Huhtamaki India Limited — Q1 FY26 earnings call

Call held 25 Jul 2025

Management summary

Huhtamaki India reported a mixed Q2 CY25, with net sales declining 4.7% YoY to ₹5.9 billion amidst subdued demand and flat volumes. However, strong cost control and an improved product mix led to a 28.7% YoY increase in EBITDA to ₹493 million and a 55% YoY rise in PBT (ex-exceptional items) to ₹331 million. The company maintained a comfortable debt-to-equity ratio and strong liquidity, despite a less favorable working capital position due to higher inventory and receivables.

Highlights

  • EBITDA grew 28.7% YoY to ₹493 million, reflecting healthy business performance and operating leverage.

  • PBT (excluding exceptional items) increased 55% YoY to ₹331 million.

  • EPS for the quarter stood at ₹3.30, with H1 EPS at ₹6.76.

  • Cost control measures are effectively helping to deliver results.

  • Debt-to-Equity ratio remains comfortable with External Commercial Borrowing (ECB) of ₹1 billion as the sole debt.

  • Liquidity continues to be strong, supported by sizeable, unutilized credit lines and surplus cash deployed in bank deposits and mutual funds yielding over 6.8%.

Concerns

  • Net sales declined 4.7% YoY to ₹5.9 billion and were slightly lower QoQ.

  • Volume remained flat QoQ and showed a decline YoY.

  • Demand situation remained mixed with urban demand not fully recovered and rural demand driving consumption.

  • Working capital position was less favorable compared to March 2025 and June 2024 due to increased inventory and receivables.

  • BOPP prices increased in double digits in the first half of the year, posing a raw material cost headwind.

Key financials

  1. Revenue 5,900 Mn -4.7%YoY
  2. EBITDA 493 Mn +28.7%YoY
  3. EBIT 362 Mn +37.4%YoY
  4. PBT (ex-exceptional) 331 Mn +55%YoY
  5. Net Profit (after exceptional) 249 Mn -35.3%YoY
  6. EPS ₹3.3

What they filed

Q1 FY27: revenue up 22.5%, net profit up 76.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue652 619 610 612 625 −4%623 +1%613 +0%750 +23%
EBITDA18 26 39 43 55 +206%54 +108%40 +3%75 +74%
Net profit12 12 26 25 37 +208%30 +150%26 +0%44 +76%
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.

Capital allocation

high confidence
  • Debt Gross ₹1 Bn Maturity: Gross debt repayment due in 2027.
    • Repayment Partial retirement of ECB in September last year, leading to 39% YoY decline in finance cost.
    the External Commercial Borrowing (ECB) of ₹1 billion representing the sole debt on the books.
  • Liquidity Liquidity disclosed Liquidity continues to be strong, supported by sizeable, unutilized credit lines that remain fully available. Surplus cash is prudently deployed in bank deposits and mutual funds, delivering an average yield exceeding 6.8% during 2025.
    Liquidity continues to be strong, supported by sizeable, unutilized credit lines that remain fully available. While the overall working capital situation is stable, the position as of June 2025 was less favourable compared to March 2025 and June 2024. This was primarily driven by an increase in inventory and receivables during the quarter.

Guidance & targets

Sustainability

  • SBTi targets for Scope 1 and Scope 2 reduction Sustainability · 2025 · Medium confidence aligned with 2023 goals
    In 2025, we are expected to sign the SBTi targets, which will be aligned with 2023 goals for a Scope 1 and Scope 2 reduction.

    — Dhananjay Salunkhe

What to watch in Q2 FY26

Inventory levels

by end of this year (CY25)
Current High, ₹310 crores as of June 2025
Target Decent inventory level

Why it matters

Optimizing inventory is crucial for improving working capital and reducing the need for provisions.

So by end of this year, we can have a decent inventory level.

Risks & concerns

  • Commodity price volatility

    high

    High-inflation situations can have a lag impact on profitability, and hedging all volatility is difficult.

    Management acknowledged

  • Subdued demand and mixed consumer sentiment

    medium

    Urban demand not fully recovered, rural demand driving consumption, leading to mixed demand situation.

    Management acknowledged

  • External headwinds (unseasonal rains, early monsoon, inflationary pressure)

    medium

    These factors impacted overall demand and performance in Q2.

    Management acknowledged

  • Volume decline YoY

    medium

    Volume remained flat QoQ but declined on a year-on-year basis.

    Management acknowledged

  • Working capital deterioration

    medium

    Position less favorable due to increased inventory and receivables as of June 2025.

    Management acknowledged

  • BOPP price increase

    medium

    Double-digit increase in BOPP prices in H1 2025, posing a raw material cost headwind.

    Management acknowledged

  • Market fragmentation and competition

    medium

    Low entry barriers have led to a fragmented flexible packaging market, increasing complexity.

    Management acknowledged

Q&A highlights

6 direct, 1 evasive
Blueloop revenue contribution Direct
So I mean it continues into the similar range what we had in the first quarter. So we are trending somewhere between 27% to 30%.

Provides insight into the contribution of a key product segment to the company's revenue.

Asked by Dhruv Himani

EBITDA margin increase drivers Direct
I mean we definitely, like even the last few business call, we are indicating we are working on the operational efficiencies that definitely is helping us, that's the one thing. And second is that we are working to improve the mix. So both factors are helping like internal and external focus, both factors are helping us to improve the bottom line.

Explains the operational and strategic factors contributing to improved profitability.

Asked by Dhruv Himani

Achieving parent company's margin (14-15%) Evasive
You know that as a policy, we don't talk about a forward-looking indications or anything but definitely -- that we would like to improve performance. And that is going to be the key priority for us.

Management declined to provide specific forward-looking margin targets, indicating caution on future projections.

Asked by Dhruv Himani

BOPP pricing trends Direct
But we are seeing definitely some increase in BOPP prices in first half of the year as compared to the previous half of the year, previous means even H1 2024 or H2 2024. So there is a comparatively increase in, I would say, in double digit.

Highlights a significant raw material cost headwind faced by the company.

Asked by Sukhbir Singh

Tube laminate share in product portfolio Partial
So possibly somewhere around high-single digit.

Gives an approximate indication of the scale of the tube laminate product segment.

Asked by Sukhbir Singh

Export share of revenue Direct
So I think the percent -- typically, we have around what 30%, 32%, 1/3 comes from exports. And I think that remain range bound.

Provides clarity on the company's reliance on export markets for revenue generation.

Asked by Sukhbir Singh

Inventory provision of ₹9.39 crores Direct
So inventory provision is normally, it's very much driven through policy what we have, and it depends on the ageing and all. It doesn't mean that the provisions what we normally do is going to have an impact and it's normal part and parcel of this. So it's not something out of the extraordinary.

Clarifies the nature and routine aspect of the inventory provision, which impacted cash flow.

Asked by Ashok B. Jain

High inventory levels (₹310 crores) Direct
No. I think it's a mix of many things. You are right that inventory levels have gone up drastically end of June. And partially it answers your questions also that inventory levels are going up that some inventories are old that require provisions so that you see in that and if it is consumed you reverse it. ... So by end of this year, we can have a decent inventory level.

Explains the reasons for elevated inventory, including strategic holding for long lead-time raw materials and provisions for older stock, with a plan to optimize by year-end.

Asked by Ashok B. Jain

2 min read 5 chapters

Detailed narrative

Q2 CY25 Performance Overview

Huhtamaki India experienced a mixed Q2 CY25, with demand remaining subdued due to a slow recovery in urban areas and typical rural consumption patterns. The quarter also faced headwinds from unseasonal rains, an early monsoon, and inflationary pressures. Despite these challenges, the company's strategic cost control measures and efforts to improve product mix helped deliver strong profitability, even as net sales declined.

Financial Highlights: Profitability Amidst Revenue Decline

For Q2 CY25, net sales stood at ₹5.9 billion, a 4.7% YoY decrease, and were nearly flat QoQ. However, EBITDA saw a robust 28.7% YoY growth, reaching ₹493 million, though marginally lower by 1% QoQ. EBIT also grew significantly by 37.4% YoY to ₹362 million. Profit Before Tax (excluding exceptional items) increased by 55% YoY to ₹331 million, despite a slight QoQ dip of 2.7%. Net profit after exceptional items and taxes was ₹249 million, with EPS at ₹3.30 for the quarter.

Strategic Focus on Operational Excellence and Sustainability

The company continues to emphasize operational efficiencies through its World Class Operations (WCO) Program. Significant improvements in safety records were noted, with reduced incident rates and fire ignition points. Huhtamaki India is also committed to sustainability, expecting to sign SBTi targets in 2025 aligned with 2023 goals for Scope 1 and Scope 2 reductions, and is pursuing projects for electrical power reduction, water conservation, and waste reduction.

Market Dynamics and Product Strategy

The market signals were mixed, with smaller players gaining traction in Q1 2025, impacting larger FMCG companies and, consequently, Huhtamaki. The company is focusing on high-value business and product mix improvement. Its 'blueloop' segment contributes 27-30% of revenue. The company is also leveraging its global presence and capabilities to offer future-ready and sustainable packaging solutions, including mono-polymer, polyolefin, and paper-based options, and sees pet food as a growing opportunity.

Working Capital and Debt Management

The company's debt-to-equity ratio remains comfortable, with the External Commercial Borrowing (ECB) of ₹1 billion being the sole debt, due for repayment in 2027. Finance costs declined 39% YoY due to partial ECB retirement. However, the working capital position as of June 2025 was less favorable compared to previous periods, primarily driven by an increase in inventory and receivables. Management acknowledged high inventory levels (₹310 crores) and aims to achieve a 'decent inventory level' by year-end.

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