Operator: Ladies and gentlemen, good day and welcome to the Huhtamaki India Limited Q3 CY26 results conference call. 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Mohit Mishra from ICICI Securities. Thank you, and over to you, sir.
Mohit Mishra: Yeah. Thanks, Tarun. Good afternoon, everyone. Thank you for joining on Huhtamaki India Limited Q3 CY26 results conference call. We have the Huhtamaki India management on call, represented by Mr. Kamal Taneja, Managing Director, and Mr. Amit Gupta, CFO. I would now like to invite Mr. Kamal Taneja to initiate with opening remarks, post which we will have a Q&A session. Thank you, and over to you, sir.
Kamal Taneja: Thank you, Mohit. I hope everybody can hear me. Welcome to the Q3 call. I think, as you notice here, we are doing a different format this time. So instead of conference call, we are doing a video call. My request to you would be that if you are asking questions after the call, after the presentation, please put your video on if possible. So first of all, I am going to start with the first slide, which is about the disclaimer. As you know, whenever we present something to the investor community, there might be some things that are kind of forward-looking. Again, this is our best estimate on what we are saying. They depend on a lot of external factors, such as the markets, industries, and of course, a lot of things that go within our company as well.
Kamal Taneja: So, you need to take that into consideration as a risk to what we are saying. The second one, which is very important here, is that we are not seeking any investment advice or solicit any investment from your side. We are just presenting the way it is and how we have seen the quarter go, and partly how we see the market grow in future as well. With that, I am going to start the presentation. This will only take a few minutes. So, me and Amit will share this. Before we share with you the financial numbers, we internally always start every presentation with a safety slide. This is our way of working. I thought this time I am also going to share that with you, because safety is our foremost priority, and it is also our group's zero ambition, zero harm ambition.
Kamal Taneja: I am pleased to tell you that in Q3, we actually had no incidents. So, no first aid, no medical incident, or no lost time. We monitor this through the year. We also look at moving average, moving month average over the last 12 months. And we are also making huge significant, actually, improvement there. A lot of companies look at just the numbers, just the KPIs, but in Huhtamaki, we actually focus on the leading indicators which actually impact the safety of our coworkers. So, we, for example, give a lot of emphasis to things like near-miss reporting. So, we have thousands and thousands of near-miss reporting from very smallest to very high severity impact near misses, which we record every year and take action on that. And we mainly focus on preventative safety observations. Yeah.
Kamal Taneja: This is how we work in Huhtamaki when the safety is concerned. Amit will give you the numbers, and I think you have seen our disclosure to the stock exchange as well. We had pretty good month, pretty good, sorry, quarter. As you have seen from the last few quarters, especially since beginning of this year, every quarter we have shown volume growth. So, no difference again. We had a pretty successful run in Q3 as well, despite what you are seeing geopolitically, all the disruptions, supply issues, and sometimes also cost issues. I think we are pretty good in handling that already. In fact, some of our best practices are also shared within the group as well.
Kamal Taneja: So, despite all that, we made sure that our customers have uninterrupted supply of materials from our side, and also products that we build for them are on time and with the right quality that they have demanded. Because of that, our revenue has grown, as you would have seen, almost 23%, 24%. And that revenue growth is a mixture of inflation or the material inflation pass-through that we do to our customers as per our contract with them, but also a very healthy mix with the volume growth as well. I think one thing that you would have noticed is that our reported EBIT was kind of flat compared to Q3 last year. But Q3 last year, we also had some one-offs, gains, which were not repeated. So, if you look at comparable basis, we were almost 18% up year on year for Q3.
Kamal Taneja: So, if I can summarize that, net sales increased by 23.7% or 24%. EBITDA, EBIT, 1.2% and 0.1% with a caveat that, like-to-like on a comparable basis, more like 18%. But nevertheless, we still kind of kept it flat or slightly up. You would have also noticed that we actually announced a closure of our factory in Baddi, so this is a labels plant, during the quarter. So, it is undergoing that period, 2-month notice period at the moment. So, we backfill it in time by tomorrow. It is gone very smoothly, and our customers are okay with that, and we have made sure that there is no, let us say, disruption to the supply to them. So, we essentially moved those volumes to the other two label plants we have in India. So, because of that, there is a charge of INR 96 million, which actually impacts in 19.1% decline that you see on PAT.
Kamal Taneja: Again, it is a one-time item, and actually it is going to improve our efficiency and optimize costs in near future as well. So, with that, I am going to ask, oh, one more thing, yeah. So, in the calls, we always get a lot of questions on blueloop, how we are doing, et cetera. Now, what you see here is that we just recently, actually just last month, we won these three awards from IFCA. So, IFCA is the Indian Folding Carton and Flexible Packaging Award community. And it is kind of neutral with whatever product that we do. So, they have actually awarded with this very prestigious three product groups. And you see, on the loop, this is actually a stand-up pouch for the cocoa powder. blueloop, which is actually where it is actually for an export customer where the tomato ketchup sachet you see in the market.
Kamal Taneja: So, it has a very high complex barrier, aluminum foil, and multiple layers of plastic material. So, we managed to actually produce a product which is reducing the use of plastic. So, instead of three or four barriers, three or four layers of plastic, we went to duplex structure, and we totally eliminated the aluminum foil. So, very good product sustainability-wise, but also cost-wise, significant saving for the customer. We also did a very unique label for one of our customers in UK. Again, this is done on a very metallic film. Very unique. And the reason we are not showing the products here is because we did not have time to actually get the approvals from the customer. So, hopefully, I will show you that in our next presentation. But very excited, very proud of showcasing this with you guys. Yeah, Amit, do you want to take over?
Amit Gupta: Sure.
Kamal Taneja: Financials and
Amit Gupta: Yeah. All the investors on the call, a very good afternoon to all of you. I would now maybe run through the financials and give you some perspective behind the numbers. As Kamal talked about, we had a great quarter. In fact, we actually recorded a sale of about INR 748 crores in the quarter, which is almost 24% up versus last year. This is also the highest sale that we have amongst the different quarters over the period of last couple of years. The good thing about the growth that we are demonstrating in this quarter, and also YTD, is the fact that we have a very healthy composition of the volume, as well as mix and pricing in this growth. On a quarterly basis, our volumes actually were up by about 7 percentage points.
Amit Gupta: And if you have to look on a YTD basis, we have actually delivered a 4% volume growth. Coming over from couple of years where the volume has been stagnant, this particular year, we have been able to drive a top line with a healthy mix of volume, as well as pricing and mix, all three coming into play. Consequently, the EBITDA margins, which again, as Kamal reflected upon for the quarter, have a bit of a one-offs with respect to the baseline. But if you look at the nine-month period, we actually closed nine months at about total EBITDA of about INR 204 crores, which is almost 10 percentage points of sales, growing by about 25 percentage points. So, against the top-line growth for a nine-month period of 16%, we are actually growing the bottom line by 25%.
Amit Gupta: Again, a good reflection of the various productivity initiatives, as well as steering our customers and the pricing in a very volatile scenario where the RM prices have been fluctuating on almost like weekly, if not daily basis. Our EBIT margins, if I have to talk specially about the quarter, there are one-offs in the last year, and those one-offs are primarily related to some employee retirements-related reversals or corrections, which happened, which would have helped in the last year P&L and are not there in the current year. That is why the two-period EBITDA margins are not directly comparable. But if I have to, let us say, exclude those and do a comparison on a like-for-like basis, the EBITDA margins actually improved by 18% versus the 1.2% which is reflected here.
Amit Gupta: EBIT margins, again, from a year-to-date perspective, we were at about INR 153 crores, up by about 22 percentage points from last year. The INR 153 crore number that we are reporting here is actually after offsetting close to about INR 8.8 crore of depreciation, the prior period depreciation correction that we passed in Q1. Excluding that one-time implication of the depreciation and the one-offs on the retirement fronts are comparable, EBITDA margin growths are much higher as compared to what is reported here. On a quarterly basis, when we are looking at our EBIT margins, again, this has a reflection of the one-timers. Excluding the one-timers, our EBIT margins have actually improved by 18% during the same period.
Amit Gupta: When we look at the overall PAT, while our PAT profit and loss for the period looks 19% lower as compared to last year, at about INR 30 crores versus the INR 37 crores last year. However, this primarily is on account of the Baddi restructuring charge that we have posted in this particular quarter. As Kamal alluded, this particular decision that has been taken is in the interest of the company and the shareholders because we had a bit of a challenge, operational as well as financial challenge with respect to the Baddi side. With this particular action, we are looking at improving the things further. But that particular charge is actually hitting our P&L in this particular quarter, and hence the profit after tax is looking lower by about 20 percentage points.
Amit Gupta: In spite of this charge, if you have to look at a nine-month profit, we are still growing at about 13 percentage points in a profit after tax, which is a reflection of our healthy margins that we are delivering for the business in a very volatile scenario. Our earnings per share have improved by about 13 percentage points for the nine-month ended September 2026. Again, this is a reflection of the profits that we have been able to generate along with the healthy top line being there. I will stop here, but I look forward to answering any of the questions which are there going forward.
Kamal Taneja: Thank you, Amit. Like Amit said, you see on the left-hand side, this is actually one of the highest quarter we had in terms of sales. I think one thing I also want to qualify there, if you look at, this is a period when you see a lot of results from some of our customers also in the market. As you see them, they are all reporting higher, let us say, sales number, but they are also saying that they are seeing a volume decline. But in our case, we actually also have a volume increase, not decline. I am very encouraged by that. On the right-hand side, you will see EBIT and EBIT margin. Again, like we said, this is after taking into account all the costs as reported.
Kamal Taneja: However, if we did not have those one-time costs, we would be looking at upwards of 8% again, which again, in our industry, is quite a good number. Next one. I think I want to spend a little bit time, like I always do, on not just financials, but for me, it is important to share with you what we are doing in terms of safety and sustainability. So, we have four pillars, like we always talk about. A people pillar, this is about safety, like I said. I think important thing here is, like I mentioned before, we look at a leading indicator, which also means that we look at things like behavior safety. Not because I think it is easy for us to form policies, et cetera, but we want to kind of change our behavior towards safety from the core.
Kamal Taneja: We have a lot of programs that are designed to address that. On climate pillar side, we have been sharing this with you earlier, but we actually started getting gain from the solar captive generation plant that we did for Khopoli. With that, it actually started in August, so actually in Q3. But with that, we are increasing our renewable energy electricity share to 23%. Decarbonization and energy efficiency, all those actions like we spoke about always in the past, they are ongoing, and we are committed to supporting our delivery of 2030 Scope 1 and Scope 2 commitments. On the nature pillar, no change from last time. We keep on doing good things on water treatment and reuse.
Kamal Taneja: I also shared with you last time in Taloja, we have a very unique plant for the water recovery, and we are doing rainwater harvesting and wherever groundwater discharge we have, we are trying to recycle that wherever possible. On the product pillar, we have done a lot of work on that. The IFCA award, for example, you saw that this is all being fed from our innovation team, where they are looking at not only using more recyclable material, more mono materials, but also reducing the use of materials as well at the same time. We are doing a lot of work on the source of our material purchase as well. For example, here, one example we do is our three plants, label plants, they are all FSC certified. I think this is what we wanted to share with you.
Kamal Taneja: If you have any further information that you need, please feel free to contact us on the email address on the screen and also through our website. With that, I thank you, Amit, on behalf of Amit and myself, and also wish you happy Diwali in advance. Happy to take question now. Yep.
Operator: Thank you very much. We will now begin the question and answer session. To ask a question, please click on the raise hand icon on your screen. The operator will announce your name when it is your turn. You may unmute your microphone and would prefer if you would start up your camera as well and proceed with your question after introducing yourself and stating your company's name. We request that you please restrict yourselves to a maximum of two questions only. You may rejoin the queue if you have further questions. Ladies and gentlemen, we will now wait for a moment while the question queue assembles. Our first question comes from the line of Aditya Khetan. We request you to please accept the prompt on your screen, unmute your audio and video, and proceed with your question.
Kamal Taneja: Yeah, Aditya, you are, I think, muted.
Operator: The current participant seems to have dropped from the queue. We will proceed to the next participant in the queue.
Kamal Taneja: Yes.
Operator: Apologies. We have Aditya Khetan with us. Aditya, are we audible to you? You may proceed with your question.
Aditya Khetan: Yeah.
Operator: All right.
Aditya Khetan: Thank you, sir. Yeah, thank you, sir, for the opportunity. Sir, my first question is, in this quarter, sir, we have witnessed moderation of margins. How much of this is attributable to higher inventory costs like we had built up in last quarter? Subsequently, are these current margins sustainable going right? First question is this, sir. Second question is, sir, when we look your overall top line over the last three to four quarters, when we look, three quarters back, we were hovering at around INR 600 to INR 620 crore top line. Now we are at INR 750, INR 770 crore top line. How much of this jump, INR 150 to INR 170 crore jump in top line is attributable to volumes and pricing? If that breakup, if you can give, that could also help.
Aditya Khetan: The third question is, at what utilization level, sir, we are operating the plant today? How much of incremental revenue jump we can see if we utilize the plant at full utilization levels? How much incremental top line we can generate?
Kamal Taneja: Yes, sir.
Aditya Khetan: Thank you, sir. Good day.
Kamal Taneja: Thank you, Aditya. Three questions, not two, but I will answer all three of them.
Aditya Khetan: Yes.
Kamal Taneja: Let me start with the top line first. A very good question. Our top line has increased, like we mentioned a few times, because of three factors. There is pricing, obviously, because in our contracts, we normally have pass-through of any inflation for the raw materials. The second driver for the top line growth is actually mix. I think, Aditya, if you joined our calls before, you would have noticed that we always talk about the quality of products. We kind of look at places where we are making less margin, or the complexity is low, or commoditized, et cetera. We focus on products which are, let us say, more aligned to our value propositions. The more products we do like that, obviously they will carry more value per, let us say, volume of the product. That is the second one.
Kamal Taneja: Third one is actually volume increase. Physically, we are doing, like Amit mentioned, about 7%, let us say, in Q3, that we did not do for a while. Those three are contributing to that. Now, how much of that is I mean, we cannot tell you exactly, because of many reasons. I think you would say almost like one-third or something like that. They are close to equal to each other, but not exactly. I think we are pretty happy, frankly, firstly, with the volume increase because we have not done that for a while, as you know. Which also brings me to the third question that you had, in terms of utilization. We always say that we have enough capacity available. We are actually making a lot of effort in becoming more efficient. Productivity, efficiency improvement is also top of our operations agenda.
Kamal Taneja: What that helps us in doing is to make sure that we have more and more capacity available for future growth. At the moment, we see that we do not have any issue, at least for next 2 to 3-year cycle, where we would need to do any huge investment to meet the market demand or increase in our volumes. Your first question was on the margins, whether it is sustainable or not. What happens is that there are two factors here. Firstly, like I said, like to like, the margin is more like 8%, for EBIT margin, because we had one-offs, which are not repeating. I think there is also sometimes a delay. For example, depending on the contracts we have with customers, any raw material price pass-through or cost pass-through does not happen in the same month, right?
Kamal Taneja: So there might be a lag. Sometimes it goes to next month, sometimes it is immediate, sometimes it takes couple of weeks, yeah? So, we experienced some of that in September, because the raw material cost actually went up significantly and more aggressively in September, and more sudden, which we were unable to pass through in the same month. So we would see the impact of that over the next quarter. But at the same time, there is a delay, but we also benefit from that sometimes because when the costs go down, we are also late in implementing that. So, it is give and take, but it just happened, the timing is such that we had that issue in Q3. So I hope I answered your question, Sahil, yeah?
Aditya Khetan: Yes, sir. Yes, sir.
Kamal Taneja: Thank you.
Operator: Thank you. Aditya, may we request you to please announce your company name as well?
Aditya Khetan: SMIFS Institutional Equities.
Operator: Thank you. We will now proceed to the next question. Our next question comes from the line of Ajit Darda. Please accept the prompt on your screen, unmute your audio and video, and proceed with your question.
Ajit Darda: Hello. Am I audible, sir?
Operator: You are audible.
Ajit Darda: Yeah. Good evening all, and thanks for the opportunity. Sir, my first question is related to the previous participant only. Sir, as you said, there was a strong volume growth in the previous quarter. How much of the volume growth was contributed by high value-added products?
Kamal Taneja: I would say majority of that, yeah, because I think that's what we are focusing on. I mean, I can't tell you exactly the split, but usually we are focusing on higher value products. Yeah.
Ajit Darda: Okay. Sir, and my next question is, are you seeing any regulatory changes, particularly around stricter food packaging requirements, front of pack nutritional labeling, and do you see any growth for our business going forward due to that?
Kamal Taneja: Yeah. I think you are referring more to the artwork, is that right? Or more on-
Ajit Darda: Yeah
Kamal Taneja: material? Okay.
Ajit Darda: Only any mandatory recycled plastic content or stricter packaging requirements, any sort of that thing. I mean, labeling things and all.
Kamal Taneja: Right. I think our value add comes from a couple of things, sir. Obviously, like you mentioned, artwork, yeah? For example, when you have festive seasons, you have different artwork because there are festive bags, et cetera. We work with our customers. That would, in our case, would have happened in the second quarter, not so much in the third quarter, because we produce the product, we supply to our customers who put on their product, et cetera, et cetera. That would have gone already, unless there is more Christmas coming. But, I think Diwali, Dussehra, and all, we are stable. Now, I think what you also want to know in terms of materials, what the regulations are coming. Actually, there is an existing regulation in the industry for use of recycled plastic, so PCR, so they use that plastic content regulation.
Kamal Taneja: The government actually specifies how much of recycled plastic should be used in our laminate. Now, it depends on different types of laminates, so let us say A, B, C, or 1, 2, 3. For example, if it is a single mono material, there is a larger requirement of recycled plastic, let us say 40% or 30%, and it actually progressively goes up every year. The more complex laminate we have, for example, which requires multiple materials, the aluminum foil, for example, there, the regulation right now is about 10% of using recycled plastic. Now, that obviously gives us opportunity, firstly, in terms of changing the spec on the job, and also, sometimes the complexity or the technology of doing that may be different, yeah, from, let us say, the laminate which is made from the virgin plastic. We do benefit from that.
Kamal Taneja: I think what we do benefit even more is through innovation. Like I mentioned before, is where we try and convince our customers to use our blueloop product, mono material, or go from multi-layer to, let's say, single layer or double layer. I think that's more encouraging for us to see. Yeah, so I think overall, it benefits us. I just hope that the regulations were also imposed, so we get more benefit. But I'm pretty sure the government knows that and makes sure that they are used more and more in future. By the way, this recycled content will also increase in future with the regulation.
Ajit Darda: If regulations get implemented, since we have already capacity.
Kamal Taneja: Oh, yes.
Ajit Darda: Unlike our smaller players, we will be at a stage that we can start the production as soon as possible probably. Right, sir?
Kamal Taneja: Yeah. I think, all I can say, we are well prepared for that. Yeah.
Ajit Darda: Okay. Sir, I just have a last question. Sir, how much time does I mean, it is a broader question. How much time does it typically take to convert a new customer into a commercial client? Probably, existing customers, new orders, or expanding existing business. I mean, if you could answer this in a broader way. Yeah.
Kamal Taneja: Well, so again, new customers, they always say, right, getting more business from existing customer is always easier and faster. New customers are because they have to kind of so, the process goes like this, right? They have a requirement, they develop an artwork, then they work with us, they even go through pre-press, we go to and fro to make sure the design is good. Then we propose to them a technology or product or laminate that will suit them, and then there are a lot of trials. By the time it comes to market, sometimes it can be anything from 3 months to a couple of years, right, depending on the complexity. The good news is that we have a very set team which does that day in, day out. Yeah. Again, it depends.
Kamal Taneja: Larger customers take longer because they also have a lot of verification and control and approval process within their system as well. Usually, working with the smaller customer, regional customers is faster.
Ajit Darda: Yeah. Thank you, sir. I am equity research analyst at Nirzar Securities. Thank you so much.
Kamal Taneja: Yeah. Thanks, Yogesh.
Operator: Thank you. Our next question comes from N. Modi. We request you to please accept the prompt on your screen, unmute your audio and video, and proceed with your question after announcing your company name as well.
[Analyst 1]: Yes, sir. Good evening. My question is regarding, sir, this land held for disposal. So, what could be the approximately market price for this land, sir? Approximately. Am I audible?
Operator: Mr. Amit Gupta, I am sorry, we are not getting your audio coming through.
[Analyst 1]: Pardon?
Operator: One moment, sir. We are just checking on the audio for the management.
Kamal Taneja: Oh.
Operator: Yeah.
[Analyst 1]: Can you hear me?
Operator: Yes. Sir, you are audible now. We request you to please start from the beginning because we missed the entire.
[Analyst 1]: Yeah. My question is regarding this property held for sale. What could be the market price for this property?
Amit Gupta: Yeah. Thanks for the question, Mr. N. Modi. This is Amit here. The pricing for the land would be consistent with the prevailing market rate. We don't have a kind of a fixed quotation right now, because we are still evaluating different bidders. I would not be able to give you an exact pricing for that. But
[Analyst 1]: Sir, please suggest very roughly.
Amit Gupta: Yeah, actually
Kamal Taneja: Do you want to buy, Mr. N. Modi?
[Analyst 1]: Maybe. I can get you the customer.
Amit Gupta: Okay. Yeah. I will probably recommend that if you would like to connect with us with respect to certain offer, you can drop us a mail, and we will connect you with the right team.
Kamal Taneja: I think it will feel speculative if we say something like that. Yeah.
[Analyst 1]: Okay, sir. I understand. Okay, sir.
Kamal Taneja: Yeah.
[Analyst 1]: Sir, other thing, sir, this depreciation, sir, which was not charged in earlier year, so has it been taken care in income tax assessment, sir? There also we might have claimed less depreciation. So, how we are going to account for that, sir, in income tax assessment?
Amit Gupta: Yeah, actually, Mr. N. Modi, there was no challenge with respect to depreciation charge from a tax perspective. As you know, the depreciation calculation for tax purposes and as per the Indian Companies Law and IGAAP is different. Hence, the adjustment that we have passed is only with respect to the IGAAP. Under the taxation depreciation, there is no kind of correction that we have done in the current year. So, there is no challenge in that.
[Analyst 1]: Okay, sir. I understand. Thank you.
Amit Gupta: Yeah, sure.
Operator: Thank you. Our next question comes from Vipul Shah. Request you to please unmute your audio and video and proceed with your question. Vipul Shah, we request you to please unmute your audio and video and please proceed. We do not seem to be having a response or getting a response from Vipul Shah. We will proceed to the next participant in the queue. Our next question comes from Dinesh Parekh. Please unmute your audio and video by accepting the prompt on your screen and proceed with your question.
[Analyst 2]: Hello? Sorry. Congratulations to Mr. Taneja and Mr. Gupta. Very good number. Can you listen me?
Operator: You are audible, sir.
[Analyst 2]: Not audible? It is audible?
Operator: You are audible.
[Analyst 2]: Audible. My question is that our PBT margin is 7%, and I think it should be more than 10% because of Huhtamaki's latest technology innovation. To get it more than 10%, 12% to 13% PBT, it is very easy for the company. You can increase price by 2% to 3% or reduce your expenses. Major expenses are salary and wages around INR 250 crores per year, and other expenses are around INR 600 crores per year. So, if you can reduce your expenditure by 2% to 5% and increase your price to 2% to 3%, we can take our PBT more than 10%, 12% to 13%. Is it possible or not? Second thing, can we use more AI? Because the packaging and flexible packaging and printing industry, AI may be very much useful to us to reduce the cost as well as to increase the productivity.
[Analyst 2]: Can you just elaborate in this? Hello?
Operator: Mr. Amit Gupta, we request you to please unmute your mic and proceed. We are not getting your audio coming through.
Amit Gupta: Yeah.
Operator: Thank you.
Amit Gupta: Yeah, thanks for the question, Mr. Parekh.
Operator: Yeah.
Amit Gupta: I will probably take the first one, which is related to PAT and PBT. So fundamentally, if you look at the progression of our PAT and PBT margins, we have actually grown our PBT from last year to the current year, from INR 117 crores to almost INR 133 crores.
[Analyst 2]: Right
Amit Gupta: for the nine-month period ended. Our constant endeavor has been to improve our profitability, which is why, if you look at the choices that we are making from a portfolio selection standpoint as to what we need to cater and what not, we are very mindful and choiceful of that. However, increase in prices is not something that we can do at a drop of a hat. Our prices are kind of linked to an underlying commodity situation, and there are specified frameworks within which we operate to pass on the price increases. We have been quite successful in passing on the price increases, which are consistent with the cost increase that we have. But beyond that, I think it is not a free flow that we can increase the prices by 2 to 3 percentage points.
Amit Gupta: However, we can improve our mix by selling high-margin products, which we consistently do, and which is what is helping us. Beyond that, even from a standpoint of our overall operating cost base, we have a productivity plan in place which actually drives productivity year on year. We are on track with respect to delivering on the targets that we had for the year, and optimizing our cost structure. So, I think on both accounts, if you look at the progression that we have on the PBT and PAT, it reflects the growth, which is in line with our commitment to grow profitably. With respect to the operational interventions, with respect to driving productivity, we have a plan in place which is adding to that.
[Analyst 2]: Regarding AI implementation, sir?
Kamal Taneja: Yeah, yeah. I will answer that. Just on the margin, right, 10%, 9%. Mr. Parekh, sometimes that is also a market competitiveness, right? So, we need to make sure that our customers value us in what we deliver to them. Our endeavor is always to improve that, like we demonstrated in last few quarters. So every quarter we are improving, yeah? Whether it is 10%, 15%, I think it depends on the market as well. But I feel if you compare us with some of the published data you see from some of our competitors, we are around the area. But obviously, we can improve, so that is something we need to look at. On the AI front, as you know, AI is like a buzzword nowadays, right? Everybody is doing that. So we also, in our organization, have a lot of initiatives on the use of AI.
Kamal Taneja: We have a few projects that we are working on, not just in terms of improving productivity, but also improving quality, for example, on improving the product that we pass on to our customers or even our service. I think they are beginning to have impact. We have just initiated some of these. We are also doing some AI projects, for example, for operations where we look at productivity improvement or even safety. Those kind of things are ongoing. Hopefully, once we see some output from them, we will share that with you in one of these calls.
[Analyst 2]: Thank you. Thank you so much. Thank you so much for elucidating everything. Thank you very much.
Kamal Taneja: Thank you.
Operator: Thank you. Our next question comes from Dhruv T. Please accept the prompt on your screen, unmute your audio and video, and proceed with your question.
[Analyst 3]: Yeah, hello. Am I audible?
Operator: You are audible, sir.
[Analyst 3]: Okay. Thank you for the opportunity, sir. I just have a couple of questions. How many acres of land do we hold in the company, and any specific areas where we hold those lands?
Kamal Taneja: Hello. Stay your answer. Yeah, sure. Yeah, so-
Amit Gupta: I think we'll
Kamal Taneja: Yeah.
Amit Gupta: No.
Amit Gupta: I think from a standpoint of the financial and the balance sheet standpoint, our assets valuations are reflected correctly there. From a standpoint of the measurement of the lands, I am not sure how relevant it would be with respect to our determining our performance or asset valuation. Honestly speaking, that information may also be a bit speculative. We won't be able to share those measurements here, but we have adequate assets to take into consideration our growth aspirations, and they are well utilized. I can maybe stop at that, if that helps.
[Analyst 3]: Actually, the specific direction was towards the held for sale.
Kamal Taneja: Yeah. We don't have anything held for sale as such.
[Analyst 3]: Okay.
Kamal Taneja: Actually, there is one in Daman. I do not know what the price for that is, but look, our job is to make packaging product. We are not looking at, how do you say that? Not a real estate kind of company, right? I think we do that more. Sometimes it makes sense for you to have your own land. Sometimes it makes sense for you to lease land. I think we have a pretty good mixture of both at the moment. For example, Daman land used to be our plant in the past, which is up for sale now, but we are in the process at the moment. I think for us to tell you how much square foot and how much price, et cetera, would be non-competitive. We want the bids to come in, et cetera.
Kamal Taneja: But obviously, when we do a sale like that, we will disclose that to the market, and you will come to know.
[Analyst 3]: Got it. Sir, another question is, other expenses in this quarter increased to INR 112 crores compared to INR 96 crores in the corresponding quarter last year. So, what were the key reasons for this increase, and should we expect these expenses to remain elevated in the future?
Amit Gupta: Yeah. So, Dhruv, actually, if you recall, we were actually referring to one-time helps that we have in the last quarter, which were primarily on account of retirements, valuations, and some of the reversals thereabout. Hence, when you are talking about the expenses, they are not completely comparable between the two periods. I think that is one adjustment that we have. Plus, if you exclude that from a standpoint of our operating cost purposes, some of the items which are leading to the inflation, they are primarily power and fuel, our CSR expenses, as well as some of the provisions that we have made basically for the CSR purposes. But all of these are taken into consideration when we determine our pricing to the customer. So, any inflationary hurts which are actually coming in is something that we factor in from a standpoint of a margin management standpoint.
Amit Gupta: Two things. One is, there is a baseline which has one-timers which are not going to get repeated. Second, there are inflationary hurts which are linked to Middle East prices, especially power and fuel, which is leading to this particular increase.
[Analyst 3]: Okay, sir. Just one last question. Sir, what is your outlook on the gross margins and EBITDA margins over the next 2 to 3 quarters?
Kamal Taneja: We do not actually disclose that yet, so we are not going to talk. Again, it can be anti-competitive, et cetera. Yeah, I think our aspiration is to maintain growth every quarter, every year, and that is what we are working on. We do not disclose our, let us say, forecast for the year.
[Analyst 3]: Okay, sir. Yeah. Thank you.
Kamal Taneja: Thank you.
Operator: Thank you. Our next question is from Shivakshi Bhardwaj. Please accept the prompt on your screen, unmute your audio and video, and proceed with your question. Once again, a reminder, we request participants to announce their company names as well.
[Analyst 4]: Hi. Am I audible?
Operator: You are audible, ma'am.
[Analyst 4]: Thank you so much. Good evening, everyone. I have a question related to Baddi plant. I wanted to know, should we be expecting some similar kind of restructuring in other plants as well? Are you looking at other plants with the same lens? Should we be expecting something similar in other plants? There is a second part to this question. The Baddi plant, of course, was serving some customers, so I would like to understand how those customers will be served now, and should we be expecting, again, some additional cost associated to this restructuring, especially within the context of Baddi plant?
Kamal Taneja: Okay. Maybe I can answer the second question first, and then we will come back to the first one. Baddi is our labels plant, so we make pressure-sensitive labels. We actually have three plants in our country. There is one in Ambernath and the other one in Bangalore, apart from Baddi. Baddi is our smallest plant in terms of output and also number of people working there, and it was not profitable. We had enough capacity in the other two plants, so from our efficiency point of view, we decided to move those volumes that Baddi was producing to the other two plants. That process has already been done. We are already in touch with our customers, and that supply chain is going smoothly.
Kamal Taneja: We are very happy to kind of absorb that in our existing setup and save some money and be more productive in Baddi, in pressure-sensitive labels. I think your first question was kind of, is that something more we are going to do like that? Not at the moment. I think, again, if we had to do something like that, we would have done together with Baddi. I think we feel quite set with this. Again, how markets develop in the future, how the demand develops in future, I think we will take action as and when required, either to expand or to contract. Again, what our deliverable is to, for our stakeholders, that they get, let us say, growth from us and better value of their stake in our company, and we are always working towards that. Whatever makes sense, we do that.
Kamal Taneja: At the moment, we are not looking at anything else.
[Analyst 4]: Yeah. That's really helpful. Thank you so much. I have one more question. Again, it's very broader in a way. Do you also track some kind of metric to decide what should be the product mix, or if whatever product mix is going to be, that's going to impact the margins and will help the company grow? Is there some kind of metric that you kind of track? Are there some indicators that you can shed some light on?
Kamal Taneja: Yeah. Amit mentioned a few times, product mix is something we track, because again, our focus has always been on higher-value products, because that's what our value propositions is to our customer. And our customers appreciate all the innovation, sustainable products, et cetera. So we always track that. Now, in terms of how much that mix would be or should be, I think it's an evolution, right? So it depends from season to season. It depends from customer to customer. There are certain kind of products that we are very good at, so we always try to sell that more, compared to, let's say, more commoditized products in the industry. Again, we do our best to work with our customer and make sure that we offer them the best value for what they buy from us.
[Analyst 4]: Yeah. Thank you so much. I have no more questions. Have a great evening. Thank you.
Kamal Taneja: Thank you.
Operator: Thank you. Our next question comes from Sheetal Shah. Please accept the prompt on your screen, unmute your audio and video, and proceed with your question. Sheetal Shah, may we request you to please unmute your audio and video and proceed?
[Analyst 5]: Hello, am I audible, sir?
Operator: You are audible.
[Analyst 5]: Very good evening, sir. Congratulations on delivering excellent revenue and volume growth, sir. My only question is, sir, what are the tailwind you aspire for the revenue to sustain this momentum and the margin to increase? The things what you aspire, are they visible as of now? Yes, sir, you can continue.
Kamal Taneja: Let me understand your question. So what you are saying is, what would help us in future in the market that would deliver more value?
[Analyst 5]: Yes. What I am telling you, sir, the tailwind you aspire for the volume to sustain this type of momentum.
Kamal Taneja: Oh, okay.
[Analyst 5]: And volume and revenue and the margin to increase. And whatever you are aspiring, are the green shoots visible as of now?
Kamal Taneja: Yeah. I think I will take a shot at this, Amit, and you can jump back in if you want to chip in. I think the biggest tailwind I would expect, aspire, is the sustainability side, right? It is not just for margin, but also from the environment point of view, from what we need to do in terms of sustainability in general. I just hope that we had more and more adoption of that. We actually made some strides this year. So far, we are seeing growth there. However, I think I just wish there was more regulatory enforcement on those kind of things, and also willingness from our customers to adapt more sustainable, even when the products are, let's say, more expensive than what they normally buy, which are more commoditized. I think that would be one I would call out.
Kamal Taneja: The other one is also the innovation. Sustainability is not just from a material point of view, but also using less plastic or less material. It does not matter plastic or compostable or paper, because we do all of them, right? However, the less material we use responsibly, I think that is something that we always try and innovate. I just hope our customers appreciate that as well. And the governments actually kind of help us to regulate those kind of things. Amit, do you want to add anything on that?
Amit Gupta: No.
Kamal Taneja: But in terms of tailwinds, I do not see many tailwinds. I think we are working very hard to kind of earn that increase in volumes and also price from our customers. It is not easy. Yeah.
[Analyst 5]: Okay. Because after long time, sir, we have crossed 10% margin last quarter after so many years.
Kamal Taneja: Yes.
[Analyst 5]: And we, as an investor, hope that this too continues. And this type of volume that we are seeing since last 2, 3 quarters, actually in the history, 4 or 5 years, I had never seen such type of volume. That is what I was asking. So, is it sustainable volume? My earlier participant also questioned this. What we are worried with, will it continue or not? And whatever tailwind you are aspiring, are they visible as of now?
Kamal Taneja: Yeah.
[Analyst 5]: In this quarter or, Amit, next quarter, do you think it will be materialized?
Kamal Taneja: Well, Sheetal, first of all, I think there is no tailwind. Yeah. There is actually a lot of geopolitical crisis going on, as you know. So it is not easy with the inflation, et cetera, for us to pass on those costs to our customers, which is understandably, because ultimately it impacts the consumer, right? So you would see maybe reduction in volume or whatever. That is what our customers are saying. I think there are two things, if you say, I do not know, it is tailwind or whatever. I think we are much more focused on our business, and me and Amit are hired for the growth. So I think if we do not deliver that, we will not be addressing these calls, I guess. Yeah. I think the second thing which I think we are doing well is the earning our volume increase.
Kamal Taneja: Although our customers are reporting, like I said, flat, let us say, volumes or not so growing volume, but we are growing, which actually shows that we are perhaps gaining market share. And the good thing is that market is still very fragmented. Despite we being one of the largest flexible packaging manufacturers in India, we are still less than double-digit market share. So there is still a long scope for us to improve and grow, and that is what we are aspiring to.
[Analyst 5]: Okay, sir. Thank you so much, and all the best for the future, sir.
Kamal Taneja: Thank you for your support. Thank you.
Operator: Thank you. Our next question comes from Magesh P. Please accept the prompt on your screen, unmute your audio and video, and proceed with your question.
[Analyst 6]: Sorry, am I audible now?
Operator: You are audible, sir. You may proceed.
[Analyst 6]: Yeah. Good evening, sir. Just couple of questions from my end. We are into FMCG, pharma, and other sectors, right? Where do you see we are doing good in these sectors, and where you feel that we have a good bargain power in these sectors for Huhtamaki?
Kamal Taneja: So the question is which segments we are doing well, is it?
[Analyst 6]: Yeah. Yes.
Kamal Taneja: All right. Okay. I think we are doing well in most of the segments. So, Magesh, for us, like I said many times, we focus on the products that we have better value propositions. Huhtamaki is very well-known in the industry in terms of the quality and the innovation we bring. We work with customers who are demanding those kind of volumes and who are working with us to kind of either upscale or upgrade their packaging, for example. Or sometimes, where they want more reliable supplier, et cetera. I would say we are segment agnostic in a sense. We can do better, obviously, in some segments. For example, pharma, still a lot of opportunity for us to grow.
Kamal Taneja: There are more commoditized segments, for example, I do not know, single layer, low complexity, what you are seeing, for example, biscuits, et cetera, where we are not so competitive because they are less complex, where we are not focusing. However, we are still a pretty decent supplier to that segment as well.
[Analyst 6]: Yeah. If you see it compared to your peers, I am not directly comparing it, but still they are able to do 15% to 20% margin in their financials. If I could match them with Huhtamaki, we are doing around 6% to 10%. For last few quarters, we are from 8% to 10%.
Kamal Taneja: Yeah.
[Analyst 6]: If you compare to your peers, where you see we are, as a company, we are lagging, and where you see they are higher edge compared to Huhtamaki, or where you see that you want to improve to, I am not expecting to reach 20% to their level, but either 10% to 12% would be a good margin moving forward. We are not expecting in, say, next quarter, but that should be some kind of working towards that. Just I want to understand your management perspective on it.
Kamal Taneja: Yeah. I think, again, I think what you are comparing us against, some of these competitors may have a different product mix, not just for where we are operating. However, having said that, like the previous caller, our aspiration is always to improve from what we are doing now.
[Analyst 6]: Okay. The last question, compared to the previous quarter, right, last quarter we have around 10% margin, and this quarter we had around 8% margin. This is mostly due to the cost inflation or we are unable to do a bargain compared to the previous quarter, or any inventory related issues? I want to understand that scale of that margin difference.
Amit Gupta: Sorry, I believe that when you are talking about margin, are you talking about EBITDA or?
[Analyst 6]: Yeah, EBITDA, yes. 8% for this quarter, and last quarter we had around 10%, right? I want to understand in the sense of whether it is some cost inflation or we have a less bargain power in a sales, or it is due to the inventory or any other criteria. I want to understand the factor in it.
Amit Gupta: The variation between the EBITDA margins between the quarters is primarily a reflection of the timing differences that we have with respect to the cost inflation and the pricing pass-through. Generally, we have a cycle wherein we establish a particular cost and then we have the price corrections coming in. There are some timing gaps which Kamal actually explained initially, that sometimes we are slightly behind, sometimes slightly ahead. While we are actually growing our profit margins in absolute terms versus the last year, between the quarters you will see a bit of a fluctuation, which is consistent with the way the business cycles operate. There is no major concern here, but from a standpoint, it is basically a reflection of some of the costs which have come in, let us say, late September, which are going to be recovered into the subsequent months.
Amit Gupta: Hence, between the quarters, there would be some play every quarter. But on a YTD basis, if you look at our EBITDA margins have grown to 10% from a 9.2%. Almost 80 basis point improvement on a 9-month basis with respect to our EBITDA margins.
[Analyst 6]: Okay, that is it from my end. Just wishing the team, and I could see a lot of improvement in these last few quarters. Please carry forward to the coming quarters, and we would like to see more wrappers while we are having food in Huhtamaki packages. Thank you.
Amit Gupta: Sure. Thank you.
Operator: Thank you. Ladies and gentlemen, we will take that as our last question for today. I would now like to hand the conference over to Mr. Kamal Taneja, Managing Director, for closing comments.
Kamal Taneja: Thank you. I see there were some questions on the chat box also. Again, we didn't have time to answer them, but please, if you have specific questions, feel free to contact us, like the contacts we flashed earlier. I think if I can summarize how we did in the quarter, as you know, we did well on the growth side. The growth is coming not just from the pricing, but also from a better, healthier product mix, as well as the volume increase, which is very encouraging for us to see because we have kind of maintained that for last few quarters now. On the margin side, I think the margin is still healthy. It depends on how you compare that. I do not see any structural change into what we are doing at the moment compared to last quarter or even future quarter.
Kamal Taneja: Our aspiration is to make sure that we return more value to our shareholders, and frankly, also to our customers moving forward. We'll always be focused on growth, focused on margin improvement, and if the market holds up, et cetera, we see that we'll do our best to improve that. Before I go, Amit, any last comments from your side?
Amit Gupta: No, Kamal, you summarized it well. I believe that more than words, the numbers speak for themselves. The quarter-on-quarter growth that we are delivering with a healthy top line, with a mix of volume, pricing and mix, and the margin improvements is a reflection of the performance. Nothing more to really add on that. But thank you, everyone, for joining the call.
Kamal Taneja: Lastly, like I said earlier, happy Diwali to everyone who is celebrating, to you, your families, and your friends. We look forward to talking to you again next quarter. Thank you.
Amit Gupta: Thank you.
Operator: Thank you. On behalf of Huhtamaki India Limited, that concludes this conference. Thank you all for joining us. You may now disconnect.
Operator: Goodbye.
