Release Date: November 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shankara Building Products Ltd (NSE:SHANKARA, Financial) reported a healthy steel volume growth of 25% year-on-year and a robust non-steel revenue growth of 35% year-on-year.
- The company achieved an overall revenue growth of 15% year-on-year, reaching INR2,620 crores for the half year.
- Shankara Building Products Ltd (NSE:SHANKARA) has a strong distribution network with leading brands like APL Apollo, AM/NS, and JSW, aiding in achieving growth targets.
- The company successfully operationalized four new fulfillment centers in H1, enhancing its distribution capabilities.
- Shankara Building Products Ltd (NSE:SHANKARA) maintained operational profitability despite a challenging macro environment, with an EBITDA growth of 11% year-on-year.
Negative Points
- The company faced a slowdown in the construction and infrastructure segments due to heavy rains and election-led slowdown, impacting demand.
- Steel prices softened substantially, leading to an approximate 10% downward correction, which impacted profits.
- The company's profitability was affected by inventory loss due to falling steel prices and increased costs in branding and marketing.
- Interest costs increased, partly due to higher interest-bearing trade payables, impacting financial performance.
- The company faces strong competition from new players, which could pressure margins and market share.
Q & A Highlights
Q: Can you clarify the growth expectations and EBITDA margins for the marketplace business in FY26 and FY27?
A: Dhananjay Srinivas, Head of Buildpro: We expect the non-steel segment to grow at 30% to 35% with EBITDA margins around 6%. Overall, the marketplace is projected to grow at a 20% to 25% CAGR, with EBITDA margins above 3%.
Q: What is the company's demand outlook for Q3 and Q4 of FY25?
A: Unidentified Company Representative: We anticipate strong demand in the coming quarters due to an infra revival post-monsoon, which typically sees increased construction activity.
Q: Why did margins decline despite growth in the non-steel business?
A: Unidentified Company Representative: We had a one-off inventory write-off of approximately INR12 crores in the last quarter, which impacted margins.
Q: What is the strategy for the manufacturing business post-demerger?
A: Unidentified Company Representative: We aim to sustain 50% capacity utilization and achieve a 3% EBITDA margin. The focus will be on improving margins and capacity utilization further.
Q: How does the company plan to manage interest costs and debt post-demerger?
A: Alexander Varghese, CFO: We aim to stabilize interest costs around INR11 crores to INR12 crores per quarter. Post-demerger, the marketplace will carry most of the debt, and we aim to reduce debt over time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
