Apex Frozen Food

Apex Frozen Foods reported a significant turnaround in Q4 FY25, with net revenue growing 22% year-on-year to ₹197 crores, primarily driven by higher realizations. Gross profit increased 24% YoY to ₹59 crores, and the gross profit margin expanded by 500 basis points quarter-on-quarter to 30%. The company achieved a positive Profit After Tax (PAT) of ₹20 million, compared to losses in the preceding quarters. This performance reflects an uptick in overall demand, particularly from the U.S., and firm global shrimp prices.

The company noted inventory liquidation in overseas markets leading to increased demand, especially in the U.S., which kept global shrimp prices firm. However, global trade uncertainties, including US reciprocal tariffs, remain a concern. While tariffs are currently at 10% for all products, a 90-day abeyance period for increased tariffs (beyond 10%) has provided temporary relief. Management is cautiously optimistic, awaiting the outcome of India-U.S. trade talks expected by Q1 or early Q2 FY26.

The European Union market showed strong growth, with sales increasing 70% year-on-year in Q4 FY25 and 41% for the full FY25. This boosted the EU's contribution to the overall sales mix to 36% in Q4 FY25 and 39% in FY25. The company is awaiting approval for its Ready-to-Eat (RTE) production lines for the EU market, which is expected very soon. Once approved, this will enable the utilization of approximately 10,000 metric tons of RTE capacity, with an expected 10-15% better realization and $0.40-$0.50 per kilo additional margins.

Management acknowledged a period of slower growth and margin compression in FY23 and FY24, attributing it to market dynamics, loss of some customers to competitors like Ecuador, and legacy provisioning issues. The company has been actively diversifying into other markets, particularly the EU, to reduce dependence on a single market. The current quarter's improved performance is seen as a turnaround, with efforts to enhance realization and change product mix to support EBITDA growth.

The recent US tariff announcements caused initial confusion among buyers, but the 90-day abeyance on increased tariffs (beyond 10%) has allowed customers to continue purchases. While the current 10% tariff is manageable (similar to 2022 levels), buyers remain cautious, awaiting clarity post-July 2025. India currently faces a 7.12% duty to the US, compared to Ecuador's 3.78% CVD, impacting competitiveness for commodity products.

For the upcoming year, Apex Frozen Foods has no plans for major additional investments beyond power backup systems and efficiency improvements to existing capacities. The focus is on optimizing current operations to reduce energy costs and improve overall efficiency. The company reported ₹50 crores in cash flow from operations for FY25 and short-term borrowings of ₹67 crores, indicating a lean capital structure and a focus on internal accruals for operational enhancements.

Recent government initiatives, including customs duty reductions in the fishery sector (from 15% to 5%), are primarily aimed at supporting primary production, such as feed and hatchery feeds. While these do not directly impact the processing sector, they are expected to indirectly benefit the company by fostering a more cost-effective and competitive raw material supply for Indian farmers, thereby enhancing the overall competitiveness of the industry in global markets.