individual Investor.
Sir, my question, we had a plan of INR 900 crores expansion, because of the market condition, are we delaying the project or how is it going? Because I can't see any investments being made for the last 6 months in the balance sheet.
Okay. So far the project is concerned, we have kept it on the hold, and we have not spent any money except purchasing the land and that is in our possession, and we are still reevaluating the project because the market conditions, visibility is not there. So we have kept the project for the time being on the hold. And we will get back to you in the next quarter or something like that, how we are going ahead with that.
And related to the same thing. Now your investor presentation is showing that you have 85% utilization of the capacity. Yarn sales have gone up, so that means we are selling the yarn, which has been produced earlier?
I couldn't get it. So 85% capacity, as I said to you, normally, we used to utilize our 100% capacity and effective utilization, 95% used to be there, 5 percentage for maintenance and those type of things. This time, we have utilized our capacity to 94% and effective utilization has been 84% because there were some interruptions even whatever capacity we're running in between because of the shortage of orders in something. So attractive utilization was 84% as against 95%, which we normally used to have. And that situation is still continuing to by and large. But then sometimes some capacity increases, sometimes some reduces, but by and large, this same situation is continuing at this point of time.
Sir, my next question is, sir, do you have any damage...
Amit, can you please switch to the handset.
Okay. Did we have any damage to the plants because of the Himachal rains because our plants are there in Himachal, too?
No, down -- at this point of time, we don't have any specific plans because at this time, the visibility is not there for anything.
No, sir. Regarding -- was there damage to the plant because of Himachal...
No, no, not at all. Not at all. No damage to any of the plants.
And did we have any production loss because of the rains?
No, no, no. There was not any flood or anything in our plants. There has not been any damage and interruption because of the floods and rains.
And how is this quarter doing compared to the last quarter, the one we completed? Is it same or is there slight uptick from the last quarter?
I think, as I mentioned, in the second quarter, we have booked a lot of stock losses because we were carrying excess inventory. So those type of losses will not be there to that extent, so this quarter looks better at this point of time as compared to last quarter.
The next question is from the line of Akshata Anjan, an Individual Investor.
I have a couple of questions, first on the home textile business. Sir, can you give us an update on the progress that we are making in the Home Textile business? And also like what is your expected time line for the breakeven for Home Textile?
Home textile has already shown -- I'd take the second question first. Home Textile is already positive EBITDA they are showing now. They are in positive EBITDA, and there is continuous improvement there, Home Textile. And our average rates have improved. Production has gone up. Marketing sales has gone up. So home textile is showing good traction, our Indian business is concerned. Then we have one, ASM, that is another subsidiary company of our, there a little bit, it is standstill because in America demand is little less, so that is more or less same.
And other so far, our spinning business is concerned, so as I mentioned that this quarter is likely to be better than the previous quarter because last quarter, we took lot of losses, and capacity utilization is more or less equal to last quarter so far. And I don't think by the end of this quarter, capacity utilization is going to be better, but you never know. So some people say after Diwali and the marriage season will come, Christmas festival will come and those type of demands may come from export. And if the export demand picks up, the pressure on domestic reduces, we will do much better because we are in premium segment like dyed yarns and other things. If the garment exporters does well, our specialty mélange -- we are forced to run gray yarn at this point of time and which we were running last quarter also. So there, we don't get much margin. So this is how the things are there and uncertainty is there. Visibility is not there. But it looks to me that this quarter is going to be definitely better as compared to previous quarter.
Okay. So you mentioned on the overall like utilization is more or less equal to what it was last quarter? Am I correct?
Yes. As I said in my earlier answer to some other question, that normally, we were utilizing our 100% capacity and effective utilization used to be 95%, 5% used to be for maintenance and all those types of things. This year, in this quarter, second quarter, we utilized 94% of our capacity, 6% had to be stopped time to time because of the lack of the orders or very uneconomic orders. And at that 94%, our effective utilization by 84% as against to 95% normally. So this is the position which is still continuing as we are speaking. If the demand picks up, say, after 15th November, after Diwali, it may improve to some extent. Otherwise, it is not likely to go down from here onwards.
The next question is from the line of Rahul Soni from ICICI Bank Limited.
Like in the yarn sales volume, we have registered like 18% of growth on Y-o-Y percent. So if you see the domestic export and sales -- domestic and exports breakup, it has been like 42% this time and also last year. But also, we are saying that export demand is low and domestic demand is also low. So but we have no -- this is not connecting, like demand is low, still we have reported growth in volume.
Yes. Yes. Yes, volume growth is there simply due to one reason that, as I mentioned, that we were carrying a very excessive inventory at the end of the first quarter. And we have cleared majority of those such inventory, so still we have something. So because of the growth of those inventories, we could reduce our inventory and our revenues increased, so that was for domestic as well as exports. So that is the reason, basically. Otherwise, we reduced the inventory of about INR 112 crores or something like that, of the finished goods and the work in process. So that was for domestic as well as for exports.
Okay. So on the expense of our realization, this volume growth has been there, okay, so that's what you wanted to say?
Yes. Yes. Whatever, it was -- since we have been a regular player, at least we could sell. As I said, others are finding even difficult to sell, so that was the plus point, which we had. Even in -- reducing inventory in such bad markets, people have increased the inventories whereas we have been able to reduce it and with sizable number, that is the strength which we have. Market rates will depend upon the demand and supply. And the reason of fall, as I mentioned, domestic was under pressure because of less demand in exports.
And since developed countries had a lot of inflationary pressure, uncertainty, demand came down. And therefore, the realizations were under pressure in domestic market as well as export market. But because of our strength of the business and diversified product portfolio, we put clear such a huge amount of inventory, which we were carrying. So that is the strength which we would definitely like to mention here.
So what kind of volume growth and margins you're aiming for the full year and next year?
Yes. In this quarter, we have yarn volume sales were 30,271 tonnes. And earlier previous quarter, it was 26,944 tonnes. In March quarter, it was 25,540 tonnes. So if I say about 12% volume growth, about 12% volume growth.
So overall growth, your guidance on overall growth for FY '24 and '25?
It's very difficult. At this point, even 2 quarters are not visible, '24, '25. Otherwise, we have been setting INR 3,000 crores, as you know. We have already touched, and there could have been normal growth, and we have always been doing something, something new. So in this period of uncertainty and there is no visibility at all. No one is able to tell. So I'm sorry, I will not be able to give anything about '24, '25 right now.
Okay. So like in exports, you have good exposure in the export market. So would you like to explain what is your client profile? What is the business model? Who are your clients globally? And also domestically, if you can explain.
We have many. We supply to industrials. We supply to home textile. We supply to apparel manufacturers and our exports are to 60, 70 countries, so it's very diversified. And exports, we are still continuing, we are still maintaining our customers. It may be the matter of the quantum may be less, realizations may be less, but we are very much present there also right now.
[Operator Instructions] There are no further questions. I would now like to hand the conference over to Mr. S. K. Khandelia for closing comments.
Thank you. In conclusion, I would like to say that it appears to me that worst is behind us. And from here onwards, even in third quarter or in fourth quarter, there will be continuous gradual improvement, even in these market conditions. And this is what appears to me though everything remains uncertain and no one can predict for the future. Challenges are continuing, and we are continuing our focus to drive the business and we have long experience, so I think we will be able to do much better than the general industry, particularly realizations and other things are the market...
And with this I would like to conclude, and I wish all of you a very happy Diwali and prosperous New Year ahead. Thank you.
On behalf of Sutlej Textiles and Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.