Ladies and gentlemen, good day, and welcome to Q1 CY 2024 Huhtamaki India Limited conference call, hosted by ICICI Securities. As a reminder, all participant line will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ashwin Jain from ICICI Securities. Thank you, and over to you, sir.
Thank you, Siju. Good afternoon, everyone. Thank you for joining on Huhtamaki India Limited Q1 CY 2024 results conference call. We have Huhtamaki India management on call, represented by Mr. Dhananjay Salunkhe, Managing Director, Mr. Jagdish Agarwal, Executive Director and Chief Financial Officer. I would like to invite Mr. Dhananjay Salunkhe, sir, to initiate with opening remarks, post which we will have Q&A session. Over to you, sir.
Thank you. Good afternoon, everyone. First of all, thank you for joining this call. This is our fourth or fifth call in succession, and we intend to continue the interactions with the community. Let me start with our safe harbor statement that what we discuss in this call may deem contain some forward-looking statement, but these are basically do not represent any future performance of Huhtamaki India. So with this, let me give some update in terms of performance of our quarter for 2024. As you would have seen, we have improved our volumes sequentially from quarter to quarter.
At the same time, as compared to the previous year, the volumes were down, and that is basically impacted because of the softer market conditions and certain supplies and constraint emanating from geopolitical situation. While we are addressing how do we go forward and improve our volume pipeline, there is a clear strategy in place to address the competitiveness and focus on creating long-term profitable growth initiatives. The couple of highlights from quarter one: one, we commissioned our BlueLoop investment equipments and they are operational from the end of the quarter one. And secondly, we have started enterprise-wide programs to support the efficiency improvement or operational efficiency improvements to support the profitability measures.
And then, we continue to invest in our operations and technology, to drive the sustainable packaging solutions forward. And that's clearly indicated, from some of the awards which, Huhtamaki India, won in, in, in the packaging space, from SIES and, WorldStar, and both of the awards represent clearly that what we are striving to achieve is clearly, acknowledged by the, industry. With this, I would, like to hand over to our CFO and Executive Director, Jagdish, to take us through the financial... detailed financials.
Thank you, Dhananjay. Good afternoon, everyone. I'm pleased to welcome you all to this quarterly investor call and to take you through the financial performance of the company for the quarter ended March 2024.
As highlighted by Dhananjay, the major highlight of the quarter has been the successful commissioning of the BlueLoop facility at Silvassa. I believe this is a stepping stone in our progress towards the sustainability goals and the strategy that we have defined for Huhtamaki in the long term. Regarding the key financial indicators, our volumes have slightly improved quarter-on-quarter basis, though slightly lagged behind on year-on-year basis. The same trend is reflecting in the top line, with revenue for the quarter standing at INR 594 crores, versus INR 555 crores we had in December 2023 quarter, and INR 646 crores we had in March 2023 quarter. This represents a 1.4% increase over the Q4 2023, though a decline of 8% over March 2023 quarter.
The volume or revenue decline in the current quarter versus corresponding quarter of the last year is primarily attributable for a couple of major events like high food inflation in the first quarter, a challenging business environment, and supply chain disturbances like Red Sea and all. EBITDA, if you talk about EBITDA for the quarter, it's INR 494 million, compared to INR 576 million in Q1 2023. Comparing with the December, it was INR 618 million. And again, the decline in the EBITDA is majorly on account of additional credit impairment we had in March 2024 quarter. EBIT for the quarter, again, it stands at INR 399 million, down around 5% year-over-year.
So in March 2023, we had around INR 420 million EBIT and in December, we had INR 506 million rupees of EBIT in December quarter. Profit before tax for the quarter before exceptional items is INR 351 million, is flat when we are comparing with the corresponding quarter of March 2023. Our net profit before exceptional or after exceptional item and after tax for the quarter stands at INR 260 million and EPS for the quarter at 2.45 paisa per share. Moving on to the debt and liquidity positions of the company. The liquidity position is stable after retirement of entire debt during the last quarter, except external commercial borrowing, that again, having a statutory covenant and maturity clause.
Debt-to-equity ratio is healthy at 0.2, in line with like what we had in December quarter. When you look at a debt-to-EBITDA ratio, end of March quarter is 4.2, slightly high if you compare to December 2023. In December 2023, it was at 3.2. And it is because we have a lower EBITDA in this year due to a credit impairment. But overall liquidity remains very strong, and we do have a sizable credit lines which are not utilized at this point of time. Working capital also improved significantly when we look at a year-over-year, even though slightly behind when we compare with the trailing quarter.
While I said the overview of financial performance of the quarter, I also would like to emphasize that the company continues to target all the levers at its disposal for supporting the profitability and build efficiencies in the existing process. We have seen lots of excellence on this front in the last year, with our focus consistently on operational excellence and customer delight. The company has a strategy in place to address competitiveness and focus on long-term profitable growth initiatives. The company is always even committed to its stakeholder, focused on technology-enabled innovation and operational performance and realization of value for its products by engaging constantly with our customers. At Huhtamaki, we are investing for future and sustainable solutions to become first choice in sustainable packaging solutions.
We believe that this will help the company remain competitive in long run through responsible and profitable growth, while upholding highest standards of corporate governance. We appreciate your continued support. Thank you. Now I hand it over to Dhananjay.
Thank you, Jagdish. I think you have covered most of the points, and as you indicated, that the quarter one highlight remained like we commissioned our blue loop assets and then organization-wide productivity and efficiency improvement programs, which will focus on all cost levers, reducing input cost, improving our wastages, overheads reduction or optimization by restructuring and overall improving the productivity will be the key for creating a competitive and sustainable business model.
While we continue to improve that, I say we are into business of sustainable packaging solutions, and how do we make it sustainably? So we also made a progress on sustainability, wherein we are taking actions in terms of climate impact reduction, the solvent consumption reduction, water consumption reduction, improving the biodiversity wherever our plants are. So with all these efforts, we are also making sure that we have a not only having a Net Promoter Scores with our customers, net positive surveys with our employees, but also net positive impact on the Mother Earth. So that's all from my side. Thank you.
Thank you, Dhananjay . So now we are open to Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.
Yeah, thank you, sir, for the opportunity. So my first question is on to the other expenses. Sir, we are witnessing a steep rise in our, in other expenses. You had mentioned that there is some credit impairment. Is this the reason? And what is the quantum of this, like, which has led to this higher other expenses?
I can take this question. You're right. Other expenses include a bigger impact of a credit impairment, and majority of the deviations what we see compared to December quarter is on account of credit impairment.
Sir, what is the quantum of that impairment?
...It's a substantial number, like if you, if you talk about the delta and the two major item, which is making impact between December to this, one of them is a higher freight, because we had supply chain disturbances, and the second is that we had a credit impairment.
Sir, if you can share that number of credit impairment, like INR 10 crore, INR 8 crore, like, because we-
Yeah, in that range only.
Okay. So this is a one-off only, right? So this might not-
Yes.
Okay. Sir, onto the volume growth, like as you had mentioned that this quarter there is only slightly improvement in the volume. So considering a two-year perspective, like in CY 2024 and in CY 2025, what is the volume growth you are targeting?
So again, I mean, we are saying that we are not giving any forward-looking kind of a statement, but definitely we are working towards that. I mean, when we talking about sustainable packaging solutions, we are working with our customers, and we have definitely planned to grow our top line and we had a focus on the bottom line. So, you know, the actions are in place, and a lot of work is happening on to address that question as well. I'll add to it. So, maybe little more sharper on that.
Look, if you go through Huhtamaki India's financials from 2019- 2023, so you would see, you know, up and down in terms of volume or in terms of net sales, which is definitely a product of volume and the commodity prices. So our objective is basically to look at best of the both, and how do we go back to the, you know, volume scenarios of 2019 or 2020, while you know keeping the overall margins in mind. So that's the goal for next two-three years horizon.
Okay. So sir, so sir, we give, so because of, of crude prices going down and the majority of the raw materials like BOPP, so they were also going down. So still, sir, we are not witnessing a good, so margin performance. So, like, what makes you confident, like for the next two years with the rise in raw material prices, if suppose demand also goes for a pause, so we can maintain our margins?
So one of the important, and you would have heard us saying multiple times, the BlueLoop, which is, the mono-material recyclable solutions, which offers us that opportunity, to drive the innovative solutions in our ecosystem, and which shall help us to maintain that position in terms of margin profile, in terms of growth profile.
Mr. Ketan, may we request that you return to the question queue for the follow-up question, as there are several participants waiting for their turn. Thank you. The next question is from the line of Bharat Sheth from Quest Investment Advisors. Please go ahead.
Hi, sir, thanks for the opportunity, and congratulations on commissioning BlueLoop plant. Coming to on this BlueLoop plant, since we are so, how do we see the ramp up of this plant? Because what we understand or how much our customer approval is already done, and how long otherwise it's not done, long it will take to really ramp up this plant, sending material. And if you can give some color, again, whether this plant will be able to cater to whole Southeast Asia and for even export market. So if you can give little more color from two-three year perspective, we'll appreciate.
Okay. You want to take off? So, you asked a couple of questions. So let me start with the ramp-up of the investment. So, as you clearly see that this is one of a kind, first to the market, you know, mono-material recyclable solution. So customer also are taking this very cautiously, while we are in a very advanced stages of product qualification with our large customers. And in fact, some of the product lines already have started commercial productions. At the same time, this is definitely a period where we have to really pre-emptively work with our you know, customers to make sure that they understand the value proposition.
One is, of course, recyclability, and second, you know, we need to ensure that customers are also in line with what quality expectations they have. You know, this is first time, like, this is called MDO, which is Machine Direction Oriented PE, which is a new to market getting established. So that's one important aspect which we are managing. And we are in a very advanced stages of commercialization. So I think we can see a gradual ramp-up in coming quarters and years. That's one.
Second, about the, which supplies to Southeast Asia or to the exports, yes, the plan is, clearly, not only, depending on our, India region, but, wherever we are right now supplying to our export, export customers as well. At the same time, we have invested this kind of technology in, another four locations, globally, worldwide, within Huhtamaki. So, so we will be also looking at, overall, manufacturing and supply chain basis that, we might be taking the, course in terms of where that supplies comes from and goes to.... So at the same time, yes, there is a plan to, continue exports as well from these, lines.
Can we expect that this, I mean, full, I mean, two, it may take two years to reach kind of, I mean, breaking even, or it is less than two years? And second question on this is particularly for food packaging or this mono-material exact application, if you can also give little more detail.
Sure, sure. So, if I have to look at how much time breakeven or turnaround, look, I mean, I can only say I, we are so excited about this. If some of the customer products click it, it can actually completely fill in within a few quarters. So that's the aggressive, you know, the product proposition is. The second question you asked is about if this is a food application also. And I think maybe next time we will add in our investor presentation the what was the past structural barrier properties of the current structures versus what we are offering. I think we will definitely would like to give it to the market where... What are we trying to do?
It is essentially we are able to replace even aluminum foil with this kind of solutions. So it is not only about the food application, but the aggressive applications of any nature, like, you know, hair products or, the food products, which are also aggressive, like citrus, acid-based products and so on. So applications are wide range, and, I cannot claim, but I, we will add this to the next time that we are offering the barrier properties of as good as a replacement of aluminum foil.
Okay. And last question, sir, if with your permission. So recently, our company has discontinued operation in Malaysia. So how do we see that, India as a, I mean, supplying to that market? And do we have any possibility of we can get a large chunk of Malaysian market also?
Yeah. So, you would have read that news article. Basically, that factory or that product was basically the food service and not the flexible packaging. So, in fact, Huhtamaki as a global had taken, as I said, enterprise-wide program, which is basically we are re-looking at our manufacturing footprint, our distribution footprint, warehouse footprint, and that's a part of that. So even in Malaysia in that region, we have also other essentially, you know, we, we as a Huhtamaki, we are into three segments. One is flexible packaging, second is fiber, food and services, and third is in North America, which is on-the-go food.
So this plant, which was closed, is part of our global segment, which is called fiber and food service, so that's basically a different segment, so not having any per se product connection with flexible packaging. But however, as a Huhtamaki holding, it reflects our initiatives to kind of consolidate operations and improve the overall long-term growth as well as profitability.
Thank you, and all the best, sir, and I'll rejoin the queue for further questions.
Thank you.
Thank you, sir. The next question is from the line of Vipulk umar Shah from Sumangal Investments. Please go ahead, sir.
Hi. Thanks for the opportunity, sir. So would you again elaborate on this credit impairment? Because I'm still not able to understand. Means, it is a, it, it is a write-off or... And what is the quantum? So what exactly this credit impairment is?
Mr. Vipul, I think, the similar questions asked earlier also, and we said that, this is definitely when we are saying credit impairment is, in the nature of kind of a write-off only, which is going to happen, so write-down is the provision we stress.
You didn't quantify the figure, sir, so would you please do it, sir?
I think numbers, we said that the major definitions, what we are talking about between the December and March quarter is because of the credit impairment only.
No, but what is the exact number? That I am asking, sir.
I mean, we definitely, you know, can talk about a very specific number and all, but when you talk about credit impairment for a specific, it talk about ECL, provisions and also it got many, many more things. But one specific item to isolate is difficult, but majority of the gap which we are talking about is because of credit impairment.
Okay. And sir, what is the absolute debt, absolute net debt on books on first quarter, and what is the ECB component in that?
So whatever debt we have, that is on account of ECB only, and you will see definitely from our December balance sheet, that ECB numbers were INR 100 crore. That remain as is even first quarter 2020.
So that we cannot repay due to contractual obligation, right?
I mean, there are rules. There are FEMA guidelines for that, there are RBI rules, that there has to be average maturity period for a loan, so that we have to follow.
Sir, my last question: What percentage of our turnover do you expect to come from this new BlueLoop, BlueLoop products over the next 2-3 years? Can you share any ballpark figure?
No. I mean, at this point of time, it is very difficult. Like, Dhananjay said, that, you know, we are working with our customers, we are looking at wider scope of the application.
... so I mean, you know, there are immense opportunity for that, but I think we have to wait a little bit more to have that concrete visibility on that.
Yeah. So to add to Jagdish's point, look, we are definitely in a derived demand industry, right? So our products are sold to our customers, which are basically large consumer packaging goods companies. And if you see two aspects coming in, one is a regulatory you know push on the recyclable packaging products, and the customers, various customers, which are our large conglomerates, they are also doing certain promises. So if we combine these two together, that's where you can look at. Today, currently, we have somewhere our recyclable products stands at around 20%-30%, 25%-30% range.
If we look at our customers' aspirations and regulatory requirements, possibly we could see that, you know, it's definitely moving at a faster rate in next two to three years, and we should reach, go more than maybe, 60%-70%. That's where the, that's where we also want to be party to.
Will it be margin accretive, sir?
Sorry?
These products will come at higher margins?
So again, it depends upon the products, the mix, as well as the categories which we work with, right? So let's say there is a pharma, there is a food, then there is a personal care and home care and healthcare and so on. So it depends. So, really putting you know whether they will be margin accretive or not, that can't be predicted, but only one thing which we can predict is basically they will be accretive to the Mother Earth.
Okay. Thank you, sir. Thank you very much, and all the best for the future.
Thank you.
Thank you, sir. The next question is from the line of Saurabh Patwa from Quest Investment Advisors. Please go ahead.
So, thanks for giving me this opportunity to ask the question. I just wanted to understand, so you have... I think in last few quarters, you took several actions, both in terms to improve profitability. I think, there were two core actions which you were called out and implemented. You came out of certain businesses which were fundamentally margin dilutive. And against that, you also cut down cost in terms of employees, in terms of reducing your manufacturing footprint. So, how just wanted to understand that, where are we in the journey? So, I think the pace of falling sales seems to have been controlled, in control now. Have the costs also been controlled now?
Incrementally, both the revenue and cost should increase. That's the first question, sir.
Okay. So, let me answer that, Saurabh, over there. So what if you look at our margin, look at last four quarter kind of a margin we have, and if you go back and look at our margin of 2022 for individual quarter, we find that there's a significant improvement on our operating margins. And this improvement is happening because a lot of actions are happening on the ground, whether we talk about bringing the operational efficiencies, whether we talk about footprint optimizations, when we talk about process improvements, whether we talk about right-sizing of team and all. So those are helping us, and we're very close. If you look at our EBITDA margins and all, we're very close to 8%-9% kind of a range we have in last three or four quarters.
Mm-hmm.
Having said that, if you're able to maintain that, and that is what we are looking, apart from that, we are seeing that we are moving into a program which we have already started with that. Again, how we are going to have operational efficiencies? And when we talk about operational efficiencies, is about definitely reducing the input cost. We are talking about a waste reduction. We are talking about optimization. We are talking about improving productivity. But when we talk about the bigger actions, which already happened in 2023, now we are going to have an incremental impact of those, and we are going to continue to drive. And it's a, it, it's like a process excellence or continuous journey.
So we'll continue to drive to bring as much as possible the operational efficiency and operational improvement, and that definitely is going to help to maintain our EBITDA or EBIT or operating margins in the range what we are looking at this current stage.
So, is it fair to understand, sir, that in terms of products where you believe the margin profile was weaker and you wanted to exit those businesses, that is behind, right? So incrementally, while the macro may impact the bigger journey, but in terms of your product categories, where you want to be the business, that's that journey is already done.
I mean, yeah, in a way, yes.
Okay, and on the blueloop, I believe from the presentation, what I can understand is that towards the end of the quarter, this is where the new facility was launched. So the cost associated with the new facility in terms of new employees and any other additional costs which you would have done, so have they already been taken care of? If not, so how much will be the impact in the coming year? Because while the revenue will take time, is what I could understand from the conversation so far.
Yeah, so I mean, you know, ramp-up have its own pace, and the ramp-up is still going on for... You know, we have already started building on these blocks from last couple of months.
Mm-hmm.
I'm not expecting any significant cost is going to go up in the subsequent months and quarters.
Okay. Sir, in terms of depreciation, so we have already, I think, our depreciation, with the change in the policy, our depreciation numbers have come down sharply. They continue to come down this quarter as well. Is this a fair number going forward, or is there still some rescope there, where you would continue to reevaluate your depreciation policy?
... I think these numbers are going to stay, and there will be impact to the extent of new capacity addition. Otherwise -
Yes. -
more or less going to stay.
Okay. And sir, with this current rise in oil prices, have you seen or increased any raw material and have been able to pass on some of it?
I think it just started when we talk about, crude prices, Brent prices, and all these are moving in the range of $85-$86, and all. So we have to really wait and watch and see the real impact, how this translating into other commodity prices. Maybe probably in a few weeks' time, we'll have better clarity on that.
Sir, may we request that you return to the question queue for follow-up questions, as there are several participants waiting for their turn. Thank you. The next question is from the line of Saket Kapoor from Kapoor & Co. Please go ahead, sir.
Namaskar, sir, and thank you for this opportunity. Sir, as you mentioned about this impairment part, as the differentiation in the other expenses between December and the March quarter. So this, if we remove this one-off item, then our comparison with last year March quarter, are the margins in the similar ballpark only? This one-off item, if we knocked off, is it a fair comparison then?
We are very close to that, yes. If you remove aside that impact, we are very close to that.
Okay. Because this was not a line item, which was relevant for the March quarter 2023.
Yeah. Yes, absolutely.
Right. Right. Sir, you have spoken in length about the BlueLoop and that getting accreted and acknowledged by your customers. Sir, I think the one of our large customers did came up with their numbers yesterday, I'm talking about Unilever, and their numbers looked depressed and the margins also contracted. So on account of their demand and the pricing part, how? What are the pillars from them? And also, sir, you have earlier spoken about the segment nature of the industry. So, how do you think the pricing power, we will be having the pricing power to get BlueLoop into the foray?
I think so that will be, that will have a difference even in terms of pricing and will not be a commoditized product. So if you could just explain the business environment currently in terms of your buyers' potential to accept the product and pay you higher price.
No, you are right, Mr. Kapoor. I mean, if you look at last couple of quarters, which were very challenging, and you have seen the results of many companies, there is definitely the pressure at the bottom line. But our focus is on whatever we can do within our influence, extent of influence, we are doing to improve our operational excellence and efficiency. And that's one of the reasons we are able to maintain our operating margins. Top line definitely is under pressure, and we are also very you know careful about to ensure that how we're going to maintain what we had in the last couple of quarters.
So we don't want to dilute that, but definitely, you know, our focus is to have both top line and bottom line maintenance and improvement on that.
So maybe I'll add to Jagdish's point. So if you see last couple of quarters, we had added one slide or one comments on our BlueLoop offerings. And if you go back to that, I would say we are offering power of three. What is that power of three? One, we are offering recyclable solutions. That's one. Recyclability is one first power. Second, those will be... Those product or solutions will be running on the customer's machines without much change. So customers are not expected to change their lines or add some CapExes, or there will be no impact on their productivities. And third is affordable.
Because, see, it's very, very easy to say this is not commodity. Exactly, it's not commodity. But at the same time, in order to have a push our innovations through the, through the customers', lines, we need to also make sure that it does not come at a very differential, differentials. Otherwise, adaptation might get delayed. So we need to have a very fine balance in terms of how do we maintain our pole position, which is a differentiation. At the same time, it is also acceptable to our customers because it also, as you said very rightly, and not only the customers you mentioned, but also in general, FMCG results, except for some of the companies, they're really muted.
In fact, one of the CEO said openly: "There is no price in the market." And that, that reflects overall. So it, it. And we are, we are the, you know, their ecosystem, right? So that's where we are, we are really playing a very, what is a golden mean, so that, you know, our products are acceptable to them, at the same time, we keep the differentiating.
Right. So just to conclude, the acceptance part, can you comment on how is the... Since you are now commercializing the BlueLoop facility, so definitely you must have got the acceptance part, the feedback from your key customers. So if you could share, what the key takeaways are in terms of the acceptance, and then on the employee cost part also, sir, I think so lot of rationalization has gone through in closure of some of the unit and now commercializing a new facility at Silvassa. So what kind of further rationalization can we expect, especially in terms of the employee benefit expenses as a percentage of sales? And if time permit, I will chip in with one small point.
... So acceptance-wise, that's what I said, you know, we are replacing certain parameters, and, like, you know, the structures which we are offering to the customers are really attractive, and they're getting really run well on their business. So from that acceptability point of view, we are really making very good progress, and that's where now most, we are in very early stages of all, I would say, not early, very forward stages of, you know, starting the commercial supplies. On the second part, maybe, if you can add on, employee cost, Jagdish, you can add.
Yeah. So, Mr. I think employee cost, we're not expecting is going to change significantly because we started doing that temper from last few months.
We are not expecting any number is going to go significantly higher side in Q2 or Q3. So we are well within our means on that.
Mr. Saket, may we request that you return to the question queue for follow-up question? Thank you. The next question is from Rohit Suresh, from Samatva Investments. Please go ahead.
Hi, sir. Good evening, and thank you for the opportunity. So my first question is to Mr. Dhananjay. So it's been, you know, a year and a half since you have joined the company. So, what are the major changes that you have seen, you know, both in terms of the positives and if there are any areas, you know, where you want to see some more improvement? So very broadly, I want to understand your picture, what has happened over the last one, one and a half year.
First of all, thank you to remind me that, I'm already 18 months old in this company. Such a nice feeling, yeah. So look, I think one very clear positive aspect of after joining in here, and I can be very proud to say this, and my colleagues here are listening to me, that I'm incredibly, incredibly proud of, you know, working with this team of Huhtamaki India. Such a talent is available and very driven and passionate. So, that's what I really surprised when you said you are 18 months old in this company. I never felt that way. And in that 18 months, if I look back, what we really drove, I think one of the critical pieces we drive our strategy execution very clearly.
So, one large takeaway that this strategy was there in the making for last few years, and what we did was actively accelerate that strategy execution. So be it, it was the footprint optimization or so on and so forth. The second one is, again, in our conversation you would have heard, we took a pole position in terms of our product portfolio. So, we took a very hard look at what products which we are making and selling. And, in last year's first and maybe first 4, 5 months, we took that calls, and I think you can see this clearly reflecting in our margin profiles. That's second one.
The third one, apart from the network optimization or so on, another good thing what we did is we also opted, you know, consolidated our offices. Now, you know, we are now in Thane, in Indian state Mumbai, where we have a consolidated office space. And then it is becoming a hot hub for all the employees coming in together, you know, having a very good collaboration and discussions together and, you know, creating something of a nature of a blueloop. So that's the three or four things I would really articulate happening very well.
What could have gone well, in spite of taking a call on the volumes and, you know, portfolio optimization, I would have still loved to have a bit of a better volume growth. That's definitely one. And second, you know, we are in a transformation, right? So, last year we kind of optimized our network and so on. So, how much we communicate internally, externally? It's still a lot to do on that. So some customers might not be very happy with our some plants closure. So, essentially the stakeholder management, more communication, even though we did really, really well, still, I would say these two aspects would have been still can be better.
Volume development and, you know, various, better and better and better communication could have been still better. So that's the two aspects I would say could have been better.
Great, sir. Thank you so much for the elaborate answer. So my second and last question would be on the demand recovery side. So are you seeing any particular segments, where, you know, demand is recovering much faster? Or are there any segments in particular where you see, you know, it might take much longer than what you had expected?
So as you would have seen commentary from, you know, mostly FMCG company last, 10 days or so, I think everyone is expecting demand, food and beverage demand to come back, or food, I would say, rather, on account of better than, better than, monsoons. Second, I think, heat wave or summers, even though they are delayed by maybe a month or so, that is coming in, and I think food and beverage demand probably shall be, going up. Then, a good monsoon will also, means, the pulses and all these stuffs, you know, pharmaceutic- the, fertilizers and so on, will be better. And other than that, we are also, closely working with pharma companies and so on.
So that is where, we, we see that, it might be improving. The reason for that is, you know, lot of regulatory, interventions are now happening in that space, and that could be, really looking at, you know, certain changes in our customer profiles. And that is where we, we are expecting that it may come back to the place like Huhtamaki India where we are known for our quality, compliance and ethical standards.
Great, sir. Thank you so much, and wishing you all the very best. Thank you.
Thank you.
Thank you. The next question is from the line of Madanlal Jain, who is an investor. Please go ahead, sir.
Hi, Dhananjay ji, hi, Jagdish ji.
Hello, good, good afternoon. Good afternoon.
Sir, sir, [Foreign language] मेरे बहुत सारे प्रश्न हैं, और एक चीज समझ में नहीं आ रही है, सर। इतने पैसे हमारे टोटल में अभी इन्वेस्टेड हैं, और उसके बावजूद भी जो मामूली प्रॉफिट हम बना रहे हैं ना सर, ये आखिर कब तक चलता रहेगा, सर? सर।
Yeah, yes, so-
[Foreign language] Aap jab main aapko continuity mein aur 2-3 prashn pooch leta hoon, sir, ki aap jab bhi compare karke aap jab reply karte ho to 21 aur 22, 2021 aur 2022 ki baatein karte ho. Sir, wahan pe to lag effect tha. COVID ke karan BOPP ye jo film wagairah aap purchase karte ho, wahan wo bahut high price ho gaye the, to aapke lag effect mein wahan se hua tha. Abhi bhi aap jab bhi unhi ko agar base bana ke agar aap baat karoge to sir, ye to company isi profit pe rahegi, aise lag raha hai mujhe sir. Sir, please sir.
Okay. Thank you for asking this question. Again, I'll first talk about the performance what we did in the last two or four quarter. In last two or four quarter, if you had seen the results, I'm sure you appreciate that our operating margins are coming into a sustainable level and at least consistent level. We are talking about 8%-9% kind of operating margin.
Again, we'll go back because, you know, when you had a base and you want to improve on that base, so the base, if you are talking about 2021, or even we talk about 2022, is better than 2021, and if we talk about 2023 is better than 2022, and definitely we are working towards how we are going to improve it further on. So there is a consistent approach, is there. There is a sustainability. Whatever you are doing, you would like to sustain it. So sequentially, if you look at, there is a good progress on that.
Now, having said that, there are a lot of things which is also happening where we spoke about that at a, at a enterprise level, at a company level, we are driving a lot of initiatives which are going to help us to improve overall, I'll say competitiveness in terms of how we are focusing on our operational efficiencies, how we are focusing on our input cost, what we are doing on optimizing our overhead cost and all. All in all, if you look at, there is a good progress, there is a good reason is there to ensure that whatever is there, how we are going to maximize the value and how we can improve, the total, shareholders value in the entire, game.
Sir, [Foreign language] mera ek last prashn hai, sir. Aapko agar watch karoge 2015 se 2024 mein abhi bhi wahi price stock market mein share price wo chal raha hai, kyunki kahin na kahin aisa kaam ho raha hai ki hum profitability mein success nahi ho rahe hain. 2015 mein INR 1,000 crore ka sales tha, INR 1,100 crore ka aur aaj hum sales INR 2,600 crore ke aaspaas pahunch gaye hain aur share price wahi ka wahi hai. Ye indicate karta hai, we are lacking lot of things. Aisa mujhe lag raha hai, kyunki stock market flare up kahaan se kahaan pahunch gaya aur hamari company ko na pasand kiya jaata hai aur na hi uske andar koi waisi growth dikhti hai. To nau saal se is tarah ke sad mein, sir pehle jo aapka jo bhi EBITDA tha, usmein aapko accha-khaasa depreciation ya interest cost wagairah bahut acche the. Ab to aapne depreciation bhi neeche le aaye ho aur aapke paas ab debt free bhi ho gaye ho. Aath saal se to aap debt free the hi nahi. Ab debt free mein bhi agar operating profit INR 250 crore ke wahaan tak nahi pahunch raha hai, to yah sochne wali baat hai sir, ki INR 1,500 crore, INR 2,000 crore ka liabilities ke saath hum assets rakh ke hum agar mere INR 100 crore ka profit dikhaayenge, sawa INR 150 crore ka profit dikhaayenge, to ye aashcharyajanak hota hai ki itne saal purani company aaj bhi sales itna jump hone ke bawajood bhi operating profit mein success nahi ho rahi hai. Yaani ki employee ke liye hi ye company chal rahi hai aur shareholders ke liye koi soch bhi nahi ho rahi. Ye aisa mera manna hai. Agar main koi sir galat use kar raha hoon to excuse me sorry, sir.
No, no, Madan ji, it's not about. I mean, you are asking questions what you feel is right, but if you look at the progress, I mean, we have to look at the progress also. We cannot discount the progress what we have in last three years. And if you look at the progress also, there is a positive progress. There is a consistency in the results also. There is a sustainability in what we are promising. So we have to take everything into account and definitely, you know, together with all your support and all, we are going to drive and we are going to ensure that how we are going to maximize the value for shareholders as well.
Thank you, sir. Thank you very much, sir.
Thank you.
Thank you. The next question is from the line of Vipul Shah from RippleWave Equity. Please go ahead.
Thank you for the opportunity, sir. Just wanted to understand a couple of things. You know, we rationalized the-
... manufacturing factories over the last year or so. And also going ahead, I mean, going with that, we've also rationalized a lot of headcount. So just wanted to understand the employee cost number, which we have reported in this quarter, which is around INR 61 crores. Does that also include the annual hikes, which the company would have given, you know, post the closure of the financial year for calendar 2024? And is this a sustainable number to go ahead, you know, for this calendar?
Yeah. So I mean, normally, you know, increment cycle, most of the company starts from the April, same with, with us. So if you compare March 2023 versus March 2024, definitely there is an element of increment, annual increment in that cost. Is that your question, Mr. Ashwin?
Yeah, I mean, March 2023, our employee benefits was, around INR 60 crores. Right now it is around INR 62 crores. So what my question was, sir, essentially, you know, whether the increment cycle has been factored in, and if the number which is appearing in this quarter is the, annual number, which, you know, number which we should annualize, or, you know, the increment cycle will come in the next quarter, which is the coming quarter?
It is going to come in the next quarter.
Okay. So that was our first question, sir. Second question, sir, you know, there is a little confusion. And I really don't understand the hesitancy in you know at least sharing the actual number for the credit impairment, which is, as we all understand, it is a one-off. I believe the Indian investor community has evolved, sir, and they understand that, you know, these you know these items are not to be considered in the normal course when you evaluate a company basis, which you make an investment or you continue to hold an investment. So the confusion was, sir, that, you know, the delta between other expenses between March 2023 and March 2024, which is INR 12 crore, or whether, you know, you should look at a quarter-on-quarter delta, which is INR 15 crore.
Is that the number for credit impairment, or is it something in between both of them?
I think mostly, you know, it's very close to what you are talking about between March 2023- March 2024.
Got it, sir. Got it. So that is really helpful. So last question, you know, which, if you allow, sir, and again, it's on a very, I mean, something to take back to the global management is, a lot of companies, MNCs in India, sir, you know, they believe in a single consolidated entity with all businesses in one listed entity. We clearly, you know, flexible packaging is a huge business for Huhtamaki in India. But has there been any thought process of, you know, bringing also the food service business in India under the listed entity fold so that you have one Huhtamaki?
So that food service business is very small, and as I said earlier, we have three segments, and each segment has its own expertise. So fiber food service needs certain expertise on the paper side of it. The flexibles where we are is basically expertise remains on the PE or we can say plastics. So and considering the huge difference in the size of operation, the target market and the focus area, Huhtamaki per se do not see that as a, I would say, a large synergy. Otherwise, they would have operated it as a globally consolidated way, right? So that's one very critical aspect. And in India particularly, that FFS, what we call, is very, very small business.
So essentially, Huhtamaki would like to continue to look at it as separate entity.
Sir, may we request that you return to the question queue for follow-up question. Thank you. The next question is from the line of Ketan Athavale from Robo Capital. Please go ahead.
Hello, sir. Thank you for the opportunity. I wanted to know, what will be the full, I mean, what will be the revenue potential of this blueloop plant on full capacity? And what is the total addressable market size which we aim to serve with this plant?
Again, you know, it's these are very dynamic kind of a situation, and it's kind of evolving. It, yeah, it's very difficult to comment. Even if you look at Mr. Ketan today, when you talk about recyclable product sales, we are in the range of 13%-30%. Now, this will be a different kind of... It's like a mono material, which is also going to add to our overall recyclability or sustainable product portfolio. So it's very difficult to comment exactly how much it is going to add to the portfolio and what's the addressable market. When you look at a market, market is a big market. It's a huge market. Flexible packaging is a huge market. And from our perspective, I think a lot can be addressed through this.
But again, these are very, very dynamic, and we also, as we are moving, we are going to have more clarity, and we'll continue to share more and more clarity on this.
Okay, got it. Thank you.
Thank you.
Thank you, sir. The next question is from the line of Aditya Khetan from SMIFS Institutional Equities. Please go ahead.
... Yeah, thank you, sir, for the follow-up. Sir, onto the BlueLoop brand, sir, is it possible to quantify what is the CapEx we had done for the last two years? And, as made, as said by an earlier participant, if you can share at peak utilization, what sort of a top line can this, so BlueLoop can generate?
I think, CapEx is, again, you know, we don't generally speak, talk very specific about a specific item. But if you look at, we had a substantial CapEx in the last two years. You can go through our annual report for 2022 and 2023, you'll, you'll see that there is a substantial CapEx we had, on, entire portfolio, not only BlueLoop, but we did... I mean, there are always you are adding something or you are doing something on that. Now, coming back to, again, I say that, again, it's very dynamic, and we do have sustainable product solutions at this moment, part of and 25%-30% sales we are doing in that. BlueLoop is going to add and complement on top of that.
It's going to mono-material share, and we definitely are going to add more and more better visibility, and we'll be able to share more concrete things in times to come.
Sir, what were the CapEx figures, sir, you mentioned?
So CapEx, if you look at our annual report of last two years, you'll see that we had a substantial CapEx. But to isolate a CapEx for a specific project is difficult.
Okay. And, sir, okay, so one on the CapEx, sir, if possible, you can share how much capacity addition is done by this BlueLoop on the base capacity?
So again, capacity will be determined with a lot, many multiple factors are there. There are laminating, laminating capacity, there's printing capacity, there's a [sipping] capacity, there's a film-making capacity. So there are different parameters when, you know, we talk about the capacity. So, again, I mean, adding some equipment, machines and something, it's very difficult to say that we have incremental of this capacity and all.
So, sir, like, I know, sir, if you're not sharing anything onto that front operational side, sir, what incremental top line we can get, if you can, like, share a base number that would have helpful, sir, for analyzing us?
Again, you know, not necessarily it's going to be incremental number. It can be replacement, like we are talking about, how these products have the capability to replace even aluminum for all kind of applications. So, it's not necessarily going to be incremental, it can be replacement. With sustainability, our focus is that how we are going to have a more sustainable product and how we are going to have more impact on the planet. At the same time, definitely, you know, growing our top line and bottom line.
Perfect. Sir, just one last question. Sir, what is the—so when, when we sell a plastic film and we sell a BlueLoop plastic, so what is the difference in terms of margins? Suppose if a normal plastic bag, so that sells for, like, 8%-9%, how much is the, how much does this BlueLoop, sort of a product, what type of margin, so this product sells at?
So may not be specific to margin, but I'll say there are three key properties which we are talking about BlueLoop. One, it's sustainable. Second, it's adaptable, it's very easy to adopt. And third, it's affordable, if we talk about overall product portfolio point of view. And definitely, it has a capability of reduction of the plastic also. So there are many solutions. We have the three ply or the four ply that can be converted into ply or three plies. So overall, the thickness of plastic is going to help in terms of affordability. You know, putting-
Sir, in terms of margins, so like it is a 20%-30% premium product as compared to your base portfolio, would that be okay?
Again, you know, I mean, you might find it little bit, not so, you know, specific, but it depends on application to application, product to product, customer to customer. So, I mean, we can't put a specific margin premium on that, but what we are saying is that overall solutions are affordable, adaptable, and sustainable.
Got it. Thank you, sir.
Thank you.
Thank you, sir. The next question is from the line of Nirav Seksaria from Living Root Analytics. Please go ahead.
Yeah, I just had one question. So, sir, what is the crude price level at which we are sustainably able to operate?
I believe that the ongoing prices, which are in the range of $85-$86 per barrel, is that what is ongoing prices. And
again, you know, when that commodity prices go up or there's a high inflation and all, we definitely have to see that how we are going to engage with the market factors and how we are going to manage it, and how we are going to maintain our... But definitely, there are going to inflation, it have an impact on the bottom line for sure.
Sir, let me rephrase my question.
Uh.
At what level of crude prices will we be able to maintain our current margins level?
So, crude prices will have an impact. That impact comes through resin prices, and then how the resin prices are going to come. You know, if we, I say that 85 is a number, 82 number, 80 number, it won't be right on my part. It depends on what kind of contract we have a customer, so we are going to have that lag impact passing on to the customer, so there are multiple factors. Actually-
No, a range would also work out.
Sorry?
A range, like, which range is it?
I mean, when we started making, you know, this year, 2024, thinking that how we are going to have this quarter and all, I think that range was it was like $81-$82 dollar was going on, and we had that in mind. But again, I'm saying that, you know, when you have inflations in place, definitely we are going to work in market factors, your customers and all, to see that how the impact is passed on to the customers.
Thank you. Ladies and gentlemen, that was the last question. I would now like to hand the conference over to Mr. Dhananjay Salunkhe for closing comments.
Okay, thank you. So, first of all, thank you my internal team, Jagdish, Anil, and Sumit, for preparing for this and keeping the tradition of having this call every quarter, and we continue to do that. Big thank you to all the questions. They are very, I would say, very thoughtful, and it also gives us also opportunity to reflect on what is that investor community is also looking at, and make us also prepare around that. And also, a big thank you to ICICI for organizing this call. So, appreciate all your support and continue to be connected. Thank you.
Thank you.
On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your line.
Thank you.