AGI Greenpac Limited — Q1 FY25 earnings call

Call held 30 Jul 2024

Management summary

AGI Greenpac reported a positive Q1 FY25, with modest revenue and EBITDA growth despite a planned furnace shutdown. The company emphasized operational efficiency, strategic product mix, and sustainability initiatives as key drivers. Management expressed confidence in maintaining growth through debottlenecking and optimizing existing capacities, while also addressing market risks and competitive dynamics.

Highlights

  • Total Income increased by 1.7% YoY to ₹577 crore in Q1 FY25, up from ₹567 crore in Q1 FY24.

  • EBITDA for Q1 FY25 was ₹147 crore, achieving 4.7% YoY growth with a stable margin of 25.4%.

  • Net Profit for Q1 FY25 was ₹63 crore, with a margin of 11%.

  • The company initiated a scheduled furnace shutdown for relining and debottlenecking in Q1 FY25, on track for completion in early August 2024.

  • A 2.8 MW solar rooftop project was commissioned at the Hyderabad plant, increasing overall solar capacity to 19.56 MW.

  • Approximately 16,000 tons of glass production were lost in Q1 FY25 due to the planned shutdown.

Key financials

  1. Total Income ₹577 Cr +1.8%YoY
  2. EBITDA ₹147 Cr +4.7%YoY
  3. EBITDA Margin 25.4%
  4. EBIT ₹105 Cr
  5. EBIT Margin 18.2%
  6. Net Profit ₹63 Cr
  7. Net Profit Margin 11%
  8. Net Debt ₹440 Cr

What they filed

Q1 FY27: revenue up 14.1%, net profit up 11.2% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue599 658 705 688 602 +1%634 −4%742 +5%785 +14%
EBITDA154 169 154 142 150 −3%150 −11%153 −1%175 +23%
Net profit72 91 97 89 76 +6%71 −22%115 +19%99 +11%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Guidance & targets

Revenue

  • Revenue Growth Revenue · FY25 · Medium confidence around 10%
    I think, we have given a guidance that we should be able to maintain our growth of around 10% with the current existing facilities by way of debottlenecking, enhancing productivity, enhancing product mix. We just hold on to that 10% growth with the existing facilities is a viable option.

    — Sandeep Sikka, Group Chief Financial Officer

Capacity

  • Commercial Glass Capacity Increase Capacity · Future · Medium confidence 70-80 tons
    So, the new furnace in commercial glass, which we are building up, we have de-bottlenecked by 70-80 tons. We expect that the furnace is going to behave and to give us the output, which is more than earlier.

    — Rajesh Khosla, President and Chief Executive Officer

  • Specialty Glass Debottlenecking Capacity · Post 100% utilization · Medium confidence Not specified
    So first, we would like to utilize the furnace. Then second is, we like to de-bottleneck the furnace.

    — Rajesh Khosla, President and Chief Executive Officer

Capacity Utilization

  • Specialty Glass Utilization Rate Capacity Utilization · Not specified · High confidence 100%
    Yes, we are looking to expand, but it all depends upon, first, we were going to utilize this furnace from 70% to 100%.

    — Rajesh Khosla, President and Chief Executive Officer

Risks & concerns

  • Market fluctuations and turbulence

    medium

    Management acknowledges market risk is always present but states the company is resilient to sustain such turbulence.

    Management acknowledged

  • Substitution of glass with PET in the alcohol industry

    low

    Management views this as a 'novelty factor' with a timeline, common switching, and emphasizes innovation to attract demand back to glass.

    Analyst downplayed

  • Competition from Firozabad cluster due to favorable gas pricing

    low

    Management highlights glass as a freight-sensitive market and emphasizes AGI's superior technology, product quality, and customer commitments.

    Analyst downplayed

  • Risk of overcapacity in the industry

    low

    Management states glass manufacturing requires significant investment, implying prudent decision-making by players, and that dormant capacities are either closed or underutilized, not readily available for new competition.

    Analyst downplayed

Areas of evasion (1)

  • HNG acquisition capex details

Q&A highlights

2 direct
Gross margin per ton expansion and sustainability Direct
But the real answer is the total, our gross margin, whatever has gone up, the big part is on the cost side and other part is on the selling price side. So, selling prices can be adjusted now and then, because of the change in the formula or whatever is the cost, but the real cost reduction, which has happened is with the de-bottlenecking and other synergies. Since they will certainly be always with the company, and it will be a permanent bottom line to the company.

Clarifies the drivers behind improved profitability and confirms the sustainability of current margins, crucial for long-term investor confidence.

Asked by Pranay Roop Chatterjee

Progress of HNG acquisition and associated capex Partial
The matter is sub-judiced and it's in front of Supreme Court and NCLT. Hearing is expected in middle of September. We feel that now it should be sorted out fast in our favor, at the earliest. And after that, I think we can move ahead and then complete the acquisition.

Provides an update on a significant potential growth avenue (HNG acquisition) and explains the legal hurdles, while also indicating that capex details are part of the resolution plan and cannot be disclosed yet.

Asked by Abhishek Jain

Impact of Q1 plant shutdown on production Direct
Sir, we were not able to produce 16,000 tons of glass in this quarter. Because of this. I'm talking quarter. So my quarter ends on 30th of June. Because part of the shutdown has spilled over to the next quarter also, but we are talking till 30th of June, we lost 16,000 tons.

Quantifies the operational impact of the planned shutdown, providing context for Q1 performance and reassuring investors that it was a scheduled event rather than an unexpected disruption.

Asked by Abhishek Jain

2 min read 6 chapters

Detailed narrative

Q1 FY25 Financial Performance Overview

AGI Greenpac reported a Total Income of ₹577 crore for Q1 FY25, marking a 1.7% year-on-year increase from ₹567 crore in Q1 FY24. EBITDA grew by 4.7% year-on-year to ₹147 crore, maintaining a stable margin of 25.4%. The company's EBIT stood at ₹105 crore with an 18.2% margin, and Net Profit was ₹63 crore, achieving an 11% margin. This performance was delivered despite a planned furnace shutdown for relining and debottlenecking during the quarter.

Operational Efficiency and Cost Optimization

The company's consistent performance is attributed to operational efficiency, a strategic product mix, and a focus on premiumization. Management highlighted significant efforts in de-bottlenecking and technology additions, which have improved productivity and efficiency. Efficiency in bottle machining has increased from 83-84% five years ago. Additionally, the company leverages its flexibility in using various fuel mixes to optimize costs based on market price fluctuations, directly contributing to gross profit.

Capacity Expansion and Debottlenecking Initiatives

AGI Greenpac's initial capacity was 1,600 tons, plus 154 tons for the cosmetic plant. Through debottlenecking, they added 100 tons in commercial glass and 30 metric tons in specialty glass, bringing the total capacity to just under 1,900 tons. A new furnace in commercial glass, currently under construction, is expected to yield an additional 70-80 tons per day post-debottlenecking. The next scheduled relining is planned for FY28.

Specialty Glass Segment and Sustainability Efforts

The specialty glass plant, which began commercial production in FY24, is performing well, driven by demand in cosmetics and perfumery. The current utilization rate for this segment is approximately 70%, with a target to increase it to 100% before further expansion. In sustainability, AGI commissioned a 2.8 MW solar rooftop project at its Hyderabad plant, increasing total solar capacity to 19.56 MW. The Specialty Glass plant also achieved the prestigious IGBC Green Factory Building Platinum rating.

Industry Dynamics and Competitive Landscape

Management addressed concerns regarding the alcohol industry's shift from glass to PET bottles, viewing it as a 'novelty factor' and a common occurrence, and plans to counter it with innovation. They also downplayed competition from the Firozabad cluster, emphasizing glass as a freight-sensitive market where AGI's superior technology and customer commitments provide an edge. The overall industry operating capacity is estimated at around 11,000 tons, with Firozabad contributing approximately 2,500 tons per day.

HNG Acquisition Update and Q1 Operational Impact

The proposed acquisition of HNG is currently sub-judiced before the Supreme Court and NCLT, with a hearing anticipated in mid-September. Management expressed optimism for a swift resolution in their favor. In Q1 FY25, a planned furnace shutdown resulted in a production loss of 16,000 tons of glass. This was a scheduled maintenance activity, and management indicated that the impact on revenue was managed through seasonality and stock, with the shutdown spilling over slightly into Q2.

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