Capitaline

Analyst Meet / AGM 03-Nov-20

Conference Call

Sheela Foam

Expects the upcoming festive season to be strong

Sheela Foam conducted conference call on 02 November 2020 to discuss the financial results and performance of the company for the quarter ended Sep'20. Mr. Rahul Gautam - Managing Director, Mr. Tushaar Gautam- Director, Mr. Rakesh Chahar - Director, Sales & Marketing and Mr. Dhruv Mathur - CFO of the company addressed the Concall.
Highlights of the Concall

The company feels that market response in Q2FY21 has been better than expected due to consumers realizing the importance of quality mattress while staying at home, shift from unorganized to organized as consumers are looking for quality furniture (this however led to increase in sales of economy range products leading to decline in mattresses ASP by 5%).

In B2B industry auto industry has done very well, whereas the shoe industry has been lagging.

Australian subsidiary saw growth of around 20% as Australian citizens realized the importance of quality mattress (as they used to travel a lot before but are now staying at home) and some impact due to exports from china being erratic.

Spain business grew by around 25-30%. Impact of second wave of coronavirus is very little in Australia, but the impact is high in Spain. However, the company is situated in a very small city and will not be impacted much.

EBITDA margins have improved significantly in Spain business and are not sustainable.

Raw material prices have doubled over the past three months as TDI prices has gone up to Rs 230 per kg and Polyol prices has also gone up to Rs 230 per kg. This is primarily due to supply chain disruptions and faster than expected demand recovery of the foam industry.

The company believes that raw materials have reached their peak and should stabilize by Q4FY21.

The company has been able to transfer most of input cost increase to consumers and it is being accepted well.

The company is also trying to increase the contribution of raw materials from domestic markets which will ensure there is no supply shortage due to supply chain disruptions.

The company believed mattresses were non-essential. However, experience from Australia, Spain and India does point to people getting conscious of spending on mattresses. Besides, limited spends on travel is helping divert income spends to this category.

There is a shift towards lower-priced mattresses driven by the shift from unorganized to organized.

Online channel contributed less than 5% of overall mattress industry. However it is growing at very healthy rate driven by SleepX brand.

The opportunity to export mattresses, foam blocks and mattress covers to the USA and Australia which were earlier importing from China is still under discussions.

Sheela foam runs its IT services from its subsidiary Staqo. The orders have started coming from large domestic private players like Jubilant, Hero etc., international players and government. The company is optimistic about meeting its targets for the subsidiary this year.

The concept of ‘Bed in a Box' is in vogue. This used to be 10–15% of the mattress segment in the US, which has increased to 20–25%.

The company is expecting the upcoming festive season to be strong.

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