Apex Frozen Foods

Apex Con Call summary Q2 2024:

1. The company experienced a 22% decline in net revenue, attributed to a 13% decrease in volume and a 10% reduction in realization.
2. Reduced volume was linked to low demand in the USA.
3. In contrast, sales in the European market saw a significant increase of 63% YoY and 100% QoQ, constituting 40% of total sales.
4. YoY realization decreased to Rs 738 per kilo in Q2 FY24 from Rs 820 per kilo in Q2 FY23. Prices, however, showed a sequential increase of 6% compared to Q1 2024.
5. EBITDA margin improved by 300 basis points to 8.1% QoQ, attributed to cost-cutting measures and stabilization in shrimp prices.
6. Debt decreased by 7 crore due to surplus cash flow utilization.
7. The company anticipates improved sales in the USA post-clearance of inventory backlog during the upcoming holiday season.
8. Approval for Ready to Eat/Cook products in Europe is pending deliberation between the Indian government and the European council.
9. The company awaits a free trade agreement between Europe and India for exporting high-margin products.
10. Exporting Ready to Eat/Cook products to Europe is expected to enhance margins.
11. Slow demand in China is anticipated to revive post the Chinese New Year 2024.
12. While supply from Ecuador is a concern, their focus is not on high-margin Ready to Eat/Cook products.
13. India holds a competitive advantage over Ecuador in terms of cost and availability of skilled labour, especially with value-added products like Ready to Eat/Cook.
14. A petition to impose countervailing duties on India, Ecuador, Vietnam, and Indonesia, still it would be level playing field as it is for all markets while Ecuador and Indonesia also face antidumping duties.
15. The removal of a diesel subsidy in Ecuador which was 10% of the cost may impact farm viability and lead to cost escalation, with the full impact becoming clear in calendar year 2024.
16. EL Nino can have adverse impact of Ecuador shrimp production, but extent of it can not be quantified as of now.

Disclosure: Have a position in Apex around 200. No recent transactions.