Key takeaways of the conference call

Sales for the quarter was lower by 3% to Rs 182.18 crore and the EBITDA was higher by 15% to Rs 13.28 crore. Expansion at EBITDA level is largely on account of 120 bps expansion in the EBITDA margin to 7.3%. The net profit was higher by 15% to Rs 7.97 crore eventually.

GRM (sales – cost of goods) for the quarter was 23.5%, up 150 bps on year on year basis. This trend is representative of the market conditions.

Both Sundrop oil spray & Ready to cook Popcorn are doing well. The company adopts gradual rollout. Both these products have good sense of customer acceptance and the Sprak is an unique product. The company is currently/ basically just feeding the demand and generating trial by way of cross sampling with existing products of the company or through order retail models .

Premium Edible Oil market– The market share stands at 57:43 in favour of Suffola:Sundrop Company's product are priced higher than that of its competitor Saffola. While the company get higher price realisation the competitor have higher market share.

In case of popcorn, the RM (corn) is imported and the company does the processing. By now the company should have imported significant amount of corn for current fiscal, but it could not do that on account of litigation in Andhra Pradesh High Cout involving DGFT. Untill the resolution of court case it can't import corn. The company goed reasonably long on corn so there is not problem/ production disturbance on account of lack of RM. Corn is imported from Latin America.

However the company will not go long in case of edible oil.

Chocalate Pudding – currently imported and sold in select markets of the country. The company is not going to change this business model. As capital cost for setting up a unit is very higher for Chocolate pudding, the current volume don't justify set up of a manufacturing unit. It is category leader in this segment.

Sundrop brand is owned by Agro Tech Food and hence there won't be any royalty. But Act II is owned by ConAgra so royalty payment is involved. The royalty is fixed and not variable in relation to sales.

Upgradation of manufacturing plants – While the upgradation of AP unit is completed that of Kashipur (UP) plant is not over. It will be over by end of this current fiscal. With Telengana issure raging in AP, there is no certainty that AP plant will run without disturbance. So the company is unable to take up upgradtion of UP unit as it does not want the supplies to market get hurt incase of there is disturbance in AP and UP unit shut for upgradation. Currently there is no major impact on account of telengana issue. Only 5 days of production is lost that shortfall in production is also compensated by other plant and only impact being the cost of keeping the plant idle.

Foods biz plans – The company has charted three level goals. Two years ago it had topline growth of 2% and the company want to take that to 15% in first stage and then to 25% and 50% eventually. Right now the company at about 15% level. Now it has to focus to grow that to 25%.

ChocPudding is targeted on weight management segment. It will become a Rs 20-25 crore brand in 3 years time. Currently the company could not allocate resource as its priority lies elsewhere. Once it gets critical mass with low key affair the company will deploy resources with ad campaign and grow it into a big segment. The resource allocation is expected to happen in 2 years time.