Key highlights

H1 FY'14 saw a net sales growth of 2%. While most of the industries continued to do well, sales to construction industry was down in double digit and that of rubber latex volume was down by 22% YoY. This resulted in lower H1 FY'14 sales growth.

The contribution of Rubber Latex to overall sales is continuously decreasing as the trend is shifting to Hawai Chappal. Rubber Latex contributed about 20% of total sales in FY'13, about 15% in H1 FY'14 and about 11% in Q2 FY'14.

Exports contribute about 10% of total H1 FY'14 sales as compared to about 8% YoY and have grown well, despite fall in exports of rubber latex.

Rupee volatility is difficult to pass on in short time period. The management stated that while the rupee at 60 or 55 is not an issue as things can get adjusted and passed on, the sharp volatility is the main concern as it is difficult to adjust and pass on.

The company has completed the entire capex in FY'13 and now there are no major capex plans for next couple of years. So higher depreciation and interest costs will hurt in H2 FY'14 as well, given some of the user industry is not helping in generating higher sales. Going forward, interest costs and depreciation will flatten out and will reduce, which will help the bottom line.

The company is confident of gross sales of about Rs 340 crore for FY'14, as in H2 FY'14, generally the seasonality of business remains and you see higher construction activities than in H1. Also this time for H1 FY'14, lot of events like monsoon, unexpected tight liquidity, higher interest rates etc have postponed some of the demand.

Management is also confident of about 9% margin as the company is not sacrificing margin to garner sales.