Greenpanel Industries Limited — Q3 FY25 earnings call

Call held 7 Feb 2025

Management summary

Greenpanel Industries reported a challenging Q3 FY25 with net sales declining 7% YoY to ₹358.12 crores and post-tax profits plummeting 75% to ₹8.5 crores. This was primarily driven by a steep 25% increase in wood prices, lower domestic MDF realizations, and a 17% decline in plywood volumes. The company's EBITDA margins contracted significantly to 5%. Management expects the new plant to be commissioned by end of Q4 FY25 and anticipates an improvement in plywood volumes post-restructuring.

Highlights

  • MDF domestic sales volume grew 11% quarter-on-quarter.

  • Plywood realizations increased by 1.2% year-on-year to ₹252 per square meter.

  • Net debt stands at a manageable ₹104 crores as of December 31, 2024.

  • Expansion project is progressing, with commercial production expected by end of Q4 FY25.

Concerns

  • Net sales declined 7% year-on-year to ₹358.12 crores.

  • Post-tax profits were lower by 75% year-on-year at ₹8.5 crores.

  • EBITDA margins compressed significantly by 1,229 basis points to 5% due to steep increase in wood prices and lower domestic realizations.

  • Plywood volumes were lower by 17% year-on-year, impacting EBITDA margins at 3.1%.

  • Net working capital increased by 11 days year-on-year to 36 days due to higher wood inventories.

Key financials

  1. Net Sales ₹358.12 Cr -7%YoY
  2. EBITDA ₹17.78 Cr
  3. EBITDA Margin 5%
  4. Post-tax Profit ₹8.5 Cr -75%YoY
  5. Gross Margin 43.2%
  6. Net Working Capital Days 36 days

What they filed

Q1 FY27: revenue up 6.6%, net profit up 103.6% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue337 359 375 328 396 +18%416 +16%399 +7%350 +7%
EBITDA30 17 48 -16 25 −17%41 +135%30 −38%30 +289%
Net profit19 9 29 -35 -6 −133%10 +20%1 −95%1 +104%
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.

Segment breakdown

Share of Sales
₹358.12 Cr Total
  • MDF ₹325.93 Cr 91.0%
  • Plywood ₹32.19 Cr 9.0%

Capital allocation

high confidence
  • Capex Capex disclosed
    • Expansion project ₹219 Cr
    Net debt stands at Rs. 104 crore as on 31st December 2024 inclusive of Rs.219 crore for the expansion project.
  • Debt Net ₹104 Cr
    Net debt stands at Rs. 104 crore as on 31st December 2024 inclusive of Rs.219 crore for the expansion project.

Guidance & targets

Volume

  • Domestic Volumes Volume · FY25 · Medium confidence reach FY24 levels
    As far as the current year, I don't think we will be able to meet the guidance which we had given in the last con-call. I think at the moment, our efforts are to ensure that domestic volumes at least reach the level which we did in FY'24.

    — V. Venkatramani

  • Volume Growth (Existing Capacity) Volume · FY26 · Medium confidence 8% to 10%
    As far as FY'26 is concerned, I think we will be targeting 8% to 10% volume growth on the existing capacity and capacity utilization of between 40% to 50% for the new plant.

    — V. Venkatramani

  • Plywood Volume Improvement Volume · FY26 onwards · Medium confidence 15% to 20%
    So, for next year, we are hoping anywhere between 15% and 20% volume improvement, if not more.

    — Shobhan Mittal

Capacity

  • New Plant Capacity Utilization Capacity · FY26 · Medium confidence 40% to 50%
    As far as FY'26 is concerned, I think we will be targeting 8% to 10% volume growth on the existing capacity and capacity utilization of between 40% to 50% for the new plant.

    — V. Venkatramani

  • New MDF Project Commissioning Capacity · Q4 FY25 · High confidence end of March
    It will be commissioned towards the end of March.

    — V. Venkatramani

Profitability

  • New Plant Breakeven Utilization Profitability · High confidence 40%
    I think it should be definitely breakeven if we achieve a 40% capacity utilization as well.

    — V. Venkatramani

What to watch in Q4 FY25

New MDF Plant Commissioning

next quarter
Current Expected end of Q4 FY25
Target Commercial production commenced

Why it matters

Crucial for future capacity, volume growth, and margin improvement.

Work is progressing on the expansion project, and we estimate commercial production towards the end of Q4 FY'25.

Risks & concerns

  • Steep increase in wood prices

    high

    Wood prices increased 25% YoY, impacting EBITDA margins significantly. Further increases possible until new crops in July.

    Management acknowledged

  • Lower domestic MDF realizations

    medium

    Domestic MDF realizations were lower by 5.5% YoY, partly due to a 4% price cut implemented in mid-August.

    Management acknowledged

  • Increased imports before BIS norms

    medium

    MDF imports doubled QoQ to 20,000-22,000 cubic meters, likely due to stocking before BIS implementation, creating pricing pressure.

    Management acknowledged

  • Plywood volume degrowth

    medium

    Plywood volumes declined 17% YoY due to ongoing restructuring of sales team and dealer network, taking longer than expected.

    Management acknowledged

  • Demand-supply gap in MDF market

    medium

    Current MDF capacity (4.2M cubic meters) exceeds market demand (2.7-2.8M cubic meters), with the gap expected to bridge over the next two years.

    Management acknowledged

Q&A highlights

6 direct
Timber procurement cost outlook Partial
I would say we are probably towards the end of the cycle, but I won't completely rule out few percentage points increase in the next couple of quarters.

Analyst sought clarity on whether the current high timber costs were a peak and management indicated potential for further, albeit smaller, increases.

Asked by Parth Bhavsar

Impact of imports and competition on domestic market Direct
There was some pressure from imports. If you look at Q2FY'25, we had imports of approximately 10,000 cubic meters per month and during Q3FY'25 it was between 20,000 to 22,000 cubic meters per month. So, the imports percentage increased in Q3 FY'25 and I think you rightly mentioned that this possibly happening before BIS comes into effect.

Highlights the increasing pressure from imports ahead of BIS norms, impacting domestic pricing and volumes.

Asked by Parth Bhavsar

Reasons for sharp drop in MDF margins Direct
I see three reasons. So, first, there has been an increase in timber prices. So, quarter-on-quarter there's been a 17% increase in wood prices primarily due to an increase of 22% in South India and year-on-year there's been a 25% increase in wood prices. Secondly, we had introduced a new scheme towards the middle of August which had an impact of about 4% on realization. ...And third, because of the increase in wood prices, there has been a significant increase in fuel costs...

Provides a comprehensive breakdown of the factors contributing to the significant margin compression, including raw material costs, realization pressure, and fuel costs.

Asked by Sneha Talreja

MDF imports in India and reasons for steep rise Direct
I'm not aware of any specific reasons, but there's a possibility that it could be because of the expectation of BIS implementation from February. Hence, OEMs who are the primary importers, have possibly stocked up before BIS implementation.

Explains the surge in MDF imports, linking it to pre-BIS norm stocking by OEMs, which could impact domestic demand in the short term.

Asked by Resha Mehta

Plywood segment volume degrowth and margin improvement Direct
Yes, the reason for the margin improvement is because we have been reducing the admin costs. We are economizing on cost that helps to build the margins because there's not been too much inflation in wood prices on the plywood side, because a lot of wood imports are happening from Africa.

Clarifies that plywood margin improvement is due to cost reduction efforts and stable wood prices (due to imports), despite volume degrowth.

Asked by Resha Mehta

Timeline for plywood volume degrowth to stop Direct
On your second question, we have taken some very drastic measures and changes within the plywood business model. Initially, there were internal changes within the sales team. Now, we're in the process of completely revamping our dealer distribution network as well. Hence, it's taking a longer period because we're sort of consolidating the dealer base, appointing larger size dealers and distributors. So, for next year, we are hoping anywhere between 15% and 20% volume improvement, if not more.

Details the ongoing restructuring in the plywood business, including dealer network changes, and provides a timeline for expected volume recovery.

Asked by Resha Mehta

Profitability of new plant at 40-45% utilization Direct
I won't give you guidance on the margin, but the new plants will help to improve the margin substantially, because the incremental fixed costs will be very low apart from the power and fuel cost and some addition of manpower on the plant side. So, there are no significant increase in fixed cost for the new plant. So, I think once we start the new plant and we achieve that capacity utilization of around 40%, I think we will see a significant improvement in the margin.

Management indicates that the new plant will significantly improve margins due to low incremental fixed costs once it reaches 40% utilization, providing insight into future profitability drivers.

Asked by Parth Bhavsar

2 min read 6 chapters

Detailed narrative

Q3 FY25 Financial Performance Overview

Greenpanel Industries reported a challenging Q3 FY25 with net sales declining 7% year-on-year to ₹358.12 crores, compared to ₹384.99 crores in the corresponding period. Post-tax profits saw a significant 75% drop, falling to ₹8.5 crores from ₹34.61 crores in Q3 FY24. EBITDA margins compressed sharply by 1,229 basis points, settling at 5% (₹17.78 crores), primarily due to increased raw material costs and lower domestic realizations.

MDF Segment Performance

The MDF segment contributed 91% of the top line, with sales of ₹325.93 crores. Domestic MDF sales volume remained flat year-on-year but showed an 11% quarter-on-quarter growth. However, domestic realizations were lower by 5.5% YoY at ₹29,867 per cubic meter, while export realizations increased by 2.2% YoY to ₹19,479 per cubic meter. Blended MDF realizations were down 4.2% at ₹28,079 per cubic meter. Capacity utilization for Uttaranchal was 82% and Andhra was 58%, leading to a blended utilization of 66%.

Plywood Segment Performance and Restructuring

Plywood sales experienced a de-growth of 16.1% to ₹32.19 crores, with volumes lower by 16.9% at 1.28 million square meters. The unit operated at 44% utilization, and EBITDA margins stood at 3.1%. Realizations were up by 1.2% YoY at ₹252 per square meter. Management indicated that the segment is undergoing significant restructuring, including changes to the sales team and dealer network, which is taking longer than expected but is projected to yield 15-20% volume improvement from FY26 onwards.

Raw Material and Cost Pressures

A steep 25% year-on-year increase in wood prices significantly impacted margins. Timber procurement costs were ₹7.15 per Kg in North India and ₹6.23 per Kg in South India, with a blended rate of ₹6.66 per Kg. This, combined with a 4% price cut introduced in mid-August and increased fuel costs, led to the substantial margin compression. Management expects wood prices to remain volatile and potentially increase further until new crops arrive in July.

Expansion Project and Future Outlook

The company's expansion project, involving ₹219 crores, is progressing well and is expected to achieve commercial production by the end of Q4 FY25. For FY26, Greenpanel targets 8-10% volume growth on existing capacity and 40-50% utilization for the new plant. The new plant is anticipated to significantly improve margins due to low incremental fixed costs once it reaches 40% capacity utilization, which is also its breakeven point.

Impact of Imports and BIS Norms

MDF imports into India surged from approximately 10,000 cubic meters per month in Q2 FY25 to 20,000-22,000 cubic meters per month in Q3 FY25. This increase is attributed to OEMs stocking up ahead of the expected implementation of BIS norms, which were announced for February 11th. Management hopes that BIS norms will restrict imports and alleviate some pricing pressure in the domestic market, particularly in the OEM segment.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Consumer Durables earnings calls