CCL Products

summary of Q4 FY23 results.

• The conference call was hosted by Nirmal Bang Equities Private Limited.
• The call was attended by various analysts and representatives from the company.
• The company achieved a turnover of INR520 crores for Q4 FY23.
• The company achieved a turnover of INR2,071.21 crores on a year-to-year basis
• The net profit for the corresponding previous year was INR204.35 crores
• The company’s EBITDA is INR403 crores and profit before tax is INR305 crores
• The company plans to put remaining free cash flows into ongoing projects and building capacities.
• CIS countries contribute almost 20-25% to the company’s volumes.
• The expected volume growth for the next year is around 20%.
• The company’s revenue is broken up into different geographies.
• The company’s volume growth for the quarter and the year was consistent at around 20-25%.
• The expansion in Vietnam led to growth in EBITDA this quarter.
• There was no contraction in demand during the COVID period.
• The company operates mostly with clients who consume instant coffee at home.
• The freeze-dried capacity is 100% full for the next one and a half years.
• There is no apparent demand contraction going forward.
• The turnover for the whole domestic business in FY ’23 was around INR 50 crores.
• The projected growth momentum for this year is between 30% to 40%.
• The EBITDA growth is always in line with the volume growth.
• The new crop in Brazil should result in lower coffee prices, but robusta prices have increased due to high demand.
• The increase in arabica prices has caused a transition towards robusta, which has also put pressure on robusta prices.
• Coffee prices are currently at an all-time high, but are expected to soften once new crops come in from Indonesia and other regions.
• The company is expected to complete the trial operations and start commercialization by the third quarter of ’25
• EBITDA per kg for spray-dried and freeze-dried products is in the range of 90-100 and 130-140 respectively
• Long-term perspective should be considered when looking at volume growth and EBITDA growth
• The business had a 25% growth rate this year.
• The projected growth rate for the next two to three years is 30% to 35%.
• The growth rate may be affected by competition and other factors.
• There was not much of an increase in expenses from Q3 to Q4.
• The volume growth was almost around 20% on a Y-o-Y basis.
• INR320 crores is expected to be rolled in the form of debt funding for the new safety capacity facility in India.
• Niche products like Cold Brews or Specialty Coffee contribute 5% to 10% of the company’s volumes
• The small-packaging unit has a capacity utilization of 50% to 60%
• The company gets 10% to 15% additional margins due to value addition from the small-packaging unit
• The U.S. market contributes 10% to 12% of the company’s business
• The company sources coffee from different origins depending on factors such as the blend and the client’s preferences.
• The realization benefit does not depend on the origin of the coffee, but rather on a complex set of factors.
• The company outsources coffee to meet higher demand and production constraints.
• The India business had a revenue of INR250 crores, with INR150-160 crores from the branded business and a growth expectation of 13% to 25% in the next two to three years.
• The Greenbird expansion is slow, but they have expanded to six cities and plan to expand to three to four more soon.
• The company is currently focusing on coffee and Greenbird, but evaluating other categories to enter.
• The CEO does not expect a lot of profit generation as they plan to keep investing in the business and expanding into other categories.
• The effective tax interest rate on working capital is around 6%
• The interest rate on term loans is likely to be around 8%
• Depreciation is expected to increase by around INR7.5 crores per quarter
• The company experiences a regular churn of clients, with around 40% being new clients and some old clients switching to new products.
• 20% of the company’s business comes from traders and middlemen looking for cheaper coffee.
• The company is commissioning a pilot plant and participating in specialty coffee fairs to increase its play in the premium and specialized coffee segment.
• Capacity constraint and price are the primary reasons why deals may not go through.
• The company is building a new Freeze Dried capacity in Vietnam to address the capacity constraint issue.
• The value addition percentage for companies in the instant coffee market depends on various factors such as processing cost, packaging cost, logistics cost, and brand strength.
• The company’s market share in the instant coffee market is around 5%
• The Indian coffee market is predominantly in South India
• The company focused on the South Indian market initially and is now expanding to other cities and towns
• The brand intends to use D2C platforms like its own site, Amazon, Flipkart, and Big Basket for sales.
• The strategy for the India market is to build distribution in the South market and use D2C platforms for sales.
• The brand plans to expand its business in the South market by increasing distribution to smaller outlets and increasing their play in plain sachets and small packs.
• The global market for instant coffee is estimated to be around 9 lakh metric tonnes, with the brand’s addressable market being around 4-4.5 lakh metric tonnes.
• The brand aims to double its volumes in four years and maintain a CAGR of approximately 18-20% volume growth.
• The company has set a goal to expand their business in the next three to four years.