Somany Ceramics expects a “better H2” with growth likely to be in “high single-to low double-digits” on the back of better capacity utilisation across installed facilities and demand stabilisation.
Abhishek Somany, Managing Director and CEO said, growth is expected to be “around 10 per cent, plus minus one percentage point or so”; with growth for the fiscal expected to be around 5 – 6 per cent or so.
“There are not too many large disruptions in H2 and we do see some sore demand stabilisation happening in the market especially in non-metro cities. Performance improvement will be driven by own manufacturing plants and the various JVs that we have put in place,” he told businessline .
Subdued demand
Demand has been subdued due to lower exports from manufacturers in Morbi (Gujarat), which has led to material oversupply in domestic market. Additionally, high rainfall during the quarter has further impacted demand conditions.
Around 75 per cent of Somany’s sales are derived from retail, while the rest comes from project business - of which government and private sectors contribute 50-50 per cent.
Capacity utilisation
Capacity utilisation is expected to improve to 80 per cent, from 77 per cent in H1. In a good year, capacity utilisation for the company has been upwards of 90 per cent.
The company has already invested ₹500 crore towards greenfield and brownfield expansion projects over the last 24 months, with capacities addition being to the tune of 25 per cent. There are no new capex plans till demand scenario improves.
The tiles and bathware-maker saw a 38 per cent-odd dip in net profit for Q2FY25 (July – September) to ₹17 crore versus ₹30 crore in the same quarter last year. Ebitda margins shrank 130 bps YoY to 8.5 per cent from 9.8 per cent in the year-ago period.
A 2.6 per cent y-o-y increase in sales volume notwithstanding the NSR declined by 3.1 per cent y-o-y to ₹319 / SQM. The product mix for the Q2FY25 for own manufacturing, JV manufacturing and others were at 28 per cent, 39 per cent and 33 per cent, IDBI said in a research report.
“In H2, we have some product launches and there is increased demand for premium offerings which would help improve capacity utilisation. So our outlook is, better volume growth leading to margins improving by 1 per cent or so for FY25 over last fiscal,” Somany said.