Ladies and gentlemen, good day, and welcome to the Greenlam Industries Limited Q3 and nine months FY24 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participant lines 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 then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Saurabh Mittal, Managing Director and Chief Executive Officer, Greenlam Industries Limited. Thank you, and over to you, sir.
Thank you. Good afternoon, friends, and a very warm welcome to all of you all. On the call, I'm joined by Ashok , our CFO, Saurabh from the finance team, and SGA, our investor relationships advisor. The results and presentations are available in stock exchanges and our company website, and I hope you've had a chance to look at it. I'll give you a little brief about the building material industry and our industry, and then just take you through the key highlights of Q3 and the other initiatives, you know, which we have, which we've undertaken over the last quarter and the last nine months. So on the industry of building materials, and in particular, the wood panel industry, I think the future of the industry looks promising and strong.
And our long-term thinking points on market share gains from unorganized to organized, the market share gain from international players in the exports business, the expansion of furniture manufacturing in India with multiple new OEMs setting up larger furniture plants in the country. So overall consumption of wood panel industry in the country. Massive real estate projects have been announced, being constructed, being at various, you know, phase of construction at the moment across the country, will come up for interior fit outs maybe in the next, you know, couple of quarters, and clearly we'll see, you know, a great demand at that point. There's also been implementation of the BIS quality standards, which we think will benefit one part of our business, which is the particle board business.
So overall, our long-term thesis, our line of thinking, you know, I think is playing out in the market. Although in the short term, there have been some concerns of slower growth in the domestic market, there have been some concerns due to logistical challenges in the international markets in one part of the world. But just generally long term, we think that, you know, all of the story is, you know, just makes sense, and it is gonna play out, and probably it's only playing out at the current moment, too. We think we are taking more market share, you know, across categories from the unorganized companies and internationally from the international traditional players.
On the quarter gone by, the revenues went up by 11.9%. The domestic business grew by 17.8%. This is including the new business of plywood. The international business grew by just 4.8%. And, like we mentioned in our communication, this was impacted due to certain revenues which could not be booked due to goods being in the water, goods being at the port, and there was a temporary availability of containers, you know, challenges for certain destinations. The gross margins were also improved at 54.8%. The EBITDA margin was at 12.5%. This is despite the fact that we had EBITDA losses at the new laminate plant in Andhra Pradesh and EBITDA losses at the plywood plant in Tamil Nadu.
The veneer allied category turned EBITDA positive. So clearly, I think some things have gone well, and, when the situation, you know, of the Red Sea, impact had it not been there, the performance in revenues and margins wouldn't be there. We continue to take several initiatives across categories in terms of channel expansion, deeper penetration in the market. Several on-ground activities are going on. Several product launches have been done in the quarter. Lot of digital media marketing, TV, TVC marketing is going on. So clearly, I think on the ground, our sales marketing teams continue to work, hard to build more market share and, continuously, you know, expand, the business.
On the key CapEx, you know, we've initiated this year, the Gujarat factory, which expanded, where we expanded capacities or rather, you know, we had to enhance capacities, in the month of May 2023, has reached nearly 100% utilization. The plywood factory is stabilizing. The product quality, you know, has been accepted in the market. And we, as we see things, we think, as we keep moving ahead, revenues will keep going up and EBITDA losses keep coming down. The Andhra Pradesh laminate factory had EBITDA losses in Q3. We think in this quarter we should have significant improvements in both revenue and profit EBITDA. And in a couple of quarters, we should be able to streamline the Naidupeta laminate plant too. The particle plant is coming up well.
There has been some delays there due to certain, unavoidable situations, and now we think the, in Q2 of 2025, we can start the factory. We also, purchased some land in Uttar Pradesh, in the district of Sitapur for the future greenfield projects, but this is really at the initial stages at the moment. We have a lot of government approvals, et cetera, to come by, and we, we will be working towards, you know, getting that done. So that's briefly from my side in terms of, of where the business is. I'll hand over the call to Ashok. Ashok will take you through the financial numbers and, and post which we'll be happy to, respond to your query and questions. Ashok, over to you.
Thank you, sir. Good afternoon, friends. I'll take you through the financial performance first for the quarter and then for nine months. Q3 FY24 on a consolidated basis, revenue grew by 11.9% and on year-on-year basis, and de-grew by 6.7% on sequential basis to INR 563.4 crore, as compared to INR 503.5 crore in Q3 FY23. Gross margin grew by 650 basis points to 54.8% in Q3 FY24, from 48.3% in Q3 last year. On a sequential basis, gross margin grew by 340 basis points. Gross margin in absolute term grew by 26.8% to INR 308.6 crore, as compared to INR 243.3 crore in Q3 last year.
EBITDA margin was up by 170 basis points, and stood at 12.6%, as compared to 10.9% in Q3 last year. On a sequential basis, EBITDA margin grew by 10 basis points. EBITDA in absolute terms grew by 29.8% to INR 71.1 crores, as in comparison to INR 54.8 crores in Q3 last year. Net profit for the quarter stood at INR 25.3 crores, as against INR 28.6 crores in Q3 last year. On nine-month basis, consolidated net revenue grew by 12.7% to INR 16.82 crores, in comparison to INR 14.92 crores in last year. Gross margin was up by 680 basis points to 52.8%, from 46% in nine months last year.
Gross margin in absolute terms grew by 29.5% to INR 888 crores, as in comparison to INR 686 crores last year. EBITDA margin was up by 200 basis points and stood at 12.6% from 10.6% in nine months last year. EBITDA in absolute terms grew by 32.9% to INR 211 crores, as in comparison to INR 158 crores in nine months last year. Net profit grew by 17.8% to INR 97.2 crores, as against INR 82.5 crores in nine months last year. Moving on to segmental performance.
Laminate revenue grew by 8.8% year-over-year, and de-grew by 5.9% sequentially to INR 499.8 crores in Q3 this year, from INR 459 crores in Q3 last year. Volume growth stood at 9.1% year-over-year. Domestic laminate revenue grew by 12.8% year-over-year, and grew by 4% sequentially in value term. Volume growth stood at 11.2% year-over-year. International laminate revenue grew by 4.8% year-over-year, and de-grew by 14.9% sequentially in value term, on account of delay in shipping and getting containers. Volume grew by 6.6% year-over-year.
EBITDA margin stood at 15.9%, a growth of 360 basis points on year-on-year basis, and degrowth of 50 basis points on quarter-on-quarter basis. This is after accounting for the initial startup cost of Naidupeta laminate plant, which was started in September 29. Production volume were at 5 ,000,000 sheets and at a utilization level of 82.82% on enhanced capacity after adding the capacity of Naidupeta plant. Capacity utilization in Naidupeta plant was approximately 20% on annualized basis. Sales volume for the quarter stood at 4,650,000 sheets, and the average realization for the quarter was at INR 1,036 per sheet. Moving on to the nine months, the laminate revenue grew by 10.5% to INR 1,503 crores from INR 1,360 crores last year.
Volume grew by 11%. Domestic laminate revenue grew by 11% in value terms, and volume growth stood at 17.9%. International laminate revenue grew by 9.8% in value terms, and volume grew by 2.6%. EBITDA margin stood at 15.7%, a growth of 350 basis points on year-on-year. Production volume were at 14,640,000 sheets and at a utilization level of 88%. Sales volume for the nine months stood at 13.,750,000 sheets, and average realization for the nine months was INR 1,050 per sheet. Moving on to decorative veneer and allied segment, which consists of decor veneer, engineered floors, and engineered doors.
In Decorative Veneer segment, business grew by 11.7% on year-over-year basis, and de-grew by 24% on sequential basis to INR 27.4 crore this quarter, from INR 24.5 crore in Q3 last year. Volume grew by 31.5% on year-over-year basis. Revenue of Decorative Veneer business grew by 11.6% on year-over-year basis to INR 88.7 crore in nine months FY 2024, from INR 79.4 crore in nine months last year. Volume grew by 6.2% on year-over-year basis. Sales volume for the quarter stood at 310,000 sq m and 980,000 sq m for nine months. Capacity utilization for this quarter stood at 31%, and for the nine months also, it was 31%.
Average realization for the quarter was INR 868 per square meter, and for the nine months, it stood at INR 991. Moving on to engineered wood flooring. Revenue of engineered wood flooring business grew by 22.3% on year-on-year basis and remained flat on sequential basis to INR 13.3 crore in quarter three this year, as against INR 10.9 crore in quarter three last year. For the nine months, revenue of engineered wood flooring business grew by 8% to INR 36.9 crore as against INR 34.2 crore nine months last year. Our capacity utilization stood at 12% for this quarter and for the nine months. We are happy to inform that this engineered wood flooring business is breakeven in this quarter.
Engineered door business grew by 22% on year-on-year basis, and grew by 15% on sequential basis to INR 7 crore as against INR 9 crore in Q3 last year. For the nine months, engineered door business grew by 23.8% to INR 22.1 crore as against INR 17.9 crore in nine months last year. Capacity utilization for the quarter was at 18%, and for the nine months it stood at 15%. Moving on to another, moving on to plywood segment. Revenue of plywood business stands at INR 16 crore in this quarter and INR 31.7 crore in nine months. Sales volume for the quarter stood at 730,000 sq m and 1,390,000 sq m for nine months. Capacity utilization for the quarter and nine months stood at 14%.
Average realization of plywood for the quarter was 218 per square meter, and for nine months it is INR 228 per square meter. Our net working capital increased by 4 days to 72 days in comparison to, in comparison to same quarter last year. This is primarily on account of, on account of, the stock material stuck at port and in the transit, and the inventory built up for our new plant, our new laminate plant at Naidupeta and plywood plant, and plywood plant. Our net debt as on December stood at INR 847 crore. That's all from our side. I would now like to open the floor for Q&A. Thank you.
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 phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets only 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 Keshav Lahoti from HDFC Securities. Please go ahead.
Hello. Hi, sir. It's good to see veneer, engineered door segment performance improving. Just want to check on the plywood side. Possibly not much ramp up is seen on QoQ basis. Earlier, you were sort of targeting, you know, 40%-50% capacity utilization in Q4. So how is the progress? What sort of distribution network you are adding it over here?
So plywood, I think we keep seeing improvements. And so I think our plan of building the factory to 100% utilization should happen in FY 2026. We are right now focused only on the South India markets, and we might add Maharashtra also to the, you know, sales marketing program for starting next financial year. And number of dealers are getting added, secondary sales are being done. And so we're seeing good progress on ground, maybe not so visible on the numbers, but clearly, I think the product quality, the stabilization, supply chain, you know, acceptance to the market, channel partners appointments, secondary activities, a lot of work is work is going on on ground, and we're seeing good, you know, work on ground happening.
We think we'll keep taking market share and growing the business, on a sequential basis.
Okay, got it. Good to hear that. So coming on the laminate side, there are two issues. One is the Israel war issue, which is impacting the demand. How is the progress going on that front? And secondly, the recent spike in the ocean freight rate, so are you able to sort of pass it on to the customer?
Yeah. So on the demand side, if you see last quarter, yes, demand was, you know, was also a little bit slow. But the last quarter was more of a challenge of, on the, delays of the vessels, because all this happened in the second, third week of December. As we talk right now, container availability is more or less streamlined, but the sailing time to, you know, Europe and America is taking 2-3 weeks longer than the previous time.
... So, on the demand side, I think we should be okay, because we've seen, we generally end up taking more market share from the international players in the difficult market situations. And also, with the Andhra Pradesh factory, we have a particular size which we did not have earlier, so I think that market is also opening up. So I think we should be okay on the demand side. And, so, so as I go, I think the demand side is okay. And what was the next question, please, Keshav?
Uh.
Ocean freight, yeah.
Yeah.
On the ocean freight, I think we have a predetermined, you know, sea freight agreed with the customers. You know, if it is, you know, beyond that particular, you know, figure, which beyond a particular freight, the customer absorbs the freight. So this we have done in the COVID time also when the sea freights really had shot up. So, that is not a big challenge, you know, for us, beyond a certain level of sea freight. But yes, the sea freights have gone, you know, from what we were paying to a certain level, which obviously will increase certain freight costs. But we think with improved, you know, product mix or improved capacity utilization, that will not be anything of much significance. We should be able to absorb to that extent.
Got it. How is the progress on the AP new laminates plant? Any number to quantify the EBITDA loss for this quarter, and when we expected breakeven and ramp-up plans?
Yeah. Thank you, sir. This was the first quarter, so EBITDA loss was in the range of around INR 3-INR 4 crore. And we are hopeful that, within let's say this quarter, next quarter, we are ramping up the production and sales, and we are hopeful that within this quarter or next quarter, we will break even, and it will start generating positive margins.
Okay. One last question from my side. I will come back in queue later. What is the idea behind the UP land? You are planning expansion on which product portfolio?
So, can't disclose much at the moment because Greenfield projects in our industry takes time in terms of licensing, environmental clearance, et cetera. Also, you know, really it's more from the long-term, you know, from a future perspective. In the past also, when you buy large amounts of land, we've had issues or delays in approvals and, you know, environmental clearance, et cetera. It's more from a long-term perspective, not much which we can discuss right now.
Okay. Okay, thank you.
Thank you. The next question is from the line of Sneha Tareja from Nuvama. Please go ahead.
Hi. Good afternoon, sir, and congrats on strong volumes despite uncertainty in the market. Just couple of questions from my end. Your decorative veneer business has definitely seen sequential improvement, but if I look at, you know, margins, they are still impacted. When can we see it, you know, going back to pre-COVID levels? And QoQ, there is a sequential decline in terms of the revenue. So what's happening here?
So the veneer and flooring business both have seen improvements in gross margins and EBITDA margins. As far as the veneer business coming back to a pre-COVID level, you know, we think the business will keep improving as raw material costs have more or less kind of you know stabilized in the veneer business. You know, because most of the raw materials for the veneer business comes in from Southeast Asia and Asia, and we don't see much impact on freight and cost you know in those markets. So I think with little bit more volume increase, you know, we should we should keep seeing improvements in the veneer business.
Understood. Secondly, it's more of a bookkeeping question. Why is the tax rate this particular quarter increased significantly to about 29 odd percent?
Will you come again, Sneha?
Sir, why is the tax rate increased during this quarter? Is there any provision, something that you've made?
No, not at all. Because the Naidupeta, which has started in this quarter, and that's in the other company, that's in the other subsidiary, and that has losses in terms of that. Because of that reason, it has gone up.
Sir, I'm sorry, I did not get that. Your, your subsidiary is making losses, but because of which, why has the tax rate gone up?
So the Naidupeta unit, which is in the GSL, which is in the loss in this quarter, and on the consol, when you do, when we do, that time the losses, that time the tax rate increases.
Okay. I'm still just trying to get the math, sir.
Your voice is cracking, Sneha.
Is it better now, sir?
Yeah, yeah, it's better now.
I said I'll actually follow up with you on a one-on-one basis after the call. Thanks. Thanks, sir, and all the best. I'll get back to you.
Thank you.
Thank you. Participants may press star and one to ask a question. The next question is from the line of Bhavin Rupani from Investec. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. My first question is related to plywood, sir. What is the breakeven level that we expect for plywood, and when will it reach?
The plywood breakeven should be at a level of 50%-60% utilization, and we hope, coming financially, we should be, you know, somewhere in that range of breakeven in the plywood business.
You're saying that the 50%-60% we will reach in next year?
That's right.
Towards the end, sir, or, in the first, first two quarters?
No, well, I never to do that quicker, but you can assume that on an annualized basis, we should be somewhere in that range. So maybe towards the end of that, let's say, question. Towards next two or next quarter.
... All right. And so my next question is related to laminates. What is the proportion of total exports, as compared to our total revenue? And what is the proportion which is exported to America and Europe?
Yeah, on laminates, in this quarter, the international business is around 47.5% of the total laminate revenue. In terms of U.S., your question is about the U.S.?
U.S. and Europe both, sir.
Okay. U.S. and Europe, that probably we will, we will have this on one-on-one basis.
All right. And sir, do you see any impact on exports going ahead if the issue persists? And is it possible to quantify anything?
I won't say much at the moment on that. Last month was okay for us. It was fine. So I don't, look, I don't see much issues unless we're surprised by something else.
All right. So third question is related to particle board. So we have delayed our commissioning by one or two quarters. So is it because of delay in delivery of machines, or is it due to elevated imports that we are seeing in India? Any-
No. So actually, most of the international, you know, imports for equipment have come to site, besides a few. So as we talk right now, that's more or less under kind of control. The commissioning work has also started at the plant. We did have an impact of a few weeks in December, due to the massive cyclone and rains happening in that part of the country, which kind of delayed certain civil works. But as we talk right now, there are no challenges on equipment delivery or availability, et cetera. Things are being executed on the ground. So, you know, things did get pushed for two to three weeks because of the rains and cyclone on the site.
You know, it was hard to do civil work at the site, but otherwise, equipment, et cetera, are under control.
All right. And sir, my last question, if I may, it's related to veneers. Sir, can you tell us some of the steps that we are taking to increase utilizations level over here?
So, if you look at the veneer and allied category, I'm assuming you're talking about the entire category, which comprises of decorative veneers, flooring, doors. Steps again, in the form of channel expansion, secondary working, working with architects, designers, developers, builders. A lot of hospitality projects are coming up, which typically needs wooden flooring, you know. So real estate projects are, you know, we are hoping that, with the amount of real estate which is being built in the country, when they come for fit outs, you know, all these categories will grow. So I think it's numerous steps in terms of both sales and marketing and product development, which is being taken.
All right. That is all, sir. Thank you.
Okay.
Thank you. The next question is from the line of Aditya Pal, from Motilal Oswal Financial Services Limited. Please go ahead.
Hello, am I audible?
Yes, please.
Yes. So, just wanted to quickly understand on the demand environment in the export markets for Indian manufacturer like Greenlam, specifically in the developed regions like U.S., Europe, Mexico.
Oh, please come again. Are you asking the demand environment?
Yes. So are we seeing any slowdown? Are we seeing any loss in market share for Indian manufacturers in these particular, particularly three regions?
I can talk about us, like for our company. We are not seeing any market loss or, you know, business slowing down, for us at least, because anyway, you know, we're not so large, you know, versus the local players there. So as we talk right now, we think it's an opportunity for us to take more market share. We are not seeing any particular market loss, or any slowdown, significant slowdown for us from the-
And-
regions at the moment.
And, for let me say, in Europe, where their manufacturers are on a cost disadvantage compared to Indian manufacturers, are we seeing good, strong market share gains from Greenlam?
Please come again. I think your voice is echoing a bit, please. So sorry about it. Can you, can you come again?
Is it better? Is it better now?
It's, it's a bit muffled, you know? It's a bit muffled.
Better now?
Yes.
Hello?
Yeah. Clear now. Yes, please, better.
Just wanted to understand, because there is a cost disadvantage for European manufacturers-
Right.
Are we seeing market share wins for Greenlam where it is moving away from companies like Formica, Pfleiderer?
Yeah, yeah. No, so, so clearly, I, I think we will have market share gains.
Mm-hmm.
You can see the past, before the Andhra factory commenced, we were restricted on capacity, and you can see the data, you know, earlier, we were nearly at 100% utilization, so we couldn't take on more customers and more business. So we will see market share gains from the companies you mentioned. Now this depends on, you know, various geographies in certain countries or regions, you know, some other players, some other companies stronger, in some other regions, someone else is stronger. So I think we'll see market share gains, in Europe, since you mentioned Europe, from the companies you mentioned. I think they have a lot of challenges with people availability and costs, et cetera, so I think we will see gains.
...Perfect. So just last question before I move to the question in the queue again. Do we share, do we see a lot of unorganized players in this segment of the market that is Europe, U.S., the developed end of the market?
No, no, we don't see. I'm assuming your question is: Do we see unorganized manufacturers in India shipping to this mar- these markets?
Yes.
Is that the question?
Correct.
No. So we don't see that, I think, because these markets need a certain product, a certain standard, and a certain dimension. You know, I think, so not every manufacturer in India, you know, ships to these regions, or they don't have the capability and the capacity to ship to this region. So it's very limited players operating in this region.
Perfect. Perfect. So just one more question, from a bookkeeping perspective. You highlighted the international business revenue share. Can you also give me the breakup of volumes?
Volume of what? Volume of international.
Volume of laminates.
We can, we can share that on one-on-one meeting.
All right. Thank you so much.
Thank you so much. Participants may press star and one to join the question queue. The next question is from the line of Hrishikesh Bhagat from Kotak Mutual Funds. Please go ahead.
Hi. Good afternoon. Thank you for the opportunity. So can you just highlight how will this BIS dynamics play out in particle board? Correct me if I'm wrong, these imports are close to more or it's largely imported fair bit of particle board in India. So how much is it BIS compliant, according to your... Probably, what could be the challenges for the importers post these norms?
So my limited understanding now is that this will have a challenge for imports coming into the country. And as you probably know, in the domestic market, you know, besides one, two players, you have largely unorganized producers producing and shipping particle boards, which mostly is of very inferior quality. So I think this will have a challenge for both imports and local unorganized producers of particle board. So I think, and if they have to follow the BIS norms, you know, clearly the cost, you know, will increase, and there'll be more level playing field in the market.
Today there's not much, in the sense import is largely non-BIS compliant, fair to believe that or different?
Import, yeah, no, no. Well, some may be BIS compliant, some may not be, but they have to still go through the process of getting the compliance done. But I think the larger impact will be from the domestic local producers, because the local production of chipboard or particle board from the unorganized producers is far higher than the imports coming into the country.
Okay.
For all practical reasons, besides, you know, 2, 3 companies, everybody else as we talk right now, you know, which could be another 30, 40 mid-size, smaller size factories, you know, producing non-standardized products.
Okay. And just, the fair bit of import demand in the domestic market, it's largely met through imports currently in absence of domestic capacity?
So, the way to look at it is in the OEM segment, our understanding is that OEMs, 80% of the raw material in the wood panel industry constitutes of pre-laminated particle board. In absence of good quality particle boards and consistent supply chain, a lot of this market, we believe, has moved to pre-laminated MDF also. So that demand is being satisfied imports by pre-laminated MDF also, right? So clearly, when a good supply comes in with the right product quality, with the right supply chain consistency of supply, right formats, which helps them improve their yield and reduce wastage, we'll gain more market share.
So our equipments and our equipments we are getting in our factory, because we are investing now with the latest equipments, which is available anywhere in the world. So the quality of the board, the quality of cutting, the finishing of the product, the surface finish, will be far superior to any other company or most of the companies in the country. And the prices of pre-laminated Particle Board is anything between 20%-25% lower than pre-laminated MDF. So we think a lot of the OEM demand of boards will move to pre-laminated Particle Boards, you know, which is happening everywhere in the world. So, so nothing new is we are talking. It's happening everywhere in the world.
Okay. Just from the larger particle board capacity, say, over the next one year, if I have to look, it's largely you guys, Century, and recently commissioned Merino. Is that, is that a fair understanding or is there anything else also on anvil?
So, my understanding is that our and Merino's capacities will be quite comparable, and, you know, we both possess similar strengths because of laminates and combination of laminates, boards, et cetera. And then, rightly mentioned, I believe Century is also looking at expanding capacity or adding a new plant in... That's right.
Apart from you guys, any new capacity?
I've not heard of anything.
Okay. Thanks. Thanks.
Thank you. The next question is from the line of Nikhil Agrawal from VT Capital. Please go ahead.
Good afternoon, sir, and thank you for the opportunity. So I wanted to understand, what are the raw material price trend in quarter three? Has it fallen down? Has it been constant? What has it been?
So, so if you go segment-wise, in the laminate segment, mostly we do, we take care of paper and chemicals, largely being stable. We have seen some temporary increase in kraft paper costs in the last last quarter came down. We've seen some increase, you know, a little bit this quarter as we talk right now. The wood veneer segment mostly has been stable. And, in the plywood business in last quarter has been stable because Q2, the costs had gone up. So broadly, little bit, give or take, has been more or less stable, you know, in the last quarter.
Okay. So, I believe we mostly import a lot of these, a lot of our raw material, like, I think in the paper segment. So any impact because of the Red Sea crisis or any issues in the supply chain because of that?
Imports from Asia is not being impacted. Imports from Europe, you know, will get impacted due to certain supply chain issues, with deliveries coming in maybe, delayed by 2-3 weeks. As we talk, but we believe that production turnaround time of our suppliers have reduced because of their own local demand issues. So yes, you know, there could be some minor impacts, but as we see things now, we don't see this to be very consequential.
Mm. Okay.
So go ahead.
Of our raw material, only the base paper and some portion of veneer is being imported from Europe side. Rest, and that too also, some percentage of that is being imported. Rest all are coming from other places and within the domestically procured also. So we will not have... Overall percentage will not have that much impact.
Okay. Okay, got it. And so, what exposure, normally what could, if you could quantify for on a quarterly basis, how much volume do we sell to Israel or the Middle East countries that are impacted? I believe that's some significant percentage or something.
So it's not, it's not so significant, but I must say our sales in Middle East and Israel haven't come down. You know, so it's, it's being, it's being maintained whole. It's not impacting the business. Yeah. It's not impacting negatively the business.
Oh, okay. Great. That's it from me. Thank you so much.
Thank you. The next question is from the line of Mr. Achal Lohade from JM Financial. Please go ahead.
Yeah, good afternoon, team. Thank you for the opportunity. Just two questions, sir. First, you know, with respect to the pre-laminated particle board, which you said, you know, is kind of being substituted as of now by the pre-laminated MDF. Would you be able to give a broad sense in terms of CBM, how much would that be?
I don't have the facts ready. So I will not be able to, you know, comment on that right now, Achal.
Okay, no problem. The second question I had, if you look at the EBITDA, you know, the EBITDA per sheet, I don't know if that is the right metric to look at. We see that prior to 2015, it used to be between INR 50-INR 70, and from 2016 to 2020, it was about 100, 2021-2023 is about INR 140, INR 130, INR 140. And last three quarters, if I look at, it's about INR 170, last five quarters, six quarters, between INR 160-INR 170. So would you be able to guide us as to what is driving this? Is it product mix alone? Is it the cost optimization?
Because on one hand, you said there is additional cost which is incurred in the new facility, which has kind of impacted the margins. But at the same time, if I look at the per sheet, it's actually fabulous at INR 170. So if you could elaborate a bit as to what is driven this improvement in terms of-
Sure.
You know, the pricing, margin, product mix, anything of that sort.
So I can't exactly go rupee-wise. What we said for Q3 was the EBITDA of the existing business of laminates was far higher, which is not visible because of the EBITDA losses, you know, in the new plant. Because we just started the plant on 29 September, it just takes time to put the things in process, get the operating parameters correct and all that, which has more or less been done. So I would say multiple things have driven it and not one particular piece. So right from, you know, higher production, improved value mix, pricing discipline, you know, cost optimization. In the initial days, we've had a lot of higher cost, you know, situations where we had large export teams, international teams, you know, where we invested ahead of the curve.
Even now, you know, we think, we still have not seen the entire return of the investments we have done or we are doing in market building, in market expansions in both domestic and international markets. So I would say multiple, you know, factors have gone into, you know, improving the profitability in percent and value per push it.
So, you know, what I'm trying to figure out is that the kind of ROC what we have, you know, on the existing, does it make more attractive for the newbies to jump into the segment and kind of pull down to the average or median, you know? I'm just coming to that.
Right. Yeah. Yeah. The laminate business, unlike several commodity businesses, are not easy to build. And you probably see companies who've been in the business for, you know, 30, 40 years or 50 years, you know, it just takes time to build the distribution network, build the international network and diversification. So I don't see, I don't see new companies or new people coming in and disturbing the, you know, in an equation, or return on capital or the other entire business population. I think it's just a very hard business to build, not the manufacturing side, but the sales and distribution side.
Understood. I think those were my two questions. Thank you so much, and wish you all the best.
Thank you.
Thank you. The next question is from the line of, Ronald Siyoni from Sharekhan. Please go ahead.
Yeah. Good afternoon, sir. So on your guidance front, would you want to like to revise the guidance, in terms of, you know, laminate volume value growth above 15% and overall 20%-25% for FY24? So, you know, do you expect Q4 to be at, on a softer side, considering the demand environment?
So Q4, I think we said FY 2024 to be like 18-20%, we think it'll be more like 15 odd %, because we've done about overall 12, slightly over than 12% growth. So I think we should be in the vicinity of 15% for this financial year. And for next, next financial year, I think overall we should be more like, I think in the vicinity of 20% growth top line.
Okay, great. And on the second question on the debt front, like, INR 847 crore or INR 850 crore odd net debt stays for FY24, or there should be, you know, marginal increase in the net debt, or this should be the peak debt that the company should have?
Hi, Ronald. We are expecting in this quarter, it may slightly go up, and it will be in the range of around INR 850 crore-INR 900 crore.
Yeah.
And that will be the peak debt, and it should start coming down from next year.
Okay, sir. Thank you very much, and best of luck, sir.
Thank you.
Thank you. The next question is from the line of Abhishek from DSP. Please go ahead.
Yeah, hi, sir. Thanks for the opportunity. So just in terms of the plywood segment, how are you seeing the competitive landscape there, given that, you know, timber prices have been on an increase? And any view that, how should one look at the timber price movement? Thanks.
We've said this in the past, that our model right now is more regional in nature. So, yes, there has been an increase in timber price in South India, you know, from the time we conceived of the project, from the time we started production to now. So as we see things now, there could be... There is a minor increase in timber prices, but we believe that prices should now, you know, kind of, somewhere peak out, as far as the timber prices are concerned. As far as we are concerned, we have facilities to in-house peel most of the raw material with two strategically located factories of peeling, which is in Tamil Nadu, partially, and partially in Andhra Pradesh.
So once our production of particle boards, laminates, and plywood all stabilize, we believe our costs, you know, will be one of the lowest in industry, because whatever waste gets generated becomes part of our raw materials for particle board plant or part of a fuel for the laminate plant, and part of the fuel for the plywood plant. So I think we're just right now setting these things up. So I think as we progress, we believe the strategy we've done in terms of sourcing timber from two different—from three different states in two different locations, and the waste being used, you know, in our manufacturing process or in the fuel, we should be okay with it. Yeah, so that, that's how, that's how we see timber prices.
This is what we can see right now. If something else happens, can't say much about it, Abhishek.
The line for the current participant has been dropped from the queue, so we'll move on to the next question. The next question is from the line of Keshav Lahoti from HDFC Securities. Please go ahead.
Hello. Thank you for the follow-up. So will it be a perfect analysis, like, Merino plant is coming in Gujarat for the particle board, and possibly you have a planned plant in south. So normally, the timber prices is far lower in south versus the west, so any day you will have upper hand over Merino, and you should make a better margin?
So I can't say much on that, but whatever we understand, I believe availability of raw materials and costs are superior in South, for raw material, versus Western India. And the market size of particle board also, we believe is larger in South India. But if things change, you know, this is what we can see, but I don't know that will lead to higher margin. Depends on who does what pricing strategy, so can't comment too much on that.
Got it. Our analysis was, you know, there was a war situation in Israel, and your commentary is you haven't seen any impact for Israel, like in quarter three, Q1, Q, your revenue is flattish for Israel, more so.
Yeah. Correct. That's correct. So our sales in Israel haven't dipped, although it's not very large, but whatever it is, it's been maintained. Actually, it's gone, it's gone up a bit. I don't know why that is so, but it's, it's going okay.
Will it be due to market share gain? Because market might have shrink due to war.
Could be, and because so I've not seen the international data, but my CFO tells me that exports from India has come down in Q3.
Right.
While we've gone up a bit, so maybe there's a market share gain.... Also, like we've said in the past, you know, we've done market development activities for many years in terms of specifications, in terms of, you know, newer capacities. A lot of marketing activities have happened, and international players were shipping into Israel, maybe their shares partially come to us, or, or maybe people are stocking up right now. So I'm not sure what, what the reason could be. It could be multiple reasons.
Got it. Is it possible to quantify how big is Israel in your export mix?
We can, but we don't want to disclose that.
Okay, not an issue. Last question from my side: What is the CapEx revised guidance for FY 2024 and 2025, because Particle Board is a bit delayed?
So, pending this, this project which has been announced, so there is not much of a CapEx in terms of the routine CapEx, which is there as of now. We will complete this. First, we want to complete this, project, and then probably, we'll see if there is any other CapEx which is needed in the core business . But as of now, there's not much of a routine CapEx.
No, got it. My question is more towards like particle board. How should we build the CapEx for FY24 and 25? The split.
That probably will, since most of the equipment has come in this quarter, and some erection has started, so there won't be much CapEx in the next year, but we will discuss this offline.
Okay. Thank you. That's it.
Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments.
Thank you, everyone. Thank you for attending the call, and thank you for your queries and questions. Ashok and Saurabh will take a few of your questions, I believe, offline, one-on-one. Thank you once again for your participation.