EPL conducted conference call on 28 May 2024 to discuss the financial results and performance of the company for the quarter ended March 2024. Mr. Anand Kripalu – MD & Global CEO, Mr. M.R. Ramasamy – COO and Mr. Deepak Goyal– CFO along with other senior management of the company addressed the call

Highlights of the Concall

• AMESA (Africa, Middle East and South Asia include operations in India and Egypt) revenue rose 4.6% to Rs 353.6 crore in Q4FY24 compared to Q4FY23 but Ebitda fell 7% to Rs 70.3 crore. Ebitda margin fell to 19.9% from 22.4%.

• EAP East Asia Pacific includes operations in China and Philipp(ines) revenue increased 4.1% to Rs 214.1 crore in Q4FY24 compared to Q4FY23 while Ebitda rose 6.2% to Rs 41 crore. Ebitda margin increased to 18.4% compared to 18%.

• AMERICAS (includes operations in United States of America, Mexico, Colombia and Brazil) revenue rose 15.9% to Rs 266.4 crore in Q4FY24 compared to Q4FY23 while Ebitda jumped 114.3% to Rs 47.8 crore. Ebitda margin improved to 17.9% from 9.7%.

• Europe (includes operations in United Kingdom, Poland, Russia and Germany) revenue rose 2.4% to Rs 250.2 crore in Q4FY24 compared to Q4FY23 while Ebitda decreased 0.7% to Rs 28.3 crore. Ebitda margin fell to 11% from 11.4%.

• Adjusted PAT, excluding exceptional items and one-off tax refunds grew by 22%. However, reported PAT declined by 73.5% due to onetime exceptional items of Rs 60.5 crore in Q4FY'24 and prior period tax refund of Rs16.5 crore in the previous year Q4.

• The details of the two EO items included in the quarter are: one, Egypt currency devaluation and second Europe restructuring. Egypt faced significant challenges in the past couple of years, leading to Forrx shortages. The Egyptian government managed to attract U.S. dollar inflows through investments and aid, leading them to make the Egyptian pound a free float currency. This resulted in the Egyptian pound depreciating by approximately 60% against the U.S. dollar causing Rs 46.5 crore in one-off losses in its books on all U.S. dollar payables. The underlying business in Egypt, however, remains strong with good profitability, and this onetime hit will not impact long-term prospects in the country. The company is actively addressing the lower margins in Europe, primarily stemming from high fixed costs. Its approach involves optimizing head count at senior and operator levels and initiatives such as manufacturing capacity realignment. This is leading to a onetime impact of Rs 14 crore.

• The company saw a positive shift in the category mix. Personal care and beyond grew by 8.1% compared to 5% growth in oral care. Personal care and beyond now contributes to 47% of total business.

• The company has more than doubled its sustainable sales contribution to 21% in FY24.

• Sequentially EAP saw 11% dip in the revenue and 25% dip in the EBITDA as Q4 in EAP is always subdued relative to previous quarters because of Chinese New Year and revenue in Q4FY'23 was actually boosted because the market has just started opening up post covid and therefore, there was a surge of volume.

• The company mentioned that the underlying performance in EAP and particularly China is actually very solid and it is very confident about robust growth in EAP.

• The market is shifting aggressively towards beauty and cosmetics, which is margin accretive. EPL is being able to exploit export opportunities from China to other countries in East Asia Pacific.

• Brazil EBITDA margin was margin accretive to the total business in Q4FY24.

• Red Sea has 2 impacts on EPL business. One is, in terms of inventory, the lead time. EPL produce laminates in India and China and then ship it across the world and as a result the lead times have gone up. Second is on the cost. While its freight costs have gone up, accordingly, its pricing also kind of factors in this kind of rate and those pricing have also gone up.

• The company objective is to get Europe to mid-teens margins. The company mentioned that the benefits of restructuring start can be seen this year itself, . EO items related to Europe will go to support 3 key initiatives that will help it to transform margins in Europe. The first is people optimization, both at the management level and the operator level. And many of these have already been done or are well underway. The second is manufacturing realignment by moving some lines from higher-cost German site to a more optimal Poland site. Some of this has already happened and some of this is underway. And the third is to create a center of excellence with respect to two areas - moving all printing of laminates from Germany and Poland and creating a center of excellence in Poland for printing and creating shared services wherever possible.

• The company mentioned that it is firmly on track to achieve its target of double-digit revenue growth with 20% margin through initiatives like Europe restructuring, mix improvement, active price management and cost optimization.