Sales Growth: Increased by 2.6% in Q2.
Operating Margin: Remained at 8.5% in Q2, same as Q1.
Gross Margin: Declined by 1.9% from 35.2% to 33.3%.
Capacity Utilization: Decreased from 81% in Q1 to 77% in Q2.
Bathware Sales Growth: Increased by 10% in Q2.
Tile Segment Decline: Ceramics down by 2% from 36% to 34%.
Bathware Segment Revenue: INR 38 crores for sanitaryware, INR 32 crores for bath fittings.
Working Capital Days: Increased to 13 days in H1 from 8 days in March ’24.
Total Debt: INR 315 crores, with INR 200 crores as term loan.
Max Plant Capacity Utilization: Running at 36%.
Investment in Solar SPV: INR 3.7 crores, expected benefit of INR 1.5 to 2 crores.
Release Date: October 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Somany Ceramics Ltd (BOM:531548) reported a 2.6% sales growth in Q2, despite challenging market conditions.
The company maintained its operating margin at 8.5% in Q2, similar to Q1, by improving its product mix.
Bathware sales grew by 10%, outperforming the tiles segment, which grew by 2.6%.
The company is net debt-free at the stand-alone level, indicating strong financial health.
Somany Ceramics Ltd (BOM:531548) expects better capacity utilization in the Max plant with upcoming product launches, aiming for improved performance in H2.
Domestic demand was weak, impacted by lower exports and incessant rains, leading to a muted quarter.
Exports declined by 15% in H1 and 40% from the peak of 2023, affecting overall sales.
Gross margin declined by 1.9% due to lower capacity utilization, which dropped from 81% in Q1 to 77% in Q2.
The Max plant’s capacity utilization was lower than expected at 36%, due to muted demand and market volatility.
The company faced price pressure due to softer demand, resulting in increased discounting towards the end of the quarter.
Q: Why has Somany Ceramics experienced muted volume growth compared to industry leaders for the second consecutive quarter? A: Abhishek Somany, CEO, explained that the muted volume growth is due to competitors introducing low-end segments, which Somany has not done. Additionally, specific regional markets, like a South Indian state, have underperformed. The company is focusing on premiumizing its brand rather than launching lower-priced products.
Q: How has the product mix helped maintain margins despite lower operating levels? A: The CEO noted that the product mix has mitigated the impact of discounting pressures. The share of GVT (Glazed Vitrified Tiles) increased from 34% to 38%, which helped offset a decline in average realization by INR 4 per square meter.