Eveready Industries, the country’s largest dry cell battery maker, expects to sustain its growth momentum on the back of increasing demand for its core offerings, batteries and flashlights. The company hopes to maintain the “current operating profit run rate” while conserving cash and keeping costs under check.
Battery and flashlights account for 70 per cent of its turnover, with lighting and small appliances accounting for the remaining.
According to Amritanshu Khaitan, Managing Director, Eveready Industries India Ltd, the company saw “better realisations” with inching up of prices at the trade-end, and an improved product-mix. Apart from favourable commodity prices, upward pricing revisions helped mitigate a near-7 per cent rupee depreciation and general inflation.
“Prices at the retail end have remained unchanged. Over the last one year, we took a price rise at the trade-end. Realisations over a one-year-period have improved by nearly 5-6 per cent,” he told BusinessLine.
Consumer demand for batteries shot up from May onwards, and was on the higher side even in June (a 12 per cent volume rise). Trends have sustained in the second quarter (July-September) period of the year. Reduction in dumping of Chinese imports, following implementation of BIS standards, and cash flow constraints have forced unorganised players off markets. This has given a fillip to branded battery makers like Eveready.
Flashlight sales though, continue to be under pressure, despite a 6 per cent volume rise during the quarter ended June compared to the previous year quarter, because of Chinese dumping.
“More than turnover growth, we hope to sustain growth in operating profit,” Khaitan added. Operating EBIDTA increased by 60 per cent YoY to ₹40 crore in Q1FY21 (despite negligible sales and EBIDTA in April).
The EBIDTA margin for batteries was 22 per cent (on a turnover of ₹177 crore) and flashlights had a margin of nearly 19 per cent (turnover of ₹50 crore) during the period.
Small appliances and lighting have reduced losses vis-a-vis the year-ago period. But the company has seen supply chain disruptions.
The lighting segment is expected to improve and achieve EBITDA breakeven in the forthcoming quarters. Meanwhile, small appliances, which fall under the discretionary spends category, remain under pressure.
“It is too early to say if anti-China sentiments will lead to an uptick (in demand) for Made-in-India appliances. Government support has to be extended to such Indian manufacturers. As consumer sentiments pick up following an economic recovery, clearer trends will emerge,” he pointed out.
The company’s current debt position is around ₹350 crore, after repayment of nearly ₹200 crore, post sale of land parcels at Hyderabad and Chennai. Interest payouts have gone down leading to likely improvement in the bottomline.
A three-month moratorium period ended in August. “We will bring down the debt further through improved cash flows. We do not see any issues with our repayment schedule,” Khaitan says.
There are no immediate plans to retire the entire debt though.